BHP Billion’s growing share price
In the face of high uncertainty in the global market, the share price of BHP Billiton Limited continues to inflate. This is, despite significant losses being posted close to $US9 billion in the company. The question from investors and financial analysts is why? The loss sparks BHP’s largest nominal loss in 133 years, and the media focus remains closely on CEO Andrew Mackenzie.
BHP has been through a number of difficult global disasters over the past few years from its lucrative commodity trade. Perhaps this is taking a toll on the profits. Still, the ASX share price continues to move with an upward trend. The tone of commentators is directed mainly towards the Scottish CEO and what his next move will be to bring the company back in line with growth.
“Hang on in there would be my message. We have done an awful lot of work to allow ourselves to survive and prosper in current conditions,” Mr Mackenzie told the ABC’s AM program.
Their share value rides, in part, with the waves of iron ore prices, but a slumping Chinese housing market and little movement in China’s steel consumption appears to be effecting company growth. The increase in share price cannot be attributed to the company’s bottom line Thus, it is perhaps from Mackenzie’s promise of lowering production costs and increasing production, with emphasis on the Escondida copper mine.
Alan Kohler of the Australian, argues this watershed moment for the CEO “will be the end of Mackenzie’s beginning”. He and and his leaders must return the company to reasonable profit margins, or fear the toppling of their positions by weary shareholders. When asked whether the worst is over for mining magnate, Mackenzie responded with a belief that their strategy will be sufficient for long-term growth.
“But I do believe that what we’ve put in place will prepare us for, and allow us to cope with, some tough times ahead as we navigate through a period where prices will be low for a prolonged period and quite volatile.” – Andrew Mackenzie.
The leadership problem
As is evident from the media attention towards Mackenzie, more and more followers and stakeholders are turning their attention to leaders to deliver upon organisational goals. A leader’s word means something. The CEO’s promise to turn the company around will have to be delivered. His attempt to do so will be watched closely by investors. South32, BHP spin-off will also be one to watch with their commitment in late 2015 to reduce controllable costs by up to $US350 million by 2018; cost reductions which are unlikely to take an effect on the BHP’s share price. When leaders fail to deliver on their word, their integrity takes a hit. The political reality of the situation is that, despite a problematic global environment, the blame will rest at least in part with the leader, not fluctuating environmental factors. An effective leader doesn’t walk around with blinkers on their eyes, they watch everything and adapt their approach to problem-solving whenever required.
“A good leader takes a little more than his share of the blame, [and] a little less than his share of the credit.” – Arnold H. Glasow.
Learning to lead: the takeaway
What we can takeaway from this crucial example of leadership is that the environment doesn’t serve as an excuse. Leaders are required to overcome challenging environments, as it will not justify poor performance. Leadership clearly has an intangible financial value, so we must invest in our leaders. Mackenzie will be an interesting leader to watch over coming months. This year will test his leadership will be tested most. He must adapt and change to be successful in his roles, not cower in the face of uncertainty. A message which applies to all leaders facing similar feats of uncertainty.
*Images Gobeirno de Chile and Amanda Slater.