Engaging Scot ready to confront future head on

Andrew Mackenzie says BHP has a ‘critical role to play in ensuring the supply of the basic commodities that the world needs to grow’.IF YOU want an insight to Andrew Mackenzie’s mind, the third floor of London’s Magdalen House is a good place to start.

Here in the humble offices of British think tank Demos, the future chief executive of BHP Billiton laid out some of his boldest ideas for society, more than a decade before he would become one of its best paid and most influential citizens.

A flick through ambitious papers like Ethics and the Multinational Corporation reveal a version of Mackenzie that many in the mining industry would recognise today.

There’s a striving for social progress, a demand for companies to think beyond their bottom lines, and a clear belief that open markets are the only way to ensure the world’s population get the food and energy they need. There’s even a wish for business to occasionally win a place in peoples’ hearts: ”We love successful sports teams and entertainers; maybe we could learn to love successful companies too.”

Twelve years on, Mackenzie is about to take control of the world’s most valuable mining company, and with profits beginning to slide, you sense he will soon discover just how compatible ethics and multinationals can be.

There was no coverage of the BHP leadership transition in the Kirkintilloch local newspaper, despite the Scottish town having bragging rights as the childhood home of the world’s newest captain of industry. The 56-year-old Doctor of Chemistry was raised here amid a climate of coalmine closures – an experience that may prepare him for dealing with tough decisions facing BHP’s coal mines in Australia’s eastern states.

While his Scottish roots were paraded proudly this week, Mackenzie has often referred to himself as an ”internationalist”, in a mark of respect to the six nations he has lived in during a career in oil and gas, chemicals and, more recently, mining and resources.

Judging by the thoughts shared in Ethics and the Multinational Corp-oration – a manifesto jointly authored with then colleague David Rice for Demos in 2001 – the notion of an international community sits comfortably with Mackenzie. ”The world, we feel, would benefit from a more international political leadership to complement strong business leadership, creating a more plural society which increases the wellbeing of all the world’s citizens,” they wrote.

The article investigates the decline of nation states and the unplanned rise of corporations as ”the main vehicles for delivering social, environmental and economic progress”.

”Employment, social policy and the environment used to be regarded as the concern of government. Now as a result of globalisation, society appears to be taking some of this power from government and giving it to business.”

If those comments set a high bar for his tenure at BHP, consider these thoughts from the same publication, in the context of BHP being one of the world’s biggest producers of carbon intensive energy through coal, oil and gas. ”Multinational corporations should be happy to be seen as powerful advocates and exemplars for human rights and the environment,” wrote Mackenzie and Rice.

”The only hope for massive reductions in future greenhouse gas emissions to slow climate change may be unilateral action from companies on behalf of their customers, employees and other stakeholders.”

While opinions can change over the years, Mackenzie is known to still believe that companies like BHP are doing more for the world than merely making shareholders wealthy.

Mackenzie is known to believe the mining industry plays a significant role in maintaining peace and stability in the world’s developing nations, by ensuring the raw materials needed to improve living standards are made available in sufficient quantities to prevent tensions spilling over.

Those views were hinted at during this week’s press conference to announce his appointment.

”We have an absolute critical role to play in ensuring the supply of the basic commodities that the world needs to grow, both in population and in wealth,” said Mackenzie in his address to the Australian media.

”You can count on me to continue Marius’s success of using the best management techniques possible and the appropriate technology to develop those ore bodies sustainably for the world and for the shareholders, so that the world gets the resources that it needs to grow in a sort of harmonious way.”

The comments can be seen as a polite challenge to sections of the public – and perhaps the Chinese government – to reconsider the antipathy they hold toward big resource companies like BHP and Rio Tinto.

Mackenzie has spent the past five years at BHP after being poached by Kloppers from Rio. His CV also contains a PhD on the behaviour of hydrocarbon deposits underground and a 22-year stint at BP.

The latter was considered a crucial factor in him beating rivals to the top job, given BHP’s increasing focus on oil and gas. Those who have worked beneath Mackenzie in his role as chief executive of BHP’s non-ferrous division say his moral perspective is one of his nicer aspects.

While profits are the focus for any businessman, they report that Mackenzie has a prevailing desire for his work to achieve something good for the world. This principle comes through in much of his earlier writing with Demos. He was thanked for his role as a sounding board to Paul Miller and Paul Skidmore in their 2004 publication Why future organisations must loosen up, which explored the growing trend for people to want ”their work to be more aligned with their human values”.

Mackenzie explored the topic himself in Ethics and the Multinational Corporation, where he and Rice wrote: ”It is preferable for employees to be able to project their personal values through work rather than leave them at the door. Talented people may not work for companies whose ethics clash with their personal values: money is not everything.”

The softer side of Mackenzie may cheer BHP’s rank-and-file staff, who under Kloppers worked under a rigid set of rules governing office conduct, including bans on pungent food and a strict ”clean desk” policy.

”Compared to Marius, whose IQ is sky high but his EQ [emotional quotient] is not, Andrew has a much higher EQ,” said one source close to the leadership transition.

”He is very good with people, he has got a softer side to him than Marius. Really, these days you want in business someone who has got a good IQ and a good EQ, so they are good with people.”

Mackenzie and his wife Liz move to Melbourne at a time when BHP appears to be coming back to earth after the heady peaks of the mining boom. While Kloppers’ time as chief was punctuated by large acquisition attempts on Rio Tinto, Canada’s Potash Corp and a desire to build greenfield ”mega-projects”, Mackenzie’s era looks set to be more modest thanks to the recent cooling of commodity prices.

He has indicated that divestments are more likely than acquisitions. Growth will be incremental and typically generated through expansions and improvements at existing assets.

Mackenzie has promised a ”lazer-like focus” on keeping costs down and he has vowed to create synergies between BHP’s petroleum and mining divisions. The initial reaction suggests the investment community are willing to give him a fair go.

”In our view, the new appointment is positive as we view Mackenzie as highly capable, he appears to be more willing to listen to the market, and it removes the uncertainty around the succession plan,” wrote JPMorgan’s Lyndon Fagan this week.

Judging from his work with Demos, Mackenzie would expect nothing less: ”Public lynching of business leaders attempting to learn from honest failure, or trying to forge pathways into an unclear future, makes us all risk averse. A constructive outlook would allow us all to be much more optimistic about an ethical future by creating more space for politicians but also for industrialists, to lead.”

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