A new direction for the BHP board?

A new appointment will add depth to the oil and gas expertise of the BHP Billiton board. But it may also presage a far broader shake-up of the 14 mainly non-executive directors of the mining giant.

It passed almost without notice but a new appointment to the BHP Billiton board could presage a significant shake-up in the boardroom of the world’s biggest resource house.

Earlier this week, BHP chairman Jac Nasser announced that Malcolm Brinded, a former director and long-time executive of Royal Dutch Shell, had been appointed as an independent non-executive director of BHP.

What he didn’t announce was a departure to create a vacancy on what is already a somewhat unwieldy board. Including chief executive Andrew Mackenzie, the group had 13 directors, 12 of them non-executive. With Brinded’s appointment, there are now 14 on the board.

In announcing the new director, Nasser said it reflected the ‘’structured and rigorous’’ approach to the board’s succession planning.

He also said, while noting the size of the board, that it reflected the ‘’overlapping tenures required to successfully manage board succession.’’ That would appear to be a broad hint of near term change.

Nasser’s job in ensuring BHP has the right people within the board room with the right range of experiences and expertise to oversee the biggest and most diversified – by geography as well as product – of the major resource companies is a challenging one made more complicated by the fact that BHP is headquartered in Melbourne. It’s not necessarily straightforward to attract appropriate and appropriately high-calibre people to such a demanding role.

In effect, if someone he believes has the right qualifications does become available and is interested, he has to grab them. That’s what appears to have happened with Brinded.

Brinded, while he’s a director of the UK’s Network Rail Board and engineering group CH2M Hill and is on several China-related advisory bodies, has a deep background in the energy industry. Given BHP’s big exposure to oil and gas, both conventional and unconventional, that is experience the group needs on the board.

It actually has quite a lot of oil and gas industry experience already. Sir John Buchanan is a former chief financial officer of BP, John Schubert is a former chairman and CEO of Esso Australia, Pat Davies was CEO of South Africa’s Sasol and Wayne Murdy, while best known for his period as CEO of Newmont, was previously an executive at Getty Oil and Apache Corp.

Buchanan, who was 70 at the time BHP’s last annual report was published, earlier this year announced his retirement from the board of the UK technology group Arm Holdings, citing health reasons.  He also retired as chairman of Smith & Nephew late last year. That might suggest a ‘’like-for-like” swap of Brinded for Buchanan.

Nasser, however, probably needs to find more than one new director. Schubert’s age was also given as 70 in the annual report, while Crawford and Murdy were both 69 and presumably close to the end of their tenures.

Both Schubert and Crawford went onto the BHP board in June 2001, weeks after BHP and Billiton shareholders had ratified the merger that created today’s group. Buchanan, chairman of BHP’s remuneration committee and a member of its nomination and governance committee, was appointed in 2003. Murdy has been on the board since 2009.

If they all go relatively close to each other, that wouldn’t only be a significant loss of experience and corporate memory but a major challenge – and a major opportunity -- for Nasser.

The last major restructuring of the BHP board came in 2010, when Nasser succeeded Don Argus as chairman. Ahead of his departure, but presumably with Nasser’s input and approval, Argus brought former Orica CEO, Malcolm Broomhead and former investment banker Carolyn Hewson onto the board at the same time.

Subsequently Nasser has added Westpac chairman Lindsay Maxstead, Davies and AstraZeneca director Baroness Shriti Vadera. The other BHP directors (other than Buchanan, Schubert, Crawford, Murdy and now Brinded) are former SUN Mining CEO Keith Rumble and former Goldman Sachs managing director Carlos Cordeiro.

Brinded’s appointment appears a pre-emptive move to fill a vacancy not yet announced but imminent. Nasser appears to have several more of those in the pipeline that he’ll also have to respond to. Despite the appeal of a BHP board seat, that’s not necessarily as easy as it might appear.

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