James Hardie Industries has a long and sordid history of attempting to shirk their obligations to asbestos victims. Most recently, the company drew national condemnation as it’s been rocked by controversy amid significant board of directors turmoil. The company’s leadership has been criticized for misleading the public and shareholders about its commitment to compensate those affected by asbestos-related diseases. The chaos only grew deeper after a fast-moving, tumultuous sequence of major developments. These ranged from a proposed $4 billion debt issuance to the abrupt firing of directors at the agency.
In 2001, James Hardie moved its corporate headquarters from Australia to The Netherlands. Many interpreted this change as a move to limit fiscal liabilities. In 2010, the company moved operations once more, this time to Ireland, leading many to wonder if they would ever be held accountable for their past wrongs. Yet the company’s legacy remains marred by the history of its negligence of asbestos victims. In 2009, an investigation found that James Hardie had violated its obligations and deceived the public regarding its duty to provide compensation.
Leadership Challenges
Meredith Hellicar, who was chair of James Hardie, left her post in 2007 in the face of heavy shareholder ire. Most recently, current chairwoman Anne Lloyd suffered a similar fate. She was roundly fired in a highly publicized 17-minute meeting. This debacle is the second time in 16 years that a James Hardie chairwoman has been humiliated in public.
The company’s board has come under even closer fire as two other directors just barely survived shareholder votes. These leadership challenges are just the most recent manifestation of persistent investor and stakeholder unhappiness with the company’s approach, strategy and stewardship of the company.
“So, there was blood all over the floor this morning in Ireland,” – Dean Paatsch
James Hardie announced a record $14 billion allstock acquisition of rival firm Azek this past March. This announcement came amidst chaos in the boardroom. Azek’s underperformance has begun to cast doubt over whether this acquisition can produce the expected benefits or make current complications worse.
Controversial Proposals and Shareholder Sentiment
In addition to these leadership challenges, James Hardie intended to sell new shares. Given this quick resolution, GM would have been stuck with an additional $4 billion in debt burden. Thousands of you submitted comments opposing the misguided proposal. Given its merits and affirmative conditions, it likely would have received shareholder approval had it gone to a vote.
“They were issuing shares in their own company,” – Dean Paatsch
Critics, including Rep. Tom Malinowski, have called this ploy a misdirection, considering the company’s checkered past and current travails. Dean Paatsch commented on the acquisition strategy, stating that it represented “the best house on the best street for what could only be described as a much inferior product. Plus, they paid too much.”
Whether the board’s response to these ongoing challenges has been effective or consistent is another question. Lloyd did express recognition of the importance of shareholder feedback, and a desire to be responsive to them in the future.
“The board acknowledges the significance of these outcomes and will engage with shareholders to understand the feedback received.” – Anne Lloyd
Legal and Ethical Implications
James Hardie’s leadership has come under equally intense fire. This criticism engages corporate governance concerns and legal aspects pertaining to previous asbestos litigation. Gzell has publicly raised questions about testimony former chair Meredith Hellicar provided during court proceedings.
“I have grave doubts about her evidence. There was a dogmatism in her testimony that I do not accept,” – Justice Gzell
Additionally, Justice Gzell concluded Hellicar to be untruthful at various times, describing her as “a most unsatisfactory witness.” This legal background makes the oversight issues for James Hardie’s board of directors all the more difficult.
In the wake of these controversies, then-CFO Anne Lloyd rebutted these criticisms by doubling down on the company’s commitment to serve long-term stakeholder value.
“We have always acted in the long-term interest of all James Hardie stakeholders,” – Anne Lloyd
