Glencores Billionaire Boys Club pack their bags, but what next for the mining giant they leave behind?
Ivan Glasenberg, a towering and unyielding figure who has run Glencore for almost 20 years, is preparing to step down
Facing corruption investigations in the US and UK, commodity trader Glencore is changing its old guard
Two weeks before Ivan Glasenberg was to shock investors byhinting at his early departure from Glencore, the worlds most powerful commodity trader, last November, he was in Australia.
On that trip, Glasenberg met Jean-Sbastien Jacques, the chief executive of mining giant Rio Tinto, and Scott Morrison, the Australian prime minister in Sydney.
The day he was due to leave, Andrew Mackenzie of fellow miner BHP announced he was planning to retire at the end of 2019.
Glasenberg diverted his flight, and travelled straight to Melbourne to meet Mike Henry, the incoming CEO.
Surely the 62-year-old South African was considering his own succession dilemma on that flight to Melbourne: Glencore has only ever had two leaders in its entire history, and soon it would begin the search for its third.
Glasenberg, a towering and unyielding figure who has run Glencore for close to 20 years, is preparing to step down and has methodically groomed each of his potential successors.
Yet now the company faces simultaneouscorruption investigations in the US and the UK, threatening to derail Glasenbergs carefully laid succession plans.
In response, he has accelerated. According to insiders the corruption investigations have hastened Glencores search for a new chief executive, as Glasenberg and his peers are phased out of the company.
Well start having the transition, moving forward to ensure that weve got a top younger new generation to take over the company going forward, he said during Glencores investor day presentation last December.
Glasenberg added that there werent many of the old guard left. I would imagine it would occur next year.
Glencore was set up by Marc Rich, a man accused of trading oil with the sanctioned Iranian government while Americans were being held hostage
Analysts and industry insiders believe this hastened transition is in order to present the US Department of Justice, and the UKs Serious Fraud Office, with a set of fresh faces when the two probes reach their inevitable conclusions.
The company will want any links to the investigations gone by the time they finish up, so that they can start with a clean slate and show the regulators that things have changed, said one analyst who asked not to be named because they were not authorised to speak to the press.
If so, the investigations will spell the end of an era for Glencores infamous Billionaire Boys Club a group of elite, freewheeling traders who all became astronomically wealthy when the company listed in London in 2011.
Several of them have already retired, including Alex Beard, the companys oil kingpin; Chris Mahoney, who was in charge of its agricultural business; Stuart Cutler, who ran the firms ferroalloys trading; and Telis Mistakidis, Glencores head of copper. A handful remain, but it is not just the personnel changing. The company itself is being transformed.
People familiar with the inner workings of Glencore say that it has installed more compliance managers, and made sweeping changes to its controls, risk and legal functions.
Glencores mines also provide a much greater share of profits than in the past, distancing the company from some of the more cavalier trading practices that have landed it in hot water with the authorities.
It has also recently slowed its acquisition spree, in favour of paying larger dividends or conducting share buybacks, uncommon in the industry.
The person who takes over will not be under pressure to grow the company, but instead to make sure the [mining] assets perform, to make sure the trading division performs, and to make sure the cash is deployed in the best possible manner, a senior person at the firm said, asking not to be named.
Currently, the list of candidates is short. The three front runners for the top job are Gary Nagle, who oversees the companys lucrative but controversial coal business; Kenny Ives, head of Glencores nickel operations; and Nico Paraskevas, leader of its copper trading division.
But Alex Sanner, Glencores chief oil trader, and Ruan Van Schalkwyk, head of ferroalloys, are also in contention for the role, according to the person familiar with the matter.
All the heads of departments potentially have a chance, the person said. But there is a zero per cent chance that the next chief executive is hired externally, they added. The unique internal culture at Glencore goes some way to explaining why the chances of an outsider taking the top job are nonexistent.
Asked once if Glencore traders had a work-life balance, Glasenberg responded: No. We work. You dont come here to take life easy. And we all got rich from it, so, you know, theres a benefit from it.
Divisional heads like Daniel Mate and Telis Misdakidis, who each owned a 6pc stake in Glencore, were worth around $3.7bn (2.8bn) when the company went public in 2011. Tor Peterson, the companys head of coal at the time of the float, netted around $3.2bn, while 43-year-old oil director Alex Beards 4.6pc stake saw him rake in $2.8bn.
And they had earned it; cutting deals in dangerous places like the Democratic Republic of Congo, their appetite for risk was legendary.
Glencore was set up by Marc Rich, a man accused by the US of trading oil with the sanctioned Iranian government while Americans were being held hostage, and who fled the US facing what has been described as the largest federal tax evasion case of all time.
But since its$90bn merger with mining company Xstratain 2013, Glencore has started to mature in to a more traditional mining company. And yet the company is haunted by the skeletons in its closet.
One such skeleton is the ongoing probe into practices of shady middlemen, brown envelopes, and backroom deals that led to hugely lucrative trading contracts or mining concessions.
The other is the companys legacy coal business, in which Glasenberg cut his teeth.
People familiar with Glencore say that the incoming leader, expected to be anointed before Glasenbergs 64th birthday in January 2021, will likely have to reckon with the increasingly unpopular, yet hugely important, fossil fuel.
It is a possibility that the coal business will be spun off, but its not something that will be done proactively, said a person familiar with the matter.
Nevertheless, Glencore is still bullish on coal. The company believes that coal is hugely important for the world for generating electricity.
Despite these factors weighing on the companys stock price, most analysts have upgraded Glencore to buy, describing the share price as undervalued.
And what next for Glasenberg himself? Glasenberg will not step in to the role of chairman, said one insider, and considering he already has one of the largest ownership stakes in the company at 10pc, he will be entitled to pick up the phone to the new chief executive at any time, they added.
The outgoing chief intends to keep his shareholding in the company for at least five years after he departs as a vote of confidence in the new leader, the person said.
The man who built the company from scratch, whose aggression and ambition are the essence of Glencore, will be keeping a watchful eye over his successor for many years to come.
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