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In a hard place

26 October 2012 By Kevin Allison

Cynthia Carroll is riding into the sunset. Anglo American and its chief executive are parting ways. Missteps early in her tenure hurt Carroll, but she did deliver needed cultural change. A new broom is unlikely to have an easier time. Anglo’s biggest problems are largely beyond the control of management.

Carroll always seemed an odd choice to run Anglo. Plucked from relative obscurity by then-chairman Mark Moody-Stuart, the Harvard MBA-toting American had a jarring effect when she took the helm in 2007. She was not South African and she lacked experience in mining.

The latter may have contributed to some early missteps. The 2008 decision to invest $5.5 billion in the Minas Rio iron ore project in Brazil made strategic sense on paper, but seemingly endless permitting problems have turned the project into a wasteful boondoggle. Of course, Carroll isn’t the only big mining executive to stumble – her peers at Rio Tinto and Xstrata have both suffered blow-ups. And Carroll was backed by her board of directors.

Carroll also delivered needed cultural change, particularly in safety. Workers were dying at a rate of more than 40 a year when Carroll arrived. That has fallen by more than half. The focus on safety was right, even if it contributed to heavy management turnover in the group’s platinum business. It was also ultimately profit-enhancing, since South African authorities have started shutting mines for days after serious accidents.

Still, returns to shareholders matter – and on that measure Carroll struggled. Including reinvested dividends, Anglo American has recorded total shareholder returns of negative 15 percent during her tenure, according to Reuters data. Of the big four miners, only Xstrata has fared worse over the period.

Carroll cannot be blamed for the main causes of that underperformance – red tape in Brazil and a heavy footprint in strife-hit South Africa. Anglo’s biggest challenges don’t have easy fixes. The outgoing boss may have reached the limit of what an industry outsider with a Harvard MBA could achieve. But her eventual successor is unlikely to have an easier time.


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