25 March 2013
At an emergency weekend meeting the board of Australia’s largest contractor, Leighton Holdings, elected Bob Humphris as the new chairman following the shock departure of chairman Stephen Johns and two non-executive directors on Friday in protest over what they described as interference from the company’s major shareholder, Hochtief.
The resignations, which saw the contractor’s share price fall 7% on Friday, came the same week the company was celebrating its subsidiary, Leighton Contractors (Asia) Ltd, winning a $656m contract to build Hung Hom Station (pictured) and other components of Hong Kong’s Shatin to Central Link (SCL) mass transit project.
The project win, Leighton’s seventh to be awarded in the past three years by Hong Kong’s MTR Corporation, highlights the importance of Leighton Holdings to its indebted owner, Hochtief.
Leighton board chairman Stephen Johns and two non-executive directors, Wayne Osborn and Ian Macfarlane, caused a furore on Friday by resigning and releasing to media letters complaining about what they described as deliberate attempts by Hochtief CEO Marcelino Fernández Verdes to undermine the independence of the Leighton Holdings board.
Shock resignations came as Leighton celebrated its $656m contract to build Hung Hom Station in Hong Kong (Credit: MTR)
Hochtief has been a major shareholder of Leighton since 1983 but informal governance protocols in place since at least 2000 have given the Australian contractor independence, with the number of Hochtief-appointed directors on the 12-member board historically limited to four.
That independence has been called into question since ailing Spanish giant Grupo ACS completed its takeover of Hochtief in 2011 and installed Marcelino Fernández Verdes as CEO in November 2012.
In his explosive letter Stephen Johns recorded a series of events that he said proved Mr Verdes was trying to undermine Leighton’s independence.
Mr Johns said Mr Verdes, who also sits on the Leighton board, vetoed the independent directors’ favoured candidate for a recent vacant board position, refused to confirm his support for Leighton’s independence, and even asked him, Mr Johns, to quit because Hochtief didn’t support him anymore.
(More background and analysis here.)
Hochtief has denied trying to undermine the independence of the board and says it disagrees with Mr Johns’ version of events concerning the appointment of the new director.
However, in a letter accompanying Bob Humphris’ election as chairman, Hochtief said it was "free to reconsider these matters at any time if it so chooses".
Another independent director, Paula Dwyer, has been appointed deputy chairman of Leighton Holdings.
Bob Humphris said that it was a privilege to become chairman of "one of Australia’s great companies".
"Leighton is in a strong position with real momentum," he said. "Our immediate priority is to identify and appoint additional independent directors with the capability to contribute to the further development of Leighton."