Combat or consensus: Cannon-Brookes’ team to meet this week with AGL
Now that tech billionaire Mike Cannon-Brookes has eviscerated AGL’s corporate strategy and annihilated its board comes the really hard part – working with what’s left of its depleted governance team. This week, the two previously warring camps will meet in what will be either a test of consensus building or a fiery confrontation.
Cannon-Brookes has at least one non-negotiable element to his demands – that AGL does not attempt to sell either of its two businesses, the retail AGL (cleanco) or the coal energy generation business (dirtyco).
He correctly argues that the shareholders led by him that scuttled AGL’s plans to demerge these two parts of the business have removed AGL’s mandate to split the company by some other means.
There has been unconfirmed chatter around the market that AGL’s investment banks Macquarie and Goldman Sachs have already been looking for potential buyers of either cleanco or dirtyco.
And Cannon-Brookes will be asking AGL to sack both investment banks, which could be a pretty early and easy concession for the company.
Rather than the AGL directors putting their pens down and breathing in the import of having the senior management and board’s strategic plans blown up, the board’s statement on Monday said the company would consider ‘new approaches from third parties’. It was an extraordinary response from a company whose strategic plan was so fresh from being publicly rejected.
Muddy governance situation
The difficult element for Cannon-Brookes is dealing with what’s left of the decision makers inside AGL.
This week’s meeting will be held between Cannon-Brookes (plus team Grok, his investment company), the current chairman of AGL, Peter Botten, who announced his imminent departure on Monday, and Vanessa Sullivan, one of the four remaining directors, who is co-chairing a board subcommittee to review the company’s strategic direction.
Cannon-Brookes will clearly want the AGL board to accept his request for two board positions, and has already got a list of preferred candidates drawn up. But interestingly, he is not asking for either of his nominees to be the chairman, and is happy for that role to be taken by an independent.
It seems likely the names of his candidates will be handed to Botten and Sullivan at this week’s get-together.
What is more difficult to assess in this muddy governance situation is who has the balance of power.
The current board doesn’t really have a mandate to do anything, and Cannon-Brookes has an 11.2 per cent stake – which alongside some shareholder allies was sufficient to stop AGL’s board from demerging, but is not enough to set the corporate agenda.
Thus Cannon-Brookes would be keen to get his candidates around the board table in order to have a say on who will take the most important roles in AGL – that of the new chairman and the new chief executive. (The current chief executive, the badly bruised Graeme Hunt, announced he was leaving when a replacement was found.)
There is already talk that AGL’s chief operating officer Markus Brokhof would be the most likely internal candidate to replace Hunt, and while the Grok camp recognise he is a talented executive it is more likely to push for fresh executive blood at the top.
Stage two of the masterplan
Given Grok can not exercise outright control of AGL, it understands this will need to be achieved by consensus.
Cannon-Brookes has managed to foil the demerger plans, but stage two of his master plan to bring forward the decommissioning of the company’s coal-fired power plants by ten years and have it invest billions of dollars in renewables can’t be achieved unless the board and management agree.
Investment bank UBS has suggested that Cannon-Brookes sees AGL as an opportunity to harness technology to develop an energy trading platform, which uses artificial intelligence to orchestrate all the power generated by households.
Fascinating as this sounds, Grok is still a long way from exercising this level of influence.
In the meantime, there remains a possibility that AGL could become the subject of a takeover bid, but if Cannon-Brookes gets two seats on the board, he would have the ability to block any deal.
All this goes to demonstrate that Cannon-Brookes has so far only won a mandate to stop a demerger. He will need more say before he can stop the company selling off one of its two businesses, and even more influence before he can dictate the minutiae of its operations.
No wonder he is now all about consensus building.
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Source: Thanks smh.com