...sounds like Trump doesn't it? Personal fiefdom, do whatever he wants like he is not accountable to anyone else
...and our society has forgotten about Ethics and Values, if you like the person and he works in your self interests, you are prepared to ignore all his misdeeds. But if you don't, just the slightest misdeeds can be blown out of proportion.
...18 months stay, why has that not be extended in other similar cases because like Trump, he is an icon above all others. They couldn't do without him, so he gets a reprieve.
...and when the rich gets richer through abuse of power, and the poorer still support them, then they can only blame themselves staying poor. Ellison should leave MinRes, today. Investors gave him a reprieve
In as good an example of investor Stockholm syndrome as you’ll ever see, Mineral Resources investors have saved the company’s managing director for up to 18 months.
Nov 4, 2024 – 12.04pm
When Chris Ellison listed Mineral Resources on the ASX in 2006 and raised capital again in 2009, he made an implicit deal with mum and dad shareholders and institutions that he would run the company in the interests of every owner.
The only person who apparently failed to understand this? Ellison himself.
Evidence uncovered by a two-year investigation conducted by the company’s own board suggests Ellison has run MinRes as a personal fiefdom.
He told MinRes staff to work on his personal boat and properties. He directed company employees to manage his personal finances. He used the company to buy goods and services for his personal use. He benefited from a string of related party transactions between the company and Ellison or those close to him, including where his daughter received rent relief on company-owned properties.
Remarkably, all this was in addition to the main allegation levelled at Ellison: that he dragged MinRes into a tax evasion scheme that he and his associates operated for a decade. The board’s investigation has also substantiated that claim, finding that the company paid $3.8 million of shareholder money to the entity at the heart of the tax evasion scheme after MinRes was listed in 2006.
Perhaps even more damningly, Ellison did not disclose to the MinRes board that he had settled this tax matter with the Australian Taxation Office – by repaying just under $4 million in unpaid taxes, interest and administrative penalties – until November last year.
The picture that emerges from the stunning revelations, which were made public by the MinRes board on Monday, is of a founder who has given the board of MinRes and rusted-on investors the middle finger while he operated the miner as a sort of turbocharged family office. Will justice arrive?
Almost any of the examples above would be grounds to immediately sack Ellison at virtually any other organisation in this country. But remarkably, he will remain as managing director of the miner for up to 18 months, while the company effects an orderly transition to new leadership.
Yes, Ellison will need to repay that $3.8 million MinRes paid as part of liabilities related to the tax evasion scheme. Yes, Ellison will forfeit various incentive payments and shares. Yes, Ellison has agreed to make a charitable donation of $1 million a year for the next five years. Yes, Ellison is “deeply sorry for the events that have occurred and the impact they have had on MinRes’ reputation”. Yes, his own reputation is in the toilet.
But he’ll keep his job, at least for another year and a half.
How on earth does that work? Ask MinRes’ major shareholders.
Chanticleer understands that after weeks of discussions with MinRes chairman James McClements – who will himself walk the plank – about 13 of the top 15 shareholders have effectively agreed to hold their noses for another 18 months because they believe that without Ellison, this company would fall apart.
Ellison’s reputation as a mercurial money maker is the stuff of legend in the Australian market. But surely this is as good an example of investor Stockholm syndrome as you’ll see.
Many large shareholders admit they’ve long been uncomfortable with the governance practices they see at MinRes, such as the related party transactions and poor disclosure. But even now, having been presented with more evidence that Ellison has treated them like second-class citizens, they’re still prepared to support the board’s approach of delayed justice.
And make no mistake: there is a real question as to whether that justice will arrive.
While Ellison and the board are said to be resolute in their commitment to succession, the ink was barely dry on the board’s ASX release when major shareholder L1 Capital said that while it is supportive of improved governance and oversight, it wants Ellison to stay on as chief executive and has been talking to several other shareholders who feel similarly.
The idea that we could have a showdown where a group of investors publicly fight to retain a CEO who has so clearly crossed ethical lines and destroyed any notion of good corporate governance at MinRes is breathtaking.
One wonders how L1 and other investors who are supportive of Ellison remaining as chief executive would explain that position to their own clients. Yes, we know this guy is a bit of a corporate scoundrel, but hey, he makes us money, so what’s the problem? That’s not an easy position to take.
The investors backing Ellison will also be hoping no fresh revelations emerge. That will leave them in a very tough spot.
The board had an incredibly difficult needle to thread here, and it thinks it’s found a pragmatic solution to a very bad situation. A corporate governance failure
McClements, who was scheduled to leave by next year’s annual general meeting, will go when a suitable replacement can be found. A new ethics and governance committee will be forged. And the company’s policies on honesty, integrity and ethics will be reinforced throughout the business – although we doubt anyone breaching them should expect the same 18-month reprieve Ellison has got.
And that’s the problem here. By failing to rein in the founder and chief executive, the board has created a corporate governance failure that will reverberate through MinRes for years to come.
The related party transactions aren’t new. The payments made by the company as part of Ellison’s tax evasion scheme aren’t new. Even the investigation of these matters is, by the board’s own admission, more than two years old.
It’s hard to escape the idea that the board has let this stuff build and build and build until the stench was simply too big to ignore. Ellison, who remains on planned leave, will have to face MinRes shareholders at the company’s AGM on November 21.
Perhaps then he can explain how on earth it is that a billionaire needed to nickel and dime his own company, and his own shareholders, with these plainly dumb little deals and arrangements. Yes, MinRes says Ellison repaid what he owed for use of company assets and resources, but it’s the fact that he was prepared to do it at all that baffles.
Was it arrogance? Was it hubris? Was it just a case that old habits die hard? Ellison said on Monday in a statement that some of his mistakes “were driven by my wish to keep private certain events that cause me great personal embarrassment”, but that’s hard to reconcile given the increased embarrassment he now faces.
Besides the future of Ellison, there are plenty of other questions to be answered from this mess.
What will any investigation by the Australian Securities and Investments Commission unearth? Surely the grounds for a full probe by the corporate cop have only expanded after Monday’s revelations.
What will the ATO say about the deal struck with Ellison? Expect plenty of heat the next time ATO officials front Senate estimates, and rightly so.
Finally, there’s a broader issue for the business community to consider as they argue for the corporate sector’s wider purpose not to be forgotten. The real danger is that instances such as this risk reinforcing a suggestion that as long as you make money, nothing else matters.
Some investors can think like that, but businesses cannot allow that perception to take root in the community.
