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Even the wealthiest and most charismatic of corporate founders have their kryptonite. For Wisetech’s billionaire, Richard White, it was the ladies, while for Mineral Resources’ billionaire Chris Ellison, it was the Tax Office.
But for travel king Jamie Pherous it was the UK government – more particularly, the fallout from his company, Corporate Travel Management, ripping it off. The company on Monday admitted it had let investors down, without blaming Pherous for its problems.
It has been six months since CTM provided the first hint that something was amiss with its accounts to this week’s abdication by Pherous from the top job and his position on the board.
Back in August, CTM’s accounting anomaly was described as something of a minor discrepancy with no cash implications. Subsequent events have made that characterisation ludicrous.
The slo-mo train wreck, which saw the shares suspended from trading in August, finally made impact in November when it was revealed it had overcharged customers to the tune of $162 million. This announcement also revealed the company’s accounts will be restated going back to 2023.
Surely, that was the point at which the board should have demanded accountability from Pherous for the disaster he oversaw.
Not a peep.
Investors, some of whom had written down their investments in CTM to zero, must have been slack-jawed at the lack of management recrimination and board repercussions. Given the size of the alleged over-charging, and hit that this saga has inflicted on the company’s reputation, there was arguably a case for some sort of action.
To be sure, there is a cohort of shareholders (particularly retail investors) who love these corporate bootstrap-pulling founder stories, the epic poverty to power play – the company governed by someone with skin-in-the-game.
All too often these captivating founders surround themselves by directors who are in the founders’ thrall.
Both Ellison and White ultimately returned from exile.
Unlike the board of White’s Wisetech where White has a controlling 35 per cent stake – and whose exodus was short-lived – Pherous has about 11 per cent of CTM.
This stake shouldn’t be large enough to secure the chief executive’s job, and there are plenty of institutional investors who don’t support Pherous.
The weird part is that the final decision for Pherous to leave was described as a mutual one – a transition to retirement.
In most cases, when a chief executive resigns immediately in a scandalous wake, the decision is not mutual – it is a board-led sacking dressed up to appear collegiate.
But in CTM’s case, it appears that the chief executive was not forced out the door, the timing of his departure was his own, and there is no suggestion that Pherous’ previous bonuses will be clawed back.
Rather, he will remain as a well-paid adviser for six months as a team of KPMG accountants trawl through the company’s UK contracts, and the Australian government seeks its own audit of CTM customer accounts to ensure there is nothing amiss.
Chairman Ewen Crouch refused to outline the trigger for any decision on Pherous. There was apparently no special or hastily called board meeting with fireworks or disagreements.
The chatter says that Pherous needed to remain until a bank funding agreement was bedded down with the company’s banking syndicate and a financial security agreement had been struck with the International Air Transport Association.
This was achieved in the days before Christmas.
But shareholders are still in the dark about when this company may be able to release even last year’s accounts and the timetable for reinstatement to the ASX.
And it’s worth noting that while the current scandals blew up six months ago, question marks have lingered longer.
There have been strong whiffs of doubt about accounting treatments employed by this company going back almost 10 years.
In 2018, it was injured by what finance lingo calls a “short attack” when a hedge fund issued a scathing report on the company accusing it of being aggressive and operating “phantom” offices.
Others have long questioned how this company’s profit margins have a plumpness, out of line with others in the industry.
A taste of fresh governance has been sorely needed.
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