How this Aussie giant’s annual meeting turned into a board lynching

It took building materials giant James Hardie decades to restore its reputation. Odiously infamous in the 1990s and early 2000s as the nefarious manufacturer of asbestos-laden products that ultimately led to the deaths of thousands of workers, it was subsequently reborn as one of Australia’s most successful companies.

It took only 24 hours to lose its standing again – this time for a different reason.

The crime this time around was that its board treated shareholders with disdain – and it paid the price for it.

On Thursday morning (AEDT), unhappy shareholders who had been seething since they had been manoeuvred out of getting a vote on the company’s $14 billion acquisition of US decking company Azek in March, got their pound of flesh.

By the close of the company’s 17-minute annual general meeting, James Hardie’s chair Anne Lloyd and two fellow directors from the board lost their jobs and a couple of others had barely scraped over the line.

As shareholder protests go, this was one for Australia’s history books.

It was a brutal display of heads on sticks and a clear warning to other companies that flirt with ignoring corporate democracy.

As shareholder protests go, this was one for Australia’s history books.

The board and the management had failed to engage with the lynching mob of shareholders fighting the deal since it was announced.

The board must have known when the proxy votes were tallied days before the meeting that retribution was ahead, but Lloyd displayed little contrition.

A group of large investors had previously written to the ASX to protest the exchange’s granting of a waiver that allowed James Hardie’s US acquisition to proceed without shareholder approval.

If that wasn’t evidence enough, the shares had lost one-third of their value.

But contrition appeared to be absent from James Hardie’s DNA.

It echoed sounds from the past when the union-led movement sought to challenge the company over putting aside appropriate compensation for those suffering from asbestos exposure.

Both James Hardie’s treatment of asbestos victims and more recently of its shareholders displayed a level of hubris and arrogance that was breathtaking.

It was the courts that eventually forced James Hardie into compensating its asbestos-related mesothelioma victims.

Could it be that the dubious corporate culture had survived decades, through many different boards and executives?

Or did the company, which derives the majority of its profits from the US and is domiciled in Ireland, believe it could ignore Australia, which houses most of its shareholders?

Chief executive Aaron Erter talked enthusiastically about this being a transformative year for the company and noted in his address that the board “take(s) the perspectives of all shareholders seriously.

“We have engaged extensively with many of you during the past several months and deeply appreciate all the feedback that we have heard,” he said. “We are committed to continuous engagement and enhancing the value of your investment.”

And Lloyd was sticking to her guns that the acquisition of Azek was the right thing to do.

But one gets the feeling that the shareholders that drove this embarrassing governance outcome for James Hardie are not finished yet.

They will be looking to be heard on who should replace Lloyd and the departing directors.

Those left sitting around the board table will need to heed shareholder threats, or else find themselves in a similar situation in a year’s time.

But it is difficult to tell whether what’s left of the board of James Hardie has got the memo.

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