A2 Milk boss steps down, NZSA says board must be held to account

A2 Milk Co chief executive and managing director Jayne Hrdlicka will step down from her role effective immediately and former head Geoffrey Babidge will take the helm while a search for a replacement is underway.

Monday, December 9th 2019, 5:17PM

by BusinessDesk

The stock dropped 7.7 percent to $14 when trading on the NZX opened. The shares have since recovered slightly and were recently down 3.4 percent at $14.65.

Hrdlicka, who took over as CEO in mid-2018, said she joined the company “excited about the opportunity to help define its full potential and deliver against it.”

However, the reality that the next three to five years need the CEO being present in the company's core markets of China and the US, “combined with running a New Zealand company based in Australia required more travel than I had anticipated when I joined the company,” she said.

“The board and I agreed that this next phase is going to be too difficult to manage alongside my other commitments whilst also managing the health and wellness priorities of my family and me,” Hrdlicka said.

The New Zealand Shareholders' Association was not impressed.

"NZSA deplores A2’s handling of the hiring and stepping down of CEO Jayne Hrdlicka," it said in a statement. “It is a classic example of why NZSA opposes golden handshakes, time-only payments and the like” said Michael Midgley, CEO of NZSA.

“When Ms Hrdlicka took on the job she knew it was a worldwide company. It should not have come as a surprise that there was going to be a lot of travelling," he said.

According to Midgley, the A2 Board "must be held to account. If there are any outstanding payments, other than base salary, to the resignation date, then the board must use every legal avenue to deny them to Ms Hrdlicka."

He also said it was disappointing that chairman David Hearn said he was unable to elaborate on the details as there "are confidentiality provisions in relation to Jayne's departure."

“In our view, there is likely to be more to it than travel. 'Confidentiality' is a very convenient excuse in these situations and may obscure other problems that shareholders have a right to know," said Midgley.

Hearn, meanwhile, said the board “wishes to thank Jayne for the important contribution she has made to the company.”

For his part, Babidge said he was delighted to contribute to A2 Milk's continued success in any way he could.

"I recognise the positive changes that Jayne has brought to the business and will continue to pursue the strategies and plans developed by management and agreed by the board,” he said.

Babidge held the role from 2010 to mid-2018 and saw the company's share price jump from around $1 at the end of 2015 on the back of successive strong sales, with the company's infant formula attracting strong demand in China.

The board will commence an international search for a full-time chief executive immediately and hopes to make an appointment before the end of its 2020 financial year in June, it said.

A2 said that Jesse Wu, the China-based non-executive director, will assume a direct oversight role of the A2 China business to support the China management team in delivering an effective and efficient execution of the recently developed investment plan for that market.

The company also reiterated the guidance it gave in November when it said its annual operating profit margin will be stronger than previously communicated and in the range of 29-30 percent.

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