In the almost half century that Glencore has traded commodities, the company has had just three chief executives — including its founder Marc Rich.
But last week’s disclosure by the UK’s Serious Fraud Office that it has begun an investigation into “suspicious bribery” at Glencore ratchets up the pressure for more change at the top of a company that has made billionaires of its senior executives.
The so-called ‘billionaire boys club’ — a close-knit group of leaders, including chief executive Ivan Glasenberg, that became fantastically wealthy when Glencore listed in London in 2011 — has already seen a string of departures over the past year. Telis Mistakidis, the former head of its copper business, and Alex Beard, its top oil trader, are among those to have exited.
“There’s a lot of pressure on this management team, especially the old guard, to change the face of the company . . . and put in some new people that have a different perspective,” said David Neuhauser, managing director of Livermore Partners. “That has to happen in order for the narrative to change on the company.”
Mr Glasenberg, the hard-charging South African who has led the company since 2002, addressed the issue of succession just days before the SFO announced its investigation.
“It is coming to the end of the time for the third generation [of Glencore management],” Mr Glasenberg said at an annual briefing for investors. “There are not many of us old guys left. So the old guys will be leaving. How soon? We are reviewing it right now. I would imagine it would occur next year.”
According to industry observers, the leading contenders to succeed Mr Glasenberg are: Gary Nagle, head of coal assets; Kenny Ives, who runs the nickel operations and new copper boss Nico Paraskevas.
Mr Nagle, a fast-talking South African, is the most like Mr Glasenberg, who once said his ideal replacement would be around 45-years-old and look much like himself.
While a frontrunner to step into Mr Glasenberg’s shoes is yet to emerge, analysts and investors are agreed that damage has been inflicted by the SFO probe. The news of the investigation, which the SFO declined to give details of, sent the company’s shares tumbling 9 per cent last Thursday. Glencore said it would co-operate with the probe.
It adds to the scrutiny Glencore is already under. The US Department of Justice has asked the company to hand over records related to its compliance with US money-laundering laws and the Foreign Corrupt Practices Act (FCPA).
Its probe — spanning Glencore’s activities in Nigeria, the Democratic Republic of Congo and Venezuela as far back as 2007 — has already cast a shadow. Since the DoJ probe was announced in July 2018, Glencore’s shares have fallen 37 per cent, vastly underperforming the FTSE All Share Mining index, which has dropped just over 1 per cent in the same period.
Large-scale physical commodity trading and mining frequently involves operating in countries that have been hotbeds of corruption, or where it is difficult to win business without well-connected intermediaries. Glencore has cut deals across the world, including in the DRC where it partnered with Dan Gertler, an Israeli businessman who has been sanctioned by the US for “corrupt and opaque” mining deals in the African country.
The group has pulled back from many of its risker practices, reducing the use of middlemen and severing ties with Mr Gertler, although it is still paying him royalties from a mine in the DRC (albeit in euros to avoid falling foul of US sanctions). But analysts say that is not enough to take the company out of regulators’ crosshairs.
“The DoJ aren’t going to be happy with just a fine. Both they and the SFO have to become convinced there has been an appreciable change in the way Glencore does business,” said Paul Gait, analyst at Bernstein Research. “And what better way of cementing that . . . than to say here are all these structural changes in management and governance that have taken place within the organisation.”
Under Mr Glasenberg, Glencore became the world’s most powerful commodity trader, with an appetite for risk unrivalled in the industry. It dominates transactions in industrial metals including copper, zinc and aluminium.
However, in recent years Glencore has also sought to move beyond commodity trading — an effort that began with its 2013 acquisition of mining group Xstrata. The appointment last year of Peter Freyberg, an industry veteran who effectively joined Glencore as part of the Xstrata takeover, to oversee all its mines underlined that it continues to have ambitions beyond trading.
Investors applauded the promotion of Mr Freyberg, as Glencore shifts to managing assets instead of simply trading them. But with the number of investigations into the company mounting, few believe it is enough to brighten sentiment towards the company.
“Until the investigations are over, Glencore will continue to be perceived as a very high risk company,” said Christopher LaFemina, analyst at Jefferies.
Last week, Mr Glasenberg insisted that “I don’t want to be an old guy running this company; and as soon as those guys are ready to take over, I’ll be ready to step aside.”
When he does hand over the reins, his successor risks finding that the investigations are part of the inheritance.