BHP spoiled for choice in a vote to decide its new chairman

THE painstaking process Don Argus set up to find someone to replace him as chairman of BHP Billiton is expected to conclude on Monday when the 14 members of BHP's board formally decide between two very able and willing candidates Melbourne born, US-based Jac Nasser, the former global chief executive of Ford, and Sydney-based John Schubert, an engineer by training who has a boardroom CV as long as his arm.

The election of a chairman through a formal ballot that will be supervised by BHP's auditor, KPMG, is unusual, and given that it is occurring because a consensus has not formed around either man, it could be close. The expectation, however, is that the new chairman will be revealed late on Monday afternoon, at the end of the first day of a three-day BHP board meeting.

The organisation of succession to the chair is an episodic affair, involving the long-term structuring of the board to put in place potential successors, the engagement of external search advisers to generate external candidates (BHP's agency of choice in this search and others, including the one that confirmed Marius Kloppers as chief executive, was Heidrick & Struggles), and a winnowing process, as the board considers names, retaining some and discarding others. BHP director David Morgan dropped out of the running in that penultimate stage.

The fact that the final two are difficult to separate is a sign that this lengthy process worked: Nasser and Schubert are both qualified for the job, although they would bring different leadership styles to the mining giant.

Nasser was brought onto BHP's board in 2006 by Argus, who also enlisted him at Brambles when he was chairman of that company. He has a particular focus on operational excellence, but colleagues say he does not seek to invade his managers' turf: that is crucial for the relationship he would have with the strong-minded Kloppers.

He is well connected in the US after his stint leading Ford (he was with the car maker for 33 years, and ran its Australian and European operations before serving as global president and chief executive from 1998 to 2001), and has strong US market links, including a role as managing director of One Equity Partners, a private equity investor that manages about $US8 billion ($A9.7 billion) of investments for JPMorgan Chase.

Nasser's visibility in the US would be an asset for BHP, which has for years been trying to attract more US investors on to its register.

An offsetting factor is that he currently calls Ford's home state in the US, Michigan, home. Foreign investment conditions on BHP's merger with Billiton in 2001 say nothing about where the chairman should live, but the group's chief executive and chief financial officer must have their main residences here, and the board must hold the majority of its meetings in Australia.

BHP is a global company. But the residency rules and the fact that the chairmanship is a two day a week job at the very least means Nasser would need to spend considerably more time here. It shouldn't be an issue for him, however: he has dual Australian-US citizenship, grew up in Coburg, and has digs in South Yarra.

Sydney-based Schubert is the more orthodox choice. He trained as an engineer, a profession that over the years has been a fertile source of boardroom talent, and in his executive career led Esso Australia and the concrete and materials group, Pioneer International.

He is a former president of the Business Council of Australia, and already has a full non-executive dance card, including his BHP directorship, the chairmanship of the CBA banking group, and a board seat at Qantas. The CBA position would probably go if he were offered the BHP position.

BHP is relatively process-heavy for a mining group, and Schubert is probably a bit more comfortable with that. BHP's paper flow would be minor compared with the one he has been dealing with at CBA, and his methodical tendencies and focus on longer-term strategic issues were honed during his time with Exxon-Esso.

He is, on balance, the more conservative choice, but the bottom line is that either of the candidates Argus' succession planning has served up will be welcomed by the markets.

Elders confirmed the sale of its insurance business to QBE yesterday, but it announced a smarter structure than expected. Instead of selling the entire insurance business, it will sell the insurance book to QBE, and will joint venture its network of 126 insurance agencies in the bush, 25 per cent Elders, 75 per cent QBE.

QBE will pay $270 million for insurance stakes, and another $45 million for 112.5 million Elders shares at 40? a share, to take a 12.1 per cent shareholding that it will retain for at least a year.

This clever deal reduces Elders' debt to more manageable levels by extracting money from its insurance business without losing its ability to sell Elders-branded insurance products to its farmer customers, and also signing up QBE as a strategic partner and cornerstone investor.

QBE's commitment to stay on the register with its 12 per cent stake for at least a year, and probably longer, means that the big share issue by Elders that is planned as the capstone off its bounce back from balance sheet extremis has at least one guaranteed buyer. QBE, meanwhile, has given the recovery plan that it is enabling a thumbs up, by agreeing to pay 40? a share for its placement when the shares were 24.5? before word of the deal started leaking.

The Elders insurance joint venture will continue to carry the Elders name and sell Elders-branded insurance, underwritten now by QBE, maintaining an important element of the suite of services Elders offers rural customers.

Elders has the right to buy back 25 per cent of the insurance agency joint venture and take its stake to 50 per cent after balance date in 2010, 2011 and 2012, and that will be the litmus test for the partnership. If it is working as hoped, Elders will be happy to maintain the status quo: if not, it will want to claw back ownership.

The Maiden family owns BHP shares.

mmaiden@theage.com.au