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Mining giants race to fill board leadership gaps

LONDON Three of the world’s biggest miners are hunting for new leaders for their boards at a time when the industry faces questions from investors about its conventional diversified business operations and strategies for growth.

BHP Billiton, Rio Tinto and Anglo American, whose chairmen have all announced their intention to step down, are also generating healthy cash flows, putting them under pressure to give more money back to shareholders.

The task to find the right candidates is particularly urgent for BHP Billiton and Anglo American due to the growing influence of major investors at both companies who have raised doubts over their future direction.

U.S. activist investor Elliott – which holds a stake of about 4 percent in BHP’s London-listed shares – has taken advantage of the planned departure of incumbent Jac Nasser to launch a campaign to shake up the world’s biggest miner.

Elliott’s proposals include getting rid of BHP’s dual company structure, spinning off its oil and gas assets and returning more cash to investors.

BHP has so far dismissed them and many other investors have also been skeptical, but say the attack highlights the need for a strong new chair to back up the CEO and unite a disparate shareholder base.

Anglo American’s new board leader will also have to deal with a new share register. Shortly after incumbent chairman John Parker announced in February that he would step down, Indian miner Vedanta’s chairman Anil Agarwal used an exchangeable bond to acquire a sizeable chunk of Anglo American shares and buy influence.


The favorite to lead Rio Tinto’s board is Sam Laidlaw, former CEO of Britain’s largest energy supplier Centrica, whom Rio made a non-executive director in February this year, four industry sources said, speaking on condition of anonymity.

BHP has said it is aiming for 50 percent women in its work force within a decade, but the sources said finding a woman chair with the availability and experience could for now be tough.

All four sources said Gail Kelly, former chief executive of Australian bank Westpac, who was an early favorite to replace Nasser, was no longer being considered but declined to give a reason.

Other names that two of the sources said have been considered were outgoing Dow Chemical’s boss Andrew Liveris and an existing BHP director, Malcolm Broomhead.

One candidate mooted to be Anglo’s new chairman, two of the industry sources say, is Guy Elliott, a former chief financial officer of Rio Tinto. None of those mentioned as a potential candidate was immediately available for comment.

Anglo’s chairman Parker’s eight-year tenure included dealing with the fallout from the miner’s costly 2007 investment in Brazil’s Minas-Rio iron ore operation, which analysts say will struggle to justify the capital outlay.

Headhunters said that although three big companies were all looking for new heads of boards at the same time, the pool of potential candidates was wide for such a global business.

Kit Bingham, a partner at top executive recruiter Odgers Berndtson, said there should be no shortage of people keen to fill the roles, which present challenges, not just from shareholders but from wider transitions, such as rolling out new technology.

That calls for all a chairman’s diplomatic skills in negotiating with governments concerned about possible job losses. “Candidates will know there’s a change agenda to deliver. It’s a pretty exciting time when the future needs to be different from the past,” Bingham said.


The new board leaders will mark a generational shift for mining companies that have spent the time since commodities prices slumped in 2015 and early 2016 cutting costs, selling off assets and restructuring their businesses to boost cash flow.

Their predecessors had overseen multi-billion dollar acquisitions at the high point of the commodity cycle, saddling their balance sheets with massive debts.

Now the search is on for new ways to grow without making the same mistakes as before.

Bruce Duguid, a director of Hermes EOS, which advises on more than 260 billion pounds ($332 billion) in client assets, says any global mining chairman needs a range of skills “to manage the many pressures on its business model”.

“These include the need to reduce costs and maintain strict capital discipline in the face of unpredictable commodities demand, management of increasing sustainability challenges as ore grades decline and overseeing a material improvement in (gender) diversity at all levels of the organization,” he said.

Hanre Rossouw, portfolio manager at Investec Asset Management, which owns shares in Anglo American and BHP, said the mining companies needed people able to help management deal with the breakup of assets and strategic de-mergers.

“You do need a chair that can think more creatively in terms of value creation with unbundlings and break-ups always options to consider,” he said, referring to Elliott’s proposal to spin off BHP’s oil and gas assets and Anglo’s plan last year to sell or spin out its South African iron ore unit.

