Building on a culture of credibility
It might seem unorthodox to step down as the chief executive of a listed company, then take on the role of chair and demote the chair to deputy, but when it comes to Worley Parsons and John Grill it makes sense.
It might seem unorthodox to step down as the chief executive of a listed company, then take on the role of chair and demote the chair to deputy, but when it comes to Worley Parsons and John Grill it makes sense.The country's biggest engineering company and Grill have earned the respect of the market by consistently performing, rarely getting into trouble and having a board and senior executives who are not afraid to hear criticism from staff or investors.In the case of the board, it is one of the best in the country, and the chairman, Ron McNeilly, stepping down a rung won't change the dynamics of the board at all. If anything, it shows that he is acting in all interests, which is something more directors should do.It is in sharp contrast to some companies operating in that sector, including Hastie - which recently collapsed due to a culture of no bad news that manifested itself as accounting irregularities to hide bad decisions - and Leighton Holdings, which has gone off the rails in the past couple of years due to a weak board, a botched succession plan and risk management systems that have been alarmingly deficient.Given the company's solid track record since it listed this year , companies and boards should examine Worley's culture and its board and use it as a pin-up of how to better behave.For starters, Grill, who is the co-founder of Worley and the biggest single shareholder with 10 per cent, has done what most senior executives and directors don't do enough of: put skin in the game.Grill is valued on the BRW Rich List at $780 million and most of this is tied up in Worley Parsons, which he co-founded and has headed for 40 years.His decision to step down from the executive ranks at the annual meeting later this year, then return as chairman next February, is something that has been expected - but dreaded - for a while. By staying on as chairman, it lessens the blow.It also illustrates a well thought-out succession plan, with the appointment of the chief financial officer, Andrew Wood, who has an engineering background, as his heir to the throne.Grill's decision to return to the board is not unique and is becoming a trend. The former JB Hi-Fi boss Richard Uechtritz rejoined as a director in April last year, Toll Holding's Paul Little retired and signalled he will return as a director, the IRESS founder Peter Dunai is now chairman, the QBE stalwart Frank O'Halloran announced his retirement earlier this year and then negotiated a seat on the board, while Elmer Funke Kupper, the former boss of Tabcorp, returned last month as a director of Tabcorp at the same time as running the Australian Securities Exchange.Grill also built a culture of transparency, strong risk management systems and empowerment. It means staff stick around, ugly surprises rarely happen and employees have respect for each other, all the way up the line. A classic case of leading by example was during the global financial crisis, when senior executives decided voluntarily to take a pay cut as a gesture of tough times.It is this culture that has allowed Grill to build the company from a small operation to a global business with 40,000 staff in more than 40 countries without having big embarrassing bombshells such as Leighton has had, including massive write-downs on projects gone wrong and more lately an investigation by the Australian Federal Police into its Iraq operations over potential corruption and bribery.Its continuous disclosure practices also became the subject of an investigation by the corporate regulator ASIC, which resulted in a fine.Despite this, Leighton continues to offer vague and inadequate explanations for what it is doing. It did it again on Thursday, when it failed to confirm another project was having difficulties, and when it announced it had sacked a senior executive over instances of failures to meet governance standards in respect of the proper documentation of contractual arrangements in Iraq.This failure appears to have happened when the present boss of Leighton, Hamish Tyrwhitt, was running Asia and Leighton Offshore. It raises the question what special efforts were taken to ensure there wasn't a problem in Iraq during the contracting phase, over and above any normal processes.As one observer said: "Commonsense would dictate that, if you are contracting in a country which in the global corruption indices is up there with North Korea and Somalia, you take extra special care." Leighton should come clean on what they did to protect shareholders from the increased risk of corruption issues in Iraq and what went wrong.It raises an old chestnut of how companies operating in countries that have a culture of bribery and graft can reduce the risk of their employees or agents getting caught up. Worley has managed to keep its nose clean, as have others. The brutal reality is that besides the reputational damage when things go wrong, the penalties are significant.Right now Australia is seen as weak in this area. It first introduced anti-bribery laws 12 years ago. During that period there have been 25 cases referred to the AFP - and only the Reserve Bank's Securency case has generated any arrests. AWB created no arrests. Leighton and its board need to take a leaf out of Worley Parsons's book and start being more generous with the facts.
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