THE ARGUS INTERVIEW: Career highlights
As corporate figures go, there are few that loom as large as Don Argus in the past two decades. Argus was director of what was then BHP Limited from November 1996 and its chairman from April 1999. He then became chairman of the enlarged BHP Billiton from June 2001. Before that he was CEO of National Australia Bank between 1990 and 1999, where he was known to refer to himself as 'head teller'.
It's not easy to get Argus to talk about the high points so I named four for him to talk about and then he added two of his own.
My four were:
– Being able to assess credit risks in the banking business more skilfully than his rivals;
– Making NAB the biggest bank in Australia;
– Turning BHP around;
– Helping Australia (and BHP) avoid the disastrous Chinalco-Rio Tinto deal.
Most people who reach the top are able to look back at the moves that enabled them to rise above their peers. Argus is very clear about his defining moment.
"In the 1980s when I ran the credit area, it was probably a career-defining moment. Not everyone in the bank agreed with what we were doing, because if you weren't on the Skases or the Bonds or someone like that, you weren't in the game. But you'd do the back-of-an-envelope sums and look at your debt pay-back periods. If there was no cash and they've got huge debt, there's nowhere to go.”
On the question of his role as NAB CEO Argus says: "I suppose NAB was a good success story, but I built on a pretty good franchise and I inherited a very good set of assets.”
Argus says that after the banking reforms of 1983, Australian banks were much more liberal with credit. The Australian banks, he says, "played with the reforms of 1983, but did not really know how to operate in that environment".
"I sat down with a few of our guys and we said, 'now how are we going to capitalise on this?', and we kept our credit quality right. We were the only bank that didn't get burned badly (in the 1987 crash), and we just took advantage of others that weren't able to compete in that market at the time because they were focused inwardly."
Argus agrees that when he came to BHP as chairman, the company was a mess. However, he says that he had three "very good” CEOs – Paul Anderson, Chip Goodyear and Marius Kloppers. (I will cover Argus' thoughts on the fourth CEO, Brian Gilbertson, tomorrow).
"Paul was like a pied piper," says Argus. "When we were negotiating his salary, he said 'don't give me cash, just give me performance shares'. So he took nominal cash and the rest of it was in performance shares. He went out to the troops and asked them what was wrong and how they would they fix it and he listened and he executed. He was a real turnaround person. He really did a great job.
"We had a hiccup with Brian and then Chip was thrown into the deep end. The company was probably unsettled after the merger with Billiton and particularly after Brian had left. Chip created an environment in which people felt safe to innovate and say what they thought again and start to drive the business again.”
Argus explained that Goodyear followed the strategy set in 2000 when the decision was made to "step out of steel".
The steel decision carried many risks. "You had the political risks. You had community risks. You had the whole lot. And, you know, you wondered if you were doing the right thing. So, that was probably the toughest decision that I've ever been involved with and it took about five board meetings.
"They were tough times, and not everyone believed that exiting steel was the right thing to do. History was kind to us. We got that one right and started to concentrate where capital was allocated.”
And in 2001-02 the China market started to emerge.
Argus recalls the BHP tough times before he took over: "We hadn't invested in iron ore for three years because we couldn't. We didn't have any money from around about 1997 though to 2000.” Referring to his early years when he became chairman of the troubled BHP, he says: "That period of time was one that I wouldn't want to ever live through again. That should have taken 10 years off anyone's life because they were tough times.”
Argus was less frank about his role in the Rio-Chinalco affair, and says that a few people did a lot of work to understand the detail of the deal. As the commercial aspects became apparent, Argus says he was "aghast” and from there he was just "doing my job”.
What he is really proud of is the recent new iron ore pricing arrangements: "This repricing of iron ore is transformational stuff, not only for Australia, but for the industry and for this company.
"Marius has been pushing away at market clearing price models ever since he's been with us (2001). I can remember sitting down with him and asking, 'Please explain it to me because I've got some directors here who think we've got a reputational risk here because you're taking on China'.
"He explained benchmark pricing very clearly and what that can do to economies. His concern about benchmark pricing is that as demand started to build up, then you start to get a spot price away from the benchmark price and the people who should be benefiting from that differential are not necessarily the customers and not necessarily the producers.
Argus also says that when he became chairman of BHP there was "no succession planning in this place, none at all – it was awful."
And with pride he says: "I've got a young fellow from Harvard coming out to sort of write a book about it, about the succession processes."
Tomorrow: Argus reveals his thoughts on the low points of his career.
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