FILE PHOTO: A James Hardie factory is seen behind a fence in western Sydney September 24, 2004. REUTERS/Tim Wimborne
January 7, 2022
By Harish Sridharan and Shashwat Awasthi
(Reuters) – Australian building materials giant James Hardie Industries fired its CEO after dozens of top executives threatened to quit over his management style, a shock development for a company that has ridden a pandemic housing boom to record profit.
The world No. 1 maker of fibre cement products said Jack Truong’s work-related interactions with up to 50 employees “extensively and materially breached” the company’s code of conduct but did not elaborate.
His dismissal underscores the growing importance companies are putting on executive conduct beyond traditional measures of performance like profit and dividends. Rio Tinto, Australia’s second-largest miner, and QBE Insurance, the country’s biggest insurer, have both lost CEOs in recent years over lawful actions deemed by their boards to have crossed ethical lines.
James Hardie Executive Chairman Mike Hammes told a conference call that he had urged Truong, who had been CEO since January 2019, to change his behaviour after many employees threatened to quit as a direct result of his conduct.
Despite those calls, as well as engaging an external counsel and a third-party consultant to address the issues raised, “it was clear that sincere change did not occur,” Hammes said.
“He was unwilling to accept what caused the issues in the first place… it was not a chemistry problem, it was a lot more fundamental than that,” he said.
Truong did not immediately respond to a request for comment.
The news initially sent James Hardie’s shares sliding nearly 11% lower on Friday, before they pared losses to be down about 4% in late trade against a 1.3% gain for the broader market.
“We have never seen something like this but appreciate the board’s decisive action,” RBC Capital Markets analyst Paul Quinn said in a client note.
“This reduces the risk of a mass exodus from the company’s leadership ranks and hopefully indicates potential for a repair of whatever damage has been done.”
The company named Harold Wiens, an independent non-executive director and a former executive at 3M Co, as its interim CEO while it looked for a permanent leader.
James Hardie also issued a third upgrade to its profit outlook in a year. It now expects adjusted net profit between $605 million and $625 million compared with a November estimate of $580 million to $600 million. Graphic: James Hardie stock soars since 2017 strategic transformation, https://fingfx.thomsonreuters.com/gfx/mkt/lbvgnjbxnpq/Pasted%20image%201641507994887.png
(Reporting by Harish Sridharan and Shashwat Awasthian and Byron Kaye in Sydney; Additional reporting by Upasana Singh; Editing by Uttaresh.V and Edwina Gibbs)