Thanks @thunderhead - that AFR report that you provided the link to was on Saturday (yesterday), and it followed this AFR article on Thursday evening:

WiseTech’s Richard White ‘fix’ just creates another problem

Given White still has CEO in his title, it’s hard not to be sceptical this fix provides the appearance of punishment for White, but shifts him into a role where his influence is just as great.

Chanticleer, AFR, Oct 24, 2024 – 6.01pm

WiseTech founder Richard White and chairman Richard Dammery must be dizzy, because the amount of spin contained in the announcement of White’s decision to stand down as chief executive is breathtaking.

After weeks of salacious revelations about White’s relationships with women, Dammery announced late on Thursday that White would step down as a director and CEO, take a short break and transition to a role that will be called “founder and founding CEO”.

WiseTech co-founder Richard White will move to a “founding CEO” role. David Rowe

After the short break, White will move to become a full-time consultant for WiseTech, reporting directly to the chairman and focused on product and business development. The consulting agreement will have a 10-year term, which could be extended by another five years.

Apparently, Dammery and White have been “discussing the evolution of the company and succession of the CEO role for many months”. Please, gents. We didn’t come down in the last shower.

The WiseTech camp acknowledges this is far from a perfect solution, but they see it as a diplomatic one.

Losing White would have been diabolical for the company on two fronts, insiders argue.

First, he is the undisputed master of WiseTech’s product roadmap and strategy. There is, very clearly, no obvious successor.

Second, White controls 30 per cent of the company’s shares and, when you include his close relationships with other major investors and executives, probably influences about 50 per cent of the register. Alienating White was not seen as an option.

Dammery and White have come to an agreement where everyone can save a bit of face, where WiseTech can gain a bit of breathing space, and where WiseTech can promise its investors that it will raise the bar on governance and accountability.

That’s the theory, anyway. But given White literally still has CEO in his title, it’s hard not to be sceptical that this is really just an each-way bet – provide the appearance of punishment for White, but shift him into a role where his influence is just as great.

To be fair, that appears to be exactly what many WiseTech shareholders want. We suspect the share price hasn’t dropped 19 per cent in four days because investors feared White would stay, but because they were worried he might end up banished.

But investors need to accept that in defusing one corporate governance timebomb, Dammery has lit the fuse on another.

As the board begins its inevitable global search for a new CEO, it does so knowing that they will be fishing in a very shallow pool. What serious CEO candidate would contemplate taking a job where the “founder and founding CEO” reports directly to the chairman and board, and has responsibility for the two most important functions in the company: product and business development?

Who will actually be running the joint? Who is in charge of strategic direction? If push comes to shove, does the board side with White or the next CEO?

Those are problems for another day. And at the very least, Dammery has bought time to address them down the track.

But he’d better hope that the investigation into the board’s handling of the matter by law firms Herbert Smith Freehills and Seyfarth Shaw uncovers no fresh problems, and that the revelations about White himself dry up.

Otherwise this Band-Aid won’t hold.

--- ends ---

Related

WiseTech director’s scathing assessment of ‘bully’ Richard White

Related

WiseTech and MinRes are prisoners of their founders’ success

WiseTech and MinRes are prisoners of their founders’ success

Investors love founders for their skin in the game and long-term thinking. But the dramas surrounding Richard White and Chris Ellison highlight the dark side of founder worship.

Chanticleer - AFR - Oct 21, 2024 – 10.31am

We don’t need a crystal ball to see where the Mineral Resources board’s investigation into founder and CEO Chris Ellison’s alleged tax evasion scheme will land.

Never mind that Ellison himself has described the alleged scheme to use a tax haven to hide profits from Australian taxpayers as “a poor decision and a serious lapse of judgment”.

Richard White and Chris Ellison are under heavy fire.  Dominic Lorrimer, Trevor Collens

Never mind the fact that the investigation is incomplete.

MinRes chairman James McClements has already written this off as a personal tax matter that should be condemned to the past; Ellison self-reported to the Australian Taxation Office and has repaid outstanding obligations. The board, McClements says, “has full confidence in Mr Ellison and his leadership of the MinRes executive team”.

And how could they not? Without Ellison’s visionary leadership, without the hard graft that saw him create a $9 billion company, there is no MinRes – and no MinRes board.

Welcome to the world of the founder-led company, where the best ones work brilliantly – until they don’t.

The dramas engulfing MinRes and Richard White, the founder of the $41 billion tech giant WiseTech, have exposed the dark side of the ASX’s unique brand of founder worship.

While WiseTech shares plunged a staggering 17 per cent on Monday morning, and MinRes shares fell more than 8.6 per cent, investors generally love investing in companies run and controlled by founders.

They love the skin they have in the game – those large shareholdings that give them a long-term mindset.

They love the soul they have in the game, too – that emotional attachment that dispassionate fund managers aren’t supposed to have.

Most of all, they love the returns they generate – there’s endless amounts of academic research suggesting founders drive better performance. Indeed, earlier this year, an analysis of the performance of the top 12 founder-led companies in Australia over the past five years by Solaris Investment Management showed they delivered a return of 400 per cent over the past five years. The ASX 200 managed just 65 per cent.

There are few better case studies than Ellison and White, whose board is now re-examining serious allegations made against White by a former sexual partner, which ultimately resulted in White paying her millions to settle the matter.

