The Fletchers Building debacle – Really?

Business readers in New Zealand may have noticed that one of the largest companies here has accrued just over $1b of losses in the past since March last year including impairments. They also fired their CEO and the Chairman had the good grace to resign.

The other board members despite their lack of industry expertise are still in there. More about that later*.

The shareholders association has thoughtfully put together a timeline of events and that can be found at on their website over here.

A version of that is included below.

Fletchers Timeline - full version from NZSA

They consider it was poor governance.

“Fletcher’s current issues started when Mark Adamson was appointed CEO. An interview Adamson gave in 2013 was the first sign he had captured the (former) Chair and board – a very dangerous situation for any company.
 
The restructuring under his watch with consequent losses of competent, qualified and experienced personnel was a blatant example of throwing out the baby with the bath water and as early as March 2015 NZSA was warning the company that this would have consequences.
 
The result by mid-2015/2016 was a gutting of skills in B+I where along with some justified changes, many high performers left rather than face job insecurity and what appeared to have become a culture of fear.
 
Having got rid of far too many experienced staff, neither Adamson (who lacked construction experience and had no experience of the issues that arise in an overheated construction market) nor the board and Chairman were equipped to predict what would happen. The wise heads were gone.”

 
Everything I’ve read on the topic seems to have been a massive understatement.
 
Brian Gaynor agreed. He wrote

“The B+I debacle is a shocking indictment of Fletcher Building’s governance, particularly the lack of industry experience on its board and failure to ensure that these fixed priced design and build contracts weren’t scrutinised far more vigorously.”

 
Earlier (in the same commentary) he noted that the Fletchers division signed up for a loss of $410m on one building project.
 

“”This contract, which is due for completion in mid-2019, is estimated to cost Fletcher Building $887m to finish. This represents a massive loss of $410m, accounting for just over 50 per cent of B+I’s assessed losses.”

 
Once again the understatement is monumental.

* This week Xero announced that the CEO was stepping down and being replaced by new CEO Steve Vamos. The usual press releases pretending to be news items appeared.

Tucked away in the fine print is a note saying that Vamos is one of the directors of Fletcher Building. At the very least there should be some eye rolling and raised eyebrows but of course the news stories are written by a pr company.

This is the second big surprise from Xero in the past few months and however great the new CEO might be it seems absolutely incredible to even consider him as a director given that $1b+ hole over at Fletcher Building.

Finally after a couple of days the NBR has noticed this along with the NZSA.

Of course mere mortals can’t read that article because its behind a paywall but over on mainstream media there is nothing. Go figure.