The Swiss Commodity traders Glencore has avoided much of the hype centred on successful businesses and their leaders. So when they announced an initial public offering (IPO) of shares for next month in London and Hong Kong [May 2011] a very interesting story began to emerge
At first the news was mostly on the scale and timing of the IPO. The company offering of $11 billion shares set a corporate value of around $60 billion. The risks of commodities trading as well as its rewards are more well-known, although as one commentator put it
“They have been a private-run company and made a truck-load of money and you’d have to think that these guys would have more market intelligence than most”
The IPO documentation alerted journalists to remuneration paid to its cadre of top traders. I couldn’t help thinking of the advertisement to be seen as you arrive at Geneva airport “Money talks but wealth whispers.” The Swiss have developed a well-justified reputation for financial discretion.
Glencore [global energy commodity resources] changed its name from Marc Rich & Co. after a management buy-out in 1994. Mr Rich has been described as a former fugitive U.S. financier. [He was indicted in the United States on federal charges of illegally making oil deals with Iran during the Iran hostage crisis. He was in Switzerland at the time of the indictment. He subsequently received a presidential pardon from U.S. President Bill Clinton on his last day of office. One report described The Rich Boys: "an ultra-secretive network rules independent oil trading. Its mentor: Marc Rich". The network includes former 'Rich Boys' who spun off and founded Trafigura, the company at the heart of a superinjuction story in 2009].
More stories developed
More stories developed. Some were about the company’s avoidance of public scrutiny. More was made public of interesting remuneration statistics.
According to financial data from Glencore Energy, a wholly owned subsidiary of Glencore UK, its 32 traders earned a total of $US41.5m. In addition, traders are understood to be paid substantial performance-related share awards. The remuneration packages of Glencore’s traders dwarfs the average payout by banks to their star employees. For example, Glencore’s London-based oil traders earn almost four times the average paid to Barclays Capital’s investment bankers.
Another story produced unfavourable comments on the uninhibited views expressed by its new chairman Simon Murray
Ruth Sutherland of The Mail online noted
Say what you like about Simon Murray, the veteran Hong Kong entrepreneur appointed to chair Glencore, but he cannot be accused of dullness. The choice of a 71-year-old polar adventurer and former French Foreign Legionnaire as chairman of Glencore always promised to be entertaining and so it has proved. Murray created a furore with his views on women in the boardroom, making it clear he wouldn’t be rushing to recruit any.
In contrast, someone who was appointed a director was Tony Hayward, the man at the centre of the BP oil-spill disaster. However, the BBC’s top business commentator Robert Peston was forced to retract a story that Lord Browne, Haywood’s mentor and former boss at BP, was to become chairman of the new floated company and at the same time revealed the appointment of Simon Murray. According to Peston, Lord Browne was rather too keen on conforming to corporate governance guidelines.
I hesitate to offer more than a few tentative questions at this stage of the unfolding story. Glencore has rarely been held up as an example of effective corporate leadership, preferring to avoid publicity. Its current chairman is quickly labelled as an old-fashioned charismatic frontiersman impatient with conventions of political correctness. Lord Browne, himself once seen as someone prepared to take risks in the interests of corporate growth, is cast as the prudent upholder of corporate governance principles. Is the polar explorer a perfect match for the once discrete corporation? Will its wealth now not so much be whispered about, but shouted in business headlines? Will Goldman Sachs, who was not invited to the IPO party, be shown right in its reservations about the whole business?