Both men are seen in the Australian market as mavericks who have charted their own course, defied the doubters and delivered fabulous growth. They talk passionately and directly about their businesses. They slap down critics and exude self-confidence. When they speak at a conference or event, it’s invariably standing-room only.

A double-edged sword

But the current controversies are a reminder that all the advantages founders bring can also turn against investors.

When things go wrong, that long-term focus starts to look like refusal to change, or at least acknowledge the need for it.

That soul in the game can blind the founder to the need for accountability.

And the founder’s large shareholding – all that skin in the game – inevitably changes the traditional power dynamic between the board and founder-led management.

How do the boards of MinRes and WiseTech deliver accountability to the founders who’ve delivered so much value, when those same directors wouldn’t be there if not for the founders’ hard work?

How do these boards show investors that they are alive to the real questions investors will have about the founders’ alleged failures of judgment?

Again, these questions are particularly acute in the cases of White and Ellison, who stand out as the singular architects of their companies’ future.

You don’t need to spend long talking to White for it to become clear that he remains the visionary with the decades-long plan and product road map inside WiseTech.

Ellison is more publicity-shy, which is part of his mystique, but there’s never any question that it is his hand on the tiller, nimbly judging the vagaries of commodity cycles, which partners to buddy up with, and knowing when to abandon one growth plan in favour of another.

From the outside at least, both leaders have lieutenants, rather than successors. Indeed, Chanticleer wonders how many investors could even name the internal leaders most likely to be able to step up. When you’re backing the founder as much as the company, this is the risk you run.

Perhaps the boards of WiseTech and MinRes have a better sense of what emergency succession might look like – that is their job, after all. As one wag suggests, maybe former test cricketer and current MinRes board member Justin Langer could step in as a temporary CEO. At least he’s familiar with short-pitched bowling.

But the succession dilemma isn’t the only one these directors face. If the investigations under way at both companies reveal conduct requiring the removal of the founders, the boards would face the prospect of operating under the shadow of a disaffected major shareholder with enormous residual influence.

The MinRes and WiseTech boards are in no-win situations. So far they’ve done nothing – either because they weren’t aware of the matters or because they felt there was no need.

But if their new investigations find serious failures of judgment, or worse, the boards must hold these founders to account on behalf of minority investors. But to do so may mean derailing the same founder-led growth those minority shareholders have bought into.

Do the sharp falls in the share prices of Mineral Resources and WiseTech suggest investors are worried Ellison and White will stay, or that they will be forced out?

We’d presume the latter; after all, investors knew they were investing in a company led by a strong-willed founder, and will likely be more worried they might lose the maverick magic that has driven the growth of MinRes and WiseTech.

RBC Capital Markets analyst Kaan Peker said the selloff at MinRes looks outsized, particularly given that the tax issues at hand largely occurred before the company listed in 2006.

“While we understand that these concerns raise questions over corporate governance, we think the share price move today is overdone. The added scrutiny and rigour, the current concerns placed on corporate governance, ultimately, should be positive for the organisation, and at face-value there appears to be no adverse impact to operations/management.”

Still, it’s hard to shake the feeling these companies - and particularly their boards - are now essentially prisoners of their founders’ success. There are no easy paths out of this.

These episodes show why strong, truly independent corporate governance matters in public companies.

But one of the problems in founder-led companies is that the founder, with their big shareholding, often plays a role in selecting the board. As such, there is a clear and present danger they surround themselves with directors who are broadly supportive and closely aligned with the company’s leader.

A perfect example of this comes from Tesla, where the company’s Australian chairwoman Robyn Denholm, who was criticised last year by a US court for her ”lackadaisical approach to her oversight obligations” in the episode that saw the Tesla board approve a giant share package for Musk.

The court noted that “Denholm derived the vast majority of her wealth from her compensation as a Tesla director”.

Shareholders in MinRes and WiseTech are about to find out if they can rely on the robust independence of their boards.

--- ends --- [that last one was published by the AFR on Monday 21st October, so is a week old, and we've had some water pass under the bridge since then.]

My two cents: As I've stated elsewhere, both men have serious character flaws, despite their notable achievements in building up their respective companies from nothing to where they both are today, and what I have been looking for as an investor is evidence of dishonesty or fraud in terms of either man using company funds for their own personal use at the expense of their shareholders - or to put it another way - has the impact of their character flaws and poor judgement been mostly confined to their private lives or has it negatively impacted their shareholders in any significant way? And it's important to note that I am NOT referring to share price movements - because share prices can bounce around (sometimes wildly) on shifts in sentiment - and they don't necessarily reflect the underlying profitability of the business; What I'm referring to is: Would the company have made greater profits or be in a better position now if the founder had NOT taken certain actions, so were there actions taken that directly impacted the profits made by the company either at that time or later?

With MIN, my answer to those questions is that yes, there were a number of actions taken by CE that directly impacted MIN negatively in that way, but I have yet to read any details of proven allegations - or allegations that were/are probably accurate - that RW has done that at WTC, despite a series of poor decisions and some serious character flaws that appear to have mostly impacted his personal life and impacted other individuals rather than impacting WTC as a business.

There is certainly scope for such allegations - of RW profiting at shareholders expense at WTC - to surface over coming days, weeks and months, and if that happens then I will reassess, but at this point, with the info that I have at my disposal, including all of these media articles and opinion pieces, I am still holding WTC shares, and not MIN shares.