Special Report Podcast: Ian Liddle – Chief Investment officer, Allan Gray
ALEC HOGG: In this Boardroom Talk special podcast Ian Liddle the chief investment officer at Allan Gray joins us. Ian big news coming out of SABMiller with the changes in the chairman, changes in the chief executive and because this is a company whose management is so stable I guess this is the big news. Let's just go back a little though – how big an investment do you have in SABMiller?
ian liddle: It’s one of the biggest shares in our portfolio. Collectively our clients own probably somewhere between 3% and 4% of the company if I remember correctly.
ALEC HOGG: Which would also make you one of the biggest shareholders, no doubt?
ian liddle: Well no, much smaller than Altria and the Santo Domingo family but probably amongst the larger institutional holders.
ALEC HOGG: Big changes, as mentioned before, coming at the annual general meeting on 26 July – I was surprised to see that Meyer Kahn is all of 72 now and that he’s been in the group for 46 years. I guess he’s going to be missed.
ian liddle: I’m sure he will be. He’s obviously made a tremendous contribution over the years. But I understand he thinks it’s the right time for him to move on, so I guess he thinks the right people are in place to take over from him which is I guess, a credit to him.
ALEC HOGG: Have you had much to do with Meyer directly?
ian liddle: I don’t believe I’ve ever met him face-to-face, but I’ve spoken to him a few times over the phone.
ALEC HOGG: He’s an interesting person, when he was appointed the Financial Mail ran a story calling him “the boytjie from Brits” and they were very sceptical about his appointment as CEO, thinking that he wasn’t going to be the right person. Well he certainly proved him wrong.
ian liddle: Yeah, he was CEO really before my time. I think all the time I’ve interacted with Meyer was in his capacity as chairman of the company.
ALEC HOGG: So Graham Mackay would be someone that you know better.
ian liddle: Yes and I think he’s an excellent candidate to take over from Meyer.
ALEC HOGG: It’s interesting that, that they have gone against all the rules in many ways – explained it in a letter to shareholders, but making the chief executive of the company become first executive chairman, and then chairman of the business. Do you look at this with perhaps an eyebrow raised?
ian liddle: I think I look at the rules with an eyebrow raised, although the one thing to be said for the rules is that they are really apply or expand roles so they still allow for common sense to prevail and where the directors think that it’s in the company’s best interests not to comply with “a rule” then they're free to do so. And I think that’s really what SAB’s directors have decided to do here. They clearly think it’s in SAB’s best interests for Graham to stay involved with the company and they’ve explained why.
ALEC HOGG: Do you buy it?
ian liddle: Yes I do. I guess one of the things that the various corporate governance rules emphasise is independence of a director and it’s important to have some independent directors. I think they tend to put too much weight on independence, not enough weight on other important characteristics like experience, business acumen, wisdom, the respect that the director commands from the executives in the business, skin in the game – all those things are important and on all those criteria, I think Graham scores very highly.
ALEC HOGG: We’ve seen a lot of businesses recently struggle a little with succession planning. In other words they have lost people without having someone who is able to walk into the void. That hasn’t been the case here at SAB. In fact they're telegraphing quite well ahead of time what they're going to be doing.
ian liddle: I think that’s to Meyer and Graham’s credit that – and this is probably hard to see just from looking at the accounts, but it’s certainly my sense that there's a very strong winning culture in SAB which is not something that comes about overnight, but it’s the result of years and years of work and clever thinking about how to motivate people and I would think they could have chosen the new CEO from a long list of internal candidates, all of whom are very good.
ALEC HOGG: He has Allan Clark with him – have you had much to do with him?
ian liddle: I’ve only met Alan once and that was many years ago when he was CEO of ABI...
ALEC HOGG: A quiet man...
ian liddle: Yes but he’s a smart man too and my understanding is that he has the respect of his peers at SAB and so we wish him all the best.
ALEC HOGG: He’s going to give every HR director perhaps a little bit of support in their view of becoming the top – in the top job as he comes from HR. I don’t know if you’ve had a look at his qualifications Ian, but he is a clinical psychologist.
ian liddle: Yeah that’s right – it’s probably good not to have an accountant in top jobs for a change.
ALEC HOGG: ...and a doctorate in literature and philosophy. That’s like the old Anglo American.
ian liddle: Yeah there probably aren’t too many accountants in top jobs – you have to be smart and motivated and work very hard to do very well at SAB and clearly Alan has worked his way up through the ranks and also on merit, so I’m sure he’s up to it.
ALEC HOGG: Are you concerned though that there might be other would-be CEOs who will now leave the group?
ian liddle: Look it’s always a risk – SAB has a lot of strength and depth in their management team and that was one of the questions that I would have for the company. I guess it’s hard to say just when something has been announced, but I wouldn’t expect any major or catastrophic losses.
ALEC HOGG: How important is it when you have a look at a company, because you are a long-term investor that things like succession planning are done well?
ian liddle: Very important. I guess the one thing people might say is it might be less important in a company like SABMiller just because it’s such a high quality business. So you’ll hear some investors say that with a very high quality business, it doesn’t matter who you have managing the thing, the company is going to do well. So I guess that line of argument would say it’s even more important in the tougher businesses that are harder to run in much more competitive industries. But I think even in a company like SAB, management have made a huge difference over the years. They’ve generally out-competed their peers so it’s important and it’s something I like about the company.
ALEC HOGG: Something else that’s rather strange perhaps is that Meyer Kahn is 72, retiring, Graham Mackay is 62, taking over as chairman and Alan Clark is 52 – so you’ve got a 10 year gap between the three of them which is probably quite symmetrical.
ian liddle: Sounds about right – sounds like you're getting the right balance of experience and youthful energy at board level, which is what you want.
ALEC HOGG: And then the successor to Alan Clark is the managing director of SAB Europe, as he moves up. He’s not 42 but 47 – Sue Clark, I’ve met Sue – she’s a smart lady. She came to the group in 2003 again I suppose for some people, she might be a surprise appointment there, given that she was running corporate affairs.
ian liddle: Yeah I guess it’s a move from the centre to the cutting edge of running the business. But I’m not close enough to that to make a really intelligent comment.
ALEC HOGG: So looking at this overall, as a large investor in SABMiller, how does it fill you?
ian liddle: I think on balance it’s good. Graham has been CEO for quite a while now and I think it’s quite a demanding job, given how spread their operations are across the globe. I think he’s done a very good job and it’s probably right to bring in someone new. So on balance, its positive news for me.
ALEC HOGG: And the fact that Graham MacKay will stay as executive chairman for a year while his successor shadows him as the chief operating officer – that’s unusual.
ian liddle: Ja it’s unusual, but it sounds like a good idea to me. I guess we’re not averse to companies doing unusual things, if they’ve applied their minds and they think it makes sense and it’s in shareholders’ best interests. Far rather that than a company blindly following all the rules...
And the term ‘golden years’ banned.