James Hardie Industries plc (ASX: JHX) fired its CEO Jack Truong after seriously violating the company’s code of conduct.
The stock price of building suppliers fell 5.29% after the announcement to $ 50.94.
Lack of “operating with respect”
In a six-page market statement, James Hardie’s board of directors explained the termination and the historic events leading up to today.
Mr. Truong is credited with James Hardie’s strategic transformation since his appointment in 2019.
However, employees have expressed concerns about his work-related interactions.
The Board initially employed a third-party consultant to perform the due diligence and retained the services of an outside advisor.
Opportunities were offered to Mr. Truong, including training to improve driving.
Other complaints were filed after this process. After direct input from executives, third-party consultant surveys and additional information, Mr. Truong was fired at today’s board meeting.
“… Sir. Truong’s conduct, while non-discriminatory, was in material and material breach of James Hardie’s Code of Conduct… The Board of Directors took this action to uphold the core values of the company, including operating with respect … ”
He will only receive statutory fees and forfeit his long-term incentives.
Current independent non-executive director Harold Vienna will assume the role of Interim CEO while a replacement is found.
In addition, the president Mike Hammes will become Executive Chairman to strengthen the management team.
Finally, Sean Gadd was promoted to President of North America.
While most of the attention will focus on the CEO firing, James Hardie has also improved his profit estimate for fiscal 22.
“Based on the continued and strong execution of the global strategy in all three regions and the expectation of continued growth in the residential market and the US market, the company increases its guidance for fiscal year 2022 “
Management expects FY22 adjusted net income to be between US $ 605 million and $ 625 million, from an earlier range of US $ 580 to 600 million.
Adjusted net income for fiscal 21 was US $ 458.0 million.
It is rare to see such clarity in announcements surrounding the dismissal of a CEO.
Often a generic explanation is provided, such as “personal reasons” or “differences of opinion”.
Despite the stock price falling 5% today, I believe the decision to publicly expose poor governance behavior will ultimately lead the market to hold James Hardie and his management team in higher esteem.
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