Jim Armitage: Glencore's top brass pay the price for misjudgments

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It’s long been said that Glencore’s collapsing share price was of only passing interest to its billionaire traders. 

For them, constrained by how much of their vast stakes in the company they can sell without spooking the market, the dividend was what really mattered.

Ivan Glasenberg, Daniel Mate, Alex Beard and other Glencore top dogs have enjoyed a share of the divi numbering in the tens of millions of dollars every six months.

Even in the bad times these payments have been huge. For the dismal half-year it reported last month Glasenberg’s take was £62 million.

That all changed today. Having finally bowed to investors’ rising fears about his refusal seriously to deal with its $30 billion (£19.6 billion)-plus pile of debt, Glasenberg has ordered his troops to sacrifice their six-monthly payola. Not only that, but they are also having to chuck tens of millions of their personal wealth into the collection plate to get today’s $2.5 billion fundraiser away. 

So, nothing coming in, millions going out.


Glencore’s share price performance since June

Doubtless Glencore top brass will stick with their leader, but further down the chain, among those less able to afford such a squeeze, I wonder if unrest may begin. Expensive wives, children and lifestyles have to be funded from somewhere, and that’s not so easy if you’re only on the shopfloor of the millionaire’s factory. 

Glasenberg has made multiple misjudgements since he floated the company four years ago.

The biggest, clearly, was missing the looming commodities crash when he spent $46 billion buying Xstrata.

Subsequently he has continued investing in minerals the world no longer wants to buy and placed too much trust in his company’s much-vaunted market intelligence.

But today we saw a new theme in his poor calculations — a terrible misunderstanding of his investors. Less than three weeks after he declared Glencore’s debts were manageable, his other shareholders forced him to think again.

It’s easy to blame Glasenberg alone for all this. After all, Glasenberg is Glencore. 

But questions must surely be asked of the chairman, former BP boss Tony Hayward. 

It’s the chairman’s job to engage with investors and feed their opinions back to the board.

Did he not pick up on their concerns before last month’s statement, or did the directors simply not listen to him?


Glencore chairman Tony Hayward

The good news is that the board has finally listened and taken the bold action that was needed.

Today marks a first step in seriously addressing the company’s debt crisis; a step that could mark an end to the relentless punishment of the share price. 

A less risky, perhaps humbler, Glencore emerges.

Source Article from http://www.standard.co.uk/business/jim-armitage-glencores-top-brass-pay-the-price-for-misjudgments-a2928576.html

September 7, 2015 |
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