Barbara Chapman is showing her lack of fitness to be Fletcher's chair

Source: LinkedIn

It's becoming clearer than ever that Barbara Chapman should not be chairing Fletcher Building, even in a temporary capacity.

It is five whole months since former chair Bruce Hassall and managing director Ross Taylor resigned, and the lapse of time is grounds alone for questioning Chapman's competence, not to mention that she's been a director since 2017 and shares the collective board responsibility for the appalling performance that led to Taylor and Hassall resigning.

But my understanding is that she has been providing 14% shareholder Allan Gray Australia with regular briefings and that the fund manager is effectively calling the shots over who should replace Chapman as chair.

Allan Gray did tell National Business Review earlier this week that it was “in regular contact” with Fletcher's board “to keep tabs on progress,” but my understanding is that it goes far beyond this.

Chapman also continues to try to be the person to appoint the replacement for Taylor, something she is manifestly unfit to do, and all the principles of corporate governance dictate that she should leave such decisions to her successor.

Her executive experience has all been in banking, not in the building supplies and construction industry in which Fletcher operates.

Inappropriate priliveging

But her lack of judgement in giving Allan Gray preferential status above the rest of Fletcher's shareholders is spectacularly astray.

No chair of an NZX-listed company ought to be privileging a minority shareholder – or even a majority shareholder – in such a fashion.

The only person that we know of who has been considered to be the new chair, former Port of Tauranga chief executive and current Freightways chair and Auckland International Airport director Mark Cairns has publicly withdrawn his candidacy, announcing earlier this week that he hadn't heard from the board in three months.

Cairns had been shoulder-tapped by Fletcher's recruitment agency at the beginning of April.

He is an engineer by training, in addition to his management experience, and therefore far more competent on the face of it than the ex-banker who is supposed to be deciding on her replacement.

Earlier this week, Cairns told me he had “felt a sense of obligation to the 15,000-odd staff” at Fletcher, and had been willing to give a tough task his best, but that “I can't believe the poor governance” that he's witnessed over the last few months,

“The remaining board take no responsibility for the $2 billion destruction of shareholder wealth over the last 12 months.”

Allan Gray's share dealings

The situation with Allan Gray also raises questions, both because it should not be able to control a New Zealand company with just a 14% stake and because it has been trading in Fletcher shares on at least some occasions since the day Taylor and Hassall resigned.

On Feb 14, the same day Taylor and Hassall resigned with immediate effect, Allan Gray lodged a substantial shareholder notice with NZX showing that it owned 102.8 million Fletcher shares, or 13.1% of the shares on issue.

Then on April 18, it lodged another substantial shareholder notice showing it had increased its holding to nearly 110.9 million Fletcher shares, or nearly 14.2%.

The blame here though is not Allan Gray’s; it has an obvious responsibility to act in the interests of its investors.

Chapman bears the responsibility for allowing the Australian firm to call the shots.

Fletcher does have a track record of having its chief executive sit on its board.

NZ Shareholders Association chief executive Oliver Mander, who describes the five-month delay in appointing a new chair as “a bizarre situation,” says he doesn't want to see that continue or to see Chapman appoint the next chief executive.

“Our expectations have always been that the chair is appointed first and we expect both roles need to be NZ-based,” given that NZ is where the bulk of Fletcher's operations are.

Australia has under-performed

While the Australian operations accounted for nearly 30% of earnings before interest and tax in the six months ended Dec 31, they have been a perennial under-performer and the company wrote another $122 million off the value of the Tradelink business across the Tasman at the half year, when it also put Tradelink up for sale.

Asked about Alan Gray's influence on Fletcher, Mander says: “I wouldn't want to add to the speculation around that. We do know Allan Gray were initially supportive of Mark Cairns as chair” and the NZSA would have voted for Cairns' candidacy.

Mander says there does seem to be a schism between Fletcher's NZ and Australian shareholders, and notes that while most Australian chief executives of listed companies do also sit on their boards, that is far from the norm in NZ.

He says Chapman has been very clear that she's temporary chair only and has no intention of staying on in that role, but that “they may be finding it difficult to recruit individuals who would support them,” the remaining directors, staying on the board.

“That may be a factor in how things are playing out – all that, of course, is speculation,” Mander says.

But he adds: “NZ Inc does not need this.”

Other directors have resigned

Since Taylor and Hassall's resignation, another three directors have stepped down, Martin Brydon, Rob McDonald and Doug McKay – McKay's wife, Patricia, was tragically and horrifically killed on July 2 when the couple were shopping in California.

That leaves only Chapman and three other directors, Peter Crowley, Sandra Dodds and Cathy Quinn.

Crowley has 40 years of experience in the construction materials and building products industries in Australia, NZ, Asia, Europe and North America, while Dodds has 30 years of operational and financial experience in infrastructure businesses.

But Quinn is a former corporate lawyer and now is a professional director – she sits on the boards of Fonterra and Rangatira, chairs Tourism Holdings and Fertility Associates Holdings, and is Pro-Chancellor of the University of Auckland Council.

Chief financial officer Bevan McKenzie has also departed.

As I wrote in February, former chair Ralph Norris should never have been allowed to pick both Adamson's replacement and the replacement board.

This came after former managing director Mark Adamson was sacked in July 2017 – not for his incompetence which had been amply demonstrated by then, but for sending an abusive email that I received a copy of and made public after his sacking.

By then and before Norris’ departure in September 2018, we already knew losses made by the high-rise construction unit were mounting - they’ve now exceeded $1 billion.

Norris' protege

Chapman has been a Norris protege since he was ASB Bank's chief executive and she was appointed to lead sister company Sovereign.

Norris went on to become chief executive at ASB's parent, Commonwealth Bank of Australia, and Chapman succeeded him as ASB's chief executive.

I'm told that the pair remain close.

I first met Chapman in her role at Sovereign and have also covered ASB throughout her seven-year tenure there.

I'm told she can be charming and witty in private, but that's a side of her I've never seen.

I've described her in the past as being wooden and “media-trained within an inch of her life” and, rather than actually answering questions while at ASB, it always appeared that she was following a script, regardless of the questions.

Chapman also chairs both Genesis Energy and NZME, (disclosure: I worked for NZME after it bought BusinessDesk in January 2022 through to April 2023 and also wrote a column for its flagship newspaper, the NZ Herald, in the early 2000s) is deputy chair of the NZ Initiative and a director of Bank of NZ.

You would think her performance at Fletcher would call into question her fitness for her other roles too.

I did write in February that NZME's share price performance was almost as bad as Fletcher's but it has improved considerably since then and is now down less than 1% year-to-date compared with Fletcher's more than 38% decline.