01/12/2014 - 11:05

The circle of trust

01/12/2014 - 11:05

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Some of Perth’s top company directors and dealmakers, including Michael Smith, Ian Cochrane, Michael Ashforth and Tony Iannello have been recruited to help run prominent family companies.

The circle of trust
LIONEL SAMSON SADLEIRS: Michael Smith.

Some of Perth’s top company directors and dealmakers, including Michael Smith, Ian Cochrane, Michael Ashforth and Tony Iannello have been recruited to help run prominent family companies.

Twenty years ago, Neil Hamilton got an unexpected phone call asking if he was interested in taking on a new board position.

He was to become the first outsider to chair D’Orsogna, the smallgoods producer that had been run by members of the D’Orsogna family since 1949.

It was a pivotal time for the family, after it decided the company would benefit from having a professional chairman and chief executive.

Unlike many family businesses, D’Orsogna didn’t opt for just an advisory board – it established a fully fledged board of directors with all of the legal responsibilities that entails.

“The most striking thing I took out of it was the courage of the family, to effectively give stewardship to an outside chairman and chief executive,” Mr Hamilton told Business News.

He said it required support both from the founders and their children.

“It wouldn’t have worked if the children who joined the board hadn’t been committed to it,” Mr Hamilton said.

When the company ‘corporatised’, its annual turnover was $37 million, it had 200 staff and one factory in Palmyra.

Turnover has grown to $170 million, staffing to 500, it has a second factory in Melbourne and is looking to expand again.

Current chairman, former Western Power boss Tony Iannello, said the decision to bring in outsiders also showed a lot of foresight, as the governance model established 20 years ago was still employed.

The family retains four of seven board seats, with the family seats divided between the descendants of company founders Tom and John D’Orsogna.

It’s a similar, but more complicated, story at Lionel Samson Sadleirs, a long-running family business with interests in transport, wine and packaging.

The business has been trading since 1829, when Lionel Samson arrived in Fremantle.

It has a complex governance structure to deal with the reality of having about 80 shareholder ‘members’ spread across the Samson and Cook families.

The families have four of six board seats, with the newest directors, Angus Samson and Tom Wisdom, being sixth-generation family members.

Steve Samson, who recently retired from the company’s board but continues as national chairman of Family Business Australia, said the family got more serious about corporate governance about 10 years ago as the business grew in size.

“When you’ve got 500-plus people employed, that’s a significant organisation; you have to make sure you’re doing the right thing by all the stakeholders,” he said.

It was only three years ago when the board recruited an outsider as chairman – that role is filled by Michael Smith, who is also national president of the Australian Institute of Company Directors and chairman of iiNet.

Mr Samson said external directors come from a different background and perspective, and should introduce independent, creative thought to the board.

“It’s someone who will check your thinking,” he said.

“They should precipitate a discussion, and the family has to make sure they listen, but you don’t want those people to be in the majority.”

Two family companies have broken the mould by giving non-family members a majority of board seats – one is very public, the other is very private.

Craig Mostyn Group was an early mover on the path to a corporate model, appointing its first non-executive director in 1955 and its first non-family chief executive in 1975.

It currently has just two family members – Andrew Mostyn and David Keyte – on its six-member board.

Mr Mostyn said the outsiders were appointed to look after the interests of all family members, particularly those not directly involved in the business, and to boost its credibility in dealings with banks.

VOC Group, which was established by the late Michael Wright, has taken the unusual step of stipulating in its articles of association that a majority of directors must be non-family members.

Mr Wright was one of three children of prospector Peter Wright, who, along with business partner Lang Hancock, negotiated a lucrative iron ore royalties deal with Hamersley Iron (now Rio Tinto) in the 1960s.

Other beneficiaries of that deal – notably Mr Hancock’s daughter Gina Rinehart and her four children – have been involved in a fractious, long-running dispute over the spoils.

Mr Wright and his sister, Angela Bennett, both recruited high-profile outsiders to oversee their family interests.

AMB HOLDINGS: Michael Ashforth.

Mrs Bennett’s AMB Holdings recently appointed Macquarie Capital dealmaker Michael Ashforth as its executive chairman.

His co-directors include former Wesfarmers executive and Sirona Capital director David McMahon, who was recruited in 2012, and family members, including Todd Bennett.

It’s a different set up at VOC Group, which was established by Mr Wright to manage his family’s wealth in perpetuity.

Since his death in 2012, the company needs to have at least five directors, and a majority of these must be non-family members.

Corporate lawyer Ian Cochrane, who retired as a partner at Clifford Chance at the end of last year, is chair at VOC.

VOC GROUP: Ian Cochrane.

The directors include Voyager Enterprises CFO Shane Wilkinson and Sydney lawyer David Lemon.

Mr Lemon previously worked for the late Carnegie ‘Carnie’ Fieldhouse, who was famous for being the lawyer to both Lang Hancock and Peter Wright.

The two family representatives are Mr Wright’s daughters Leonie Baldock and Alexandra Burt.

(Mrs Baldock and Mr McMahon are also directors of Wright Prospecting, which this year beat off a long-running legal challenge from Mrs Rinehart to retain a 50 per cent stake in the large Rhodes Ridge iron ore deposit in the Pilbara.)

VOC Group’s articles state that the company shall “continue for the benefit of the family of Michael Wright”.

The articles define family as Leonie Baldock and Alexandra Burt, and their lineal descendants.

Business News understands that Michael Wright’s widow, Mary-Ann, and his son Myles, who has not been involved in the family’s business affairs, are looked after through other arrangements.

Beyond this general purpose, Mr Wright inserted only one specific preference, “that his trophy company Voyager Estate (WA) be retained as a family legacy”.

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