Rio Tinto, which is losing chairman Jan du Plessis to telecoms group BT where he will take up the same role, needs a replacement who will be able to keep a tight grip on governance.

The world’s second-biggest miner after BHP is embroiled in a corruption scandal that has led to two senior dismissals last year and a legal challenge from one of those sacked.

Both Rio and BHP scrapped their progressive dividends in response to the commodity price crash of 2015 and early 2016.

Elliott wants to introduce a formula for delivering more money to shareholders, which BHP has said it cannot do because of the cyclical nature of mining. Anglo suspended its dividend at the end of 2015 and has said it will bring it back around the end of the year.

Investors will also be keeping watch on the pay packages of the new recruits. Anglo was hit last year by a shareholder revolt over CEO Mark Cutifani’s pay and has since proposed a cap, agreed by shareholders this week, on how much executives can earn from share awards.

(This version of the story corrects paragraph 13 to show Minas Rio purchase was before John Parker’s appointment)

(Editing by Lina Saigol and Philippa Fletcher)

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South Korea court says Uber violated transport law, latest setback for U.S. firm

SEOUL A South Korean court on Wednesday ruled that the ride-hailing group Uber Technologies Inc illegally used private vehicles for commercial purposes, in the latest legal setback for the U.S. firm in Asia’s fourth biggest economy.

Uber’s operations in South Korea were not expected to be impacted by the ruling, since it suspended its UberX service after prosecutors filed charges against the local unit in 2014 for violating the transport law, a company spokeswoman said.

Uber’s local unit has “admitted and repented” its illegal act and resolved the issue, a judge at Seoul Central District Court said in a ruling. The company was fined 10 million won ($8,863).

“Uber respects the court’s decision and we are looking forward to strengthening our partnership with the government and serving riders, drivers and cities in Korea,” the company said in a statement.

Uber’s South Korean unit continues to offer its premium taxi service, UberBLACK, and uberASSIST for seniors and people with disabilities, as those services do not use private vehicles, the spokeswoman said.

The U.S.-based company links users to both licensed taxis and unlicensed cars and drivers, a business model that has faced legal challenges in several other cities across the world.

Uber’s investors include Goldman Sachs (GS.N) and GV, formerly known as Google Ventures (GOOGL.O).

(Reporting by Hyunjoo Jin; Editing by Randy Fabi)

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Daimler says diesel probes could result in penalties, recalls

FRANKFURT Daimler on Wednesday reiterated that recent steps by United States authorities to investigate diesel emissions pollution and so-called auxiliary emission control devices could lead to significant penalties and vehicle recalls.

Several federal and state authorities, including the U.S. Department of Justice and Environmental Protection Agency (EPA) as well as the Stuttgart prosecutor in Germany are investigating the emissions of Mercedes-Benz diesel vehicles.

Last month, the Stuttgart prosecutor launched an investigation against Daimler employees on suspicion of fraud and misleading advertising tied to vehicle emissions.

“In light of the ongoing governmental information requests, inquiries and investigations, and our own internal investigation, it cannot be ruled out that the authorities might reach the conclusion that Mercedes-Benz diesel vehicles have similar functionalities,” Daimler said in its quarterly report, reiterating a statement from its annual report.

The inquiries and investigations are still ongoing, Daimler said, adding that the outcome of these probes could not be predicted.

Daimler said in January 2017 that U.S. authorities appeared to have taken a tough stance on what constitutes an illegal defeat device, a step that could have implications for Mercedes-Benz in particular.

Daimler said that in a notice of violation issued against another manufacturer in January that regulators identified functionalities “apparently including functionalities that are common in diesel vehicles, as undisclosed Auxiliary Emission Control Devices (AECD)”.

In January the U.S. EPA accused Fiat Chrysler Automobiles NV of illegally using hidden software to allow excess diesel emissions to go undetected.

