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23 April 2012 23:13

SABMiller plc board and management changes: Ian Liddle (Allan Gray) & Tony Manning (strategy consultant)

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Alec Hogg is a writer and broadcaster. He founded Moneyweb

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    Both interviewees have high praise for SAB and its succession plans.

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    ALEC HOGG: Fifty-two-year-old Alan Clark, who ran ABI in Johannesburg before moving abroad to run SAB’s European operations, has been tapped to succeed Graham Mackay as chief executive of SABMiller. Mackay will become executive chairman. That’s a move which breaks the recommended corporate governance rules, where they say you should separate the chairman from the chief executive and never appoint the chief executive then as the executive chairman – and, indeed, as Mackay is going to be, the chairman thereafter. So I asked the chief investment officer of Breweries’ biggest local shareholder, Ian Liddle of Allan Gray, whether he raised an eyebrow at today’s news.
    ***

    IAN LIDDLE: I think … the one thing to be said for the rules is that they are really apply-or-explain rules. So they still allow for common sense to prevail, and where the directors think that it's in the company’s best interest not to comply with “a rule”, then they are free to do so. I think that’s really what the SAB 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?

    AN LIDDLE: Yes, I do. I guess one of the things that the various corporate governance rules emphasises 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 and not enough weight on other important characteristics like experience, business acumen, 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 new people without having someone who is able to walk into the void. That hasn’t been the case here at SAB – in fact they are telegraphing quite well ahead of time what they are going to be doing.

    AN LIDDLE: Yes, I think that’s to Meyer and Graham’s credit – and this is probably hard to see just from looking at the accounts. Certainly in my sense there’s a very strong 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: Well, the share price is down by just over 1% today. Not bad, less than the market, R3.30, I suppose at a R324 share price, Dave.

    DAVID SHAPIRO: It's been a great performer. Just look where it's come from.

    ALEC HOGG: If Allan Gray is a big shareholder, you are probably in the right…

    DAVID SHAPIRO: As a point, just stay with the good companies. You find analysts tend to look at metrics and say, ah, this is too expensive, and so on. But I think with companies like that, where you know – and Ian said it – they’ve got a winning formula, they’ve got a winning culture, stay with it.

    ALEC HOGG: Tony Manning is a strategy consultant and author. I refer to you often, Tony, when we talk abut SABMiller, because back in the day when you wrote a book at the time of transition to the new democracy, this was the one world-class company that you tipped and, my goodness, have they gone on to prove you right!

    TONY MANNING: Ja, you are right, Alec. Well, they spent many, many years trying to understand what it would take to be world class. So they came into the game very well prepared. And when they started moving, improving production of beer, improving branding with gearing and improving distribution of beer, they had a very clear sense of what it was going… and they’ve been relentless about honing most… abilities over the last 20-odd years. So it really is a phenomenal story and I must agree with everything that has been said about Graham. I think he was two years ago by Harvard ranked as one of the top ten CEOs in the world in terms of what he had produced for shareholders over a long period of time. He’s an absolutely outstanding executive and, like the guys around him, understands that business absolutely backwards. So they all bring enormous strengths into the game.

    ALEC HOGG: One of the top 10 in the world – that’s quite an accolade from the Harvard Business Review. But Alan Clark – do you know him well? Do you think he’s going to carry on the tradition?

    TONY MANNING: I don’t know him well, but I worked with him and Graham many, many years ago on their strategies, and he’s been in the business for years and has had a fantastic track record. So I think the prospects under him are outstanding and with Graham still involved and, I guess, involved for many years, there’s no question the business is going to go from strength to strength. This is a really remarkable organisation – on the one hand because of its length of focus on what it has to be good at, but also in terms of its deal-making capability, it's ability to strike up relationships with the societies and the governments where it's involved. So it's a very unusual kind of organisation.

    ALEC HOGG: The departure of Meyer Kahn after 46 years at SABMiller – that’s quite a long period, and quite a track record. I suppose he won't only be missed for his humour.

    TONY MANNING: I'm sure he’ll be missed for his humour. And I thought he brought a great deal of flair to the business, because no question – the so-called boykie from Boksburg is a very savvy businessman, and I have no doubt that he was very involved in much of the deal-making and the decision-making behind those deals. And yes, I'm sure he’ll be missed. But there comes a time you’ve got to step down and move on, and I have absolutely no doubt at all that Graham is going to fill those shoes adequately. And to think about bringing an outsider in, to me, when you’ve got Graham sitting here, just makes no sense at all, quite frankly.

    ALEC HOGG: One of the points that Ian Liddle made was that there was probably a legion of managers that could have been tapped to take over as the next chief executive. Would you agree with that, or is Alan Clark perhaps one who stood out?

    TONY MANNING: Look, there’s no question – Alan has got the job because, of all the people available, there was a decision made that he really was the guy who should be No 1. However, I think SAB brings a serious [lesson] to all companies, which is the importance of a deep bench, and the importance of building executive talent and a team over many, many years. And I think for businesses in South Africa that aspire to be world class, there’s a very, very powerful lesson here. We fall into the trap of thinking anybody can do anything and you can make a manager in five seconds flat, which is just not the way it works. These guys understand that it is a long, slow process of honing talent, building talent, and building that spirit amongst the team that is so important. So that’s the kind of thing that I think makes them No 1…

    ALEC HOGG: Tony Manning. Dave, I don’t know if you had the chance to watch Carte Blanche last night – but you’ve got to feel for Khulubuse Zuma. The way that he was manipulated and was completely out of his depth, as he’s admitted now on camera, finally, in the whole Aurora saga, is just pitiful. I think what Tony is saying is right – it's not easy to run a big company, it's not easy to run any company. You need the experience, you need your talents to be honed, you need to be putting your head down and working at it over a period of time – and hey, presto! Look at the results that you can see SAB achieved.

    DAVID SHAPIRO: I think it doesn’t only apply in business. It applies in administration, even in government, etc. It's a very important rule that Tony has brought up.

    ALEC HOGG: You've got raw talent, which is fantastic. Hone the talent, but don’t throw the talent in a time when maybe you are doing them more of…

    DAVID SHAPIRO: When you set the people up for failure.

    ALEC HOGG: We shouldn’t do that in our country. We've got great people coming through, which is wonderful, and it's nice to see another South African to run this big international company. And, as he said, the bench is strong.

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