Qantas ‘strategic’ bid confirmation by Dixon puts Joyce and Clifford in a very tough place
November 26, 2011 – 7:31 am, by Ben Sandilands
This morning’s confirmation in The Australian of a plan by former Qantas CEO Geoff Dixon to buy a ‘strategic’ stake in the airline puts its current CEO Alan Joyce and chairman Leigh Clifford at risk.
That risk arises from their claims to have no knowledge of any move on Qantas by interested parties, claims made in various interviews and at the Qantas AGM of 28 October, the day before Alan Joyce insists that he woke up and said to himself it was time to ground the airline without warning to all those customers it kept selling fares to for flights that wouldn’t operate.
Joyce and Clifford are potentially compromised by the revelations because while they are required to maximise returns to Qantas shareholders, Joyce had been meeting with Dixon as far back as May with his predecessor who was involved in a plan to take advantage of the low share price to buy a strategic stake.
If we assume that Joyce learned of this plan and informed his chairman Clifford of this materially significant intelligence then Clifford is going to come under intense scrutiny for the way he chose to handle that information. If Clifford didn’t know anything about, he is at risk for failing to exercise diligent oversight of the performance of his CEO, not to mention failing to investigate persistent media reporting of market talk of an impending play on an undervalued Qantas.
There is an obvious tension between Joyce meeting with a person involved in a potential play based on a declining share price, and his role as CEO to maximise the company’s value.
The only defence Joyce would have is that of being taken for a fool by Dixon and kept completely in the dark. In a second article in The Australian Dixon makes the following observations which go to the very nature of regular contacts between himself and Joyce.
While speculation of the play is said to have angered Alan Joyce at the time, Dixon says they remain “quite close”.
“We would have a drink every couple of weeks,” he says.
“We get on very well. We are, as he said the other day, very left of centre in our politics. Do I give him some advice? Very rarely. If he asks my opinion, I give it. When we get together we talk principally about airlines.” . There is an enormous body of video audio records of Joyce and Clifford batting away speculation about a bid between May and end of October. Dixon would have known this when he chose to disclose the true state of affairs to The Australian’s business affairs journalist Damon Kitney, and this means investors and employees need to know what will be the consequences, intended or otherwise, from this story being lobbed at this moment.
It is implausible that Dixon had a Joyce moment, woke up and thought it was time to suddenly tell all, as distinct from spontaneously grounding the entire airline.
One thing is clear. Qantas stock has been traded for months without all investors being in possession of all of the information known to Joyce. On what basis did Joyce choose not to share his information about the matters raised by Dixon? And who else knew?
This management has some credibility and transparency issues. Joyce broke all the normal protocols in going public over ‘death threats’ that a subsequent police task force investigated without result for weeks and at considerable public expense, and according to some reports, achieving no result because of the later intervention of Qantas.
He has been materially contradicted over the spontaneity of his decision to ground the airline, and break Australian consumer law, on 29 October, by evidence concerning hotel bookings, and the courier arrangements made well in advance for the individual delivery of lock out notices to some 30,000 Qantas employees, and he has given inconsistent guidance about plans for a premium narrow body Asia based carrier that will variously cost 1000 jobs, no jobs, be based in Singapore or Malaysia, and while only minority owned, will save the fortunes of Qantas international, which in the meantime is being reduced in size.
This is an enterprise in which the unions, the focus of management finger pointing, could disappear tomorrow and it would remain in severe decline because of its failures in managing its brand, its product, its fleet and its network.
Like the police death threats fiasco, the Dixon disclosures leave a very bad smell hanging over this management.
Comments (6) | Permalink
6 Comments
1
LongTimeObserver
Posted November 26, 2011 at 7:54 am | Permalink
Ooops. BUSTED!
2
Bas Scheffers
Posted November 26, 2011 at 9:09 am | Permalink
You are confusing “not having heard the rumours” and “no knowledge” in a guy-running-a-public-company sense.
What should he have done when he too heard talk of a group of people considering buying a large chunk of shares, something that group themselves obviously wanted to keep secret as to not increase the share price prematurely?
Should AJ have shouted it from the roof tops, probably pumping up the share price?
Then today (or Monday, when markets open) you would have written a story how he facilitated a pump-and-dump for existing share holders at the expense of those who bought in when they saw the price go up and are now much worse off.
Unless there was a firm offer that this group of investors wanted to take to the shareholders, “no knowledge” is *exactly* the right line.
Anything else could well see you investigated, fined and jailed by ASIC.
3
Ben Sandilands
Posted November 26, 2011 at 9:26 am | Permalink
You have a touching faith in ASIC or perhaps you have no knowledge of its consistent and scandalous failures to enforce corporate governance requirements in Australia.
It’s worth a long search and read when the opportunity arises.
While there is a grey area as to what a board should do when a CEO is informed of a potential play, as distinct from a formal offer, there is a clear legal duty to truthfully answer the question, Are you aware of any proposed or planned bid for a reportable stake in Qantas stock?
I think that in terms of the public record that question was not truthfully answered, on a number of occasions.
I also think that certain parties will now examine the public record with a view to determining if the market has been fully and truthfully informed.
4
TomTom
Posted November 26, 2011 at 9:42 am | Permalink
re: “Then today (or Monday, when markets open) you would have written a story how he facilitated a pump-and-dump for existing share holders…”
Well, yeah, if there has been any malfeasance in either direction, it would be reported.
And it’s a fair question. The biggest problem besetting Clifford and Joyce is of their own making: they have very little credibility because it is one revelation after another, one hard-to-believe story after another, one own-goal after another. This pattern of dissembling, obfuscation and incompetence has woven a thread which is easier to believe than the ritual denials from Qantas P.R. department.
How many side shows are currently active in this circus? Let’s see: there’s Jetstar, there’s the RB211 problem, there are the various union issues, there is the Red Q and Malaysia and sigapore and Hong Kong reputed Qantas offspring-to-be, there’s the on again/off again investigation into alleged death threats, there’s the spontaneous grounding, there’s the major social media and P.R. fail right at the time of the grounding, there’s the issue of selling tickets into the grounding, there’s the allegedly perjured testimony to the Senate enquiry regarding the grounding, there’s the issue of the CEO and other senior management too busy to respond to a new Senate enquiry regarding the alleged perjury to the prior Senate enquiry, there’s the large entourage seen in the SQ lounge in Singapore raising the issue of who is minding the store, there is the issue of 71% pay rise for the CEO who is the proud sponsor of all of this chaos – let’s see, have I missed anything?
The Bottom Line, to me, is that the current leadership is not capable and does not have the credibility to lead Qantas out of the quagmire of all of these distractions – not to mention other pertinent issues which should be focused upon, such as the poaching of all of Qantas’ traffic by other carriers while its management is focused on all of these distractions.
The current senior management should step aside and allow a new management to come in and actually manage and lead Qantas, without all of these self-inflicted wounds and self-induced distractions – before it is too late. Enough is enough.
5
johnb78
Posted November 26, 2011 at 9:58 am | Permalink
I’m more confused by “very left of centre in our politics” than anything else. Offshoring the majority of your business, at the risk of destroying it altogether, in an at-all-costs attempt to break the unions, isn’t listed under ‘left-of-centre’ in my dictionary.
6
ohreally
Posted November 26, 2011 at 10:50 am | Permalink
He is left of centre , if you consider Adolf hitler centre
QAN Price at posting:
$1.46 Sentiment: None Disclosure: Not Held
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