ASM (ASX) Ann: Managing Director and CEO Transition

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55.5¢ australian strategic materials limited

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aceisme

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19/07/22

10:34

Post #: 62603356
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Originally posted by Maccajohn: ↑

These sorts of announcements with the sudden departure of the CEO and immediate appointment of a new one without enough details are always a puzzle to shareholders. Where there is a clear lack of transparency regarding reasons for the changes, and this ASM announcement is a good example, it always leaves shareholders unsettled and speculating which is never good for the SP.

It is also disconcerting that this is the second time it has happened to DW (ie happened at FMG).

CEO’s always have longer periods for termination or resignation and 3 months or longer is the norm.

Where the CEO departs with immediate effect, it normally implies that it is due to the board viewing the CEO’s performance as unsatisfactory or due a clash between the board (ie personality, strategy, etc) or some form of misconduct The board dresses it up as a resignation but it is not a real resignation. Serious misconduct by the CEO usually results in immediate dismissal of the CEO, appointment of an acting CEO and full transparency of the reasons in the announcement (eg a past QBE CEO).

Another possible reason for the CEO departure is due to personal reasons which covers a multitude of issues such as health, spending more time with family, etc. However, in my experience departure of CEO’s for this reason are normally disclosed in the announcement but I admit this may not always be the case.

Other reasons for departure of the CEO include the CEO taking a position in another company or it’s the end of the contract period. Both these reason would normally be disclosed in a market announcement.

What is very clear is that is that discussions have been going on for sometime at board and senior exec level (how long no one knows) for the departure of DW and appointment of the new CEO to be announcement at the same time. Serious mIsconduct by the CEO usually results in immediate dismissal and an acting CEO is appointed.

It is also quite disconcerting to ASM shareholders that this is the second time it has happened to DW (ie it happened at FMG). I also believe it is unusual for the Chair to be in Korea, meeting with potential partners and doing media interviews without the CEO (does anyone know if IG was accompanied by the new CEO?).

While I am aware it is speculation on my part, thinking about it logically based on my experience, actual and past similar situations noted in the media (as I attempted above) my money is on unsatisfactory performance.(I would be surprised it was a clash on strategy or personality). If that is the real reason and the new CEO is much better than the old CEO (and that requires proof from actual performance) then this should be good for the ASM performance and the SP. However in the short term lack of transparency will probably weigh on the SP until it is clear the new CEO is better or until the real reason is made public.

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ASM Price at posting: $3.16 Sentiment: Buy Disclosure: Held
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