Analysis: Anglo’s Cynthia Carroll, still skating the glass cliff

By Branko Brkic 24 February 2010

Anglo American CEO Cynthia Carroll has just endured perhaps the worst year in the history of the company that has for so long been as quintessentially South African as vuvuzelas. For Carroll, it seems a classic case of breaking through the glass ceiling could end up on a glass cliff. But will she fall off?

Whatever you might think of Anglo American as a company – hate it, hate its stock market performance, hate the fact that it stopped paying dividends, hate the fact that it’s done a runner from its birthplace – you would have to have an extremely cold heart not to sympathise with Cynthia Carroll.

She may be a good example of a phenomenon called “the glass cliff”. Briefly, the theory is that the circumstances have to be so unusual for a woman to break through the glass ceiling that she tends to end up in a position with a much higher risk of failure. The term was coined by two academics, Michelle Ryan and Alex Haslam of Exeter University in 1994. Their research concluded: “It, therefore, appears that after having broken through a glass ceiling, women are actually more likely than men to find themselves on a ‘glass cliff’, meaning their positions of leadership are risky or precarious.”

How does this fit in with Carroll’s position? Pretty much perfectly.

Carroll took over the once mighty Anglo American in 2007 just at the point when it was becoming obvious that the company had fabulously misread the commodity cycle, standing still while others around it forged ahead.

Its long-time competitors, BHP and Rio Tinto, were larger and growing faster, benefiting from their proximity to the Asian upsurge. They were more aggressive acquirers too, with Australia’s BHP merging with South Africa’s Billiton in the late 1990s to put its nose in front. 

By the time of Carroll’s appointment, the BHP Billiton merger was starting to look like an act of brilliance; a company with enough heft to open huge mines that require eye-popping amounts of cash and doing so without strain. And shareholders who were responding with enthusiasm.

Meanwhile, two new competitors arrived: Brazilian iron ore company, Vale, and seemingly out of nowhere, Xstrata, a function of rapid consolidation in the industry. Meanwhile, Anglo was preoccupied with shedding its domination of the South African business scene and its industrial interests. While everyone was getting bigger, Anglo was getting smaller.

That history culminated in Carroll’s annus horribilis 2009. As commodity markets crashed, Anglo’s vulnerability became apparent. So apparent, in fact, that the company, which is more than a century old, had to fend off a unwelcome bid from 10-year-old Xstrata. Anglo, which paid dividends throughout the Great Depression and two world wars, passed on its dividend.     

For all kinds of reasons, Carroll was a controversial choice: a woman in an industry not only dominated by men, but dominated by alpha males; an American in a company dominated by Brits and Anglophile South Africans and the first non-South African to hold the post. On top of that, she joined a company involved in an ongoing complex repositioning exercise.

Carroll’s first act was to reassert the company’s power by making an aggressive acquisition of Brazilian company, Minas Rio, to demonstrate Anglo was still in the game.

Necessary as it might have been, the bid was massively poorly timed, and that too came home to roost in 2009. Meanwhile, the companies on the edge of Anglo’s portfolio were teetering as the travails of the auto industry hit Anglo Platinum hard and the recession spiked the diamond industry setting 45% Anglo-owned De Beers back on its heels.

All that history and pain became plain last week when Anglo delivered a much-anticipated, but still truly terrible set of results, passing on its dividend again even as others in the industry had resumed paying them.

All four major mining companies have now reported on a really poor year for all, and guess who comes out bottom: Anglo, of course.

Earnings before interest and tax – in other words, earnings high up the income statement before all the confusing stuff happens – for the Big Four ends up like this: BHP Billiton down 44%, Rio down 39%, Xstrata down 38% and Anglo down 51%.

Not only that, but the company took a $1.5 billion write-down because of the mine which Carroll bought partly (it’s hard not to suspect) to declare Anglo back in the growth game.

Inside the company things have been pretty brutal too: 23,400 people lost their jobs over the past year. Think of how many enemies that makes for the boss.

For Carroll, 2009 was about survival – and here is the good news – she has survived. As it happens Anglo, by most accounts, has turned a major corner.

Despite its poor results, it has a larger pipeline of mega-projects coming on line than its competitors. Its product profile is better suited to late-cycle recovery – for example, platinum, which is dependent on the car industry, is now turning the corner. Its results were hurt during the past year by the strong rand, but that will not always be the case.

If Carroll can manage to keep her balance just a bit longer on the edge of the glass cliff, then her prospects look much improved.

It’s hard not to notice how much of a symbol she is for women in business. She is one of only three female CEOs of a Top 100 British company. If she slips over the edge, something of the gender revolution in business could go down with her.

For now, the art is one of survival. If she can do that, as every month passes, her position will strengthen. Once that gets traction, her reputation as someone who not only broke through the glass ceiling, but managed to skate on the glass cliff could make her a memorable force in both Anglo and in global business in general.

But don’t hold your breath. Nothing in this mining camp game is certain.

By Tim Cohen

Photo: Cynthia Carroll speaks at the opening session of the World Economic Forum (WEF) in Cape Town, South Africa, June 13, 2007. REUTERS/Finbarr O’Reilly


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