Wal, Don't Lie to Me

Leighton's share price rose 2.9% yesterday, the day the board formally announced the company's CEO for the past 23 years would be stepping down at the end of this year. Wal King played down the transition, stating he was doing it voluntarily, talked up his successor, Chief Operating Officer David Stewart and gave the media a spray for the circus surrounding the board's decision.

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To me, he doesn't look happy. (Has anyone seen the show Lie to Me, where Dr. Carl Lightman solves crimes by interpreting facial expressions and body language? Maybe body language analysis would be a good addition to the fund manager's tool kit … watch the video and let me know what you think). Not with the fact that he has been forced to 'voluntarily' retire. Nor with the replacement the board has chosen. At 57, Stewart isn't that much younger than King and it seems he has been selected as someone more likely to execute the board's (read majority shareholder Hochtief's) wishes without a fight.

It is often said that 'the market hates uncertainty', as if certainty is an option. Indeed the share price rise would indicate that investors think Leighton is worth more today, with the succession issue settled, than it was a few days ago. But shareholders may well look back on the day they lost Wal King as the turning point.

Leighton doesn't own much in the way of equipment or assets. It is a massive project manager, acting as a middleman between companies or governments that need large infrastructure built, and hundreds of subcontractors with the equipment and skills necessary to get their part of the contract done.

Like Mondadelphous, it is a people business. For Leighton to stand head and shoulders above its competitors like it has for the past 20 years, its people must be better and, to attract the best people, it must have a superior culture. When King walks out the door in a few months' time, shareholders run the risk that a large part of that culture walks with him.