“If these or other inquiries, investigations, legal actions and/or proceedings result in unfavourable findings, an unfavourable outcome or otherwise develop unfavourably, Daimler could be subject to significant monetary penalties, remediation requirements, vehicle recalls, process improvements and mitigation measures,” Daimler said.

(Reporting by Edward Taylor; Editing by Ludwig Burger and Maria Sheahan)

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Asian stocks near two-year high on U.S. optimism, euro steady

HONG KONG Asian stocks extended gains for a fifth consecutive day on Wednesday, as renewed optimism about the world’s biggest economy brightened the outlook for risky assets while the euro held on to previous gains as political concerns in France ebbed.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, hovering near their highest since June 2015. Stock markets in Japan and Australia led gainers.

European markets were pointing higher in opening trades with index futures up between 0.05 and 0.1 percent.

“We are carrying on the momentum from the overnight rally in the U.S. markets and financials are in the spotlight on expectations of good earnings,” said Alex Wong, a fund manager at Ample Capital Ltd in Hong Kong, with about $130 million under management.

The outlook for Asian markets is looking favorable with the MSCI Asia ex-Japan index having broken above a technical level, suggesting more room for gains.

A strong finish to U.S. markets was the main driver for Asia. The Nasdaq Composite hit a record high on Tuesday, while the Dow and SP 500 brushed against recent peaks as strong earnings underscored the health of corporate America. [.N]

Fanning the market’s rally were reports that President Donald Trump’s tax reform proposals, due to be announced on Wednesday, would include a slashing of the corporate tax rate and lower taxes on offshore earnings stockpiled by U.S. companies overseas.

The threat of a U.S. government shutdown this weekend also receded after Trump backed away from demanding Congress include funding for his planned border wall with Mexico in a spending bill.

Financials led the Hong Kong stock market higher as fund managers bet on expectations the quality of banks’ balance sheets will likely get better on an improving economic cycle and cheaper valuations.

In Hong Kong, for example, the financial sector trades at a forward price-to-earnings ratio of 8.7 times compared with traditional market darlings of technology stocks at 29 times, according to Thomson Reuters data.

In currency markets, the euro built on strong gains posted this week after business-friendly centrist Emmanuel Macron won the first round of the French vote on Sunday and opinion polls indicated less support for the eurosceptic Marine Le Pen.

While that is not expected to sway the European Central Bank into further action at Thursday’s meeting, policymakers see scope for sending a small signal in June towards reducing monetary stimulus, according to sources, another factor underpinning the single currency.

“In our view, downside risks to growth have actually decreased with the outcome of the first round of the French election…the underlying tone of the press conference should still be positive,” Holger Sandte, a strategist at Nordea markets wrote in a note.

The euro was steady at $1.09480, retaining most of Monday’s 1.3 percent gain. On Monday it posted its strongest one-day performance in 10-1/2 months, which lifted the common currency to a 5-1/2-month high.

Growing appetite for risk meant safe-haven assets fell out of favor, with U.S. 10-year Treasury yields firming to 2.34 percent from 2.23 percent on Friday.

U.S. crude futures slipped after a volatile overnight session following an industry report showing a surprise build-up in inventories. U.S. crude futures were down 0.3 percent at $49.41 a barrel.

(Additional reporting by Masayuki Kitano in SINGAPORE; Editing by Jacqueline Wong)

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Credit Suisse to raise $4 billion in rights issue, ditches Swiss unit IPO

ZURICH Credit Suisse (CSGN.S) will raise around 4 billion Swiss francs ($4 billion) through a rights offering to catch up to European rivals on capital, ditching plans to float a minority stake in its Swiss banking unit.

“We expect the capital increase will strengthen our pro forma look-through CET1 ratio to approximately 13.4 percent and our pro forma look-through tier 1 leverage ratio to approximately 5.1 percent, based on our end-1Q17 risk-weighted assets and leverage exposures,” Zurich-based Credit Suisse said in a statement on Wednesday.

Switzerland’s second-biggest bank also reported net profit of 596 million francs for the first three months of 2017, its highest quarterly profit since a sweeping restructuring by Chief Executive Tidjane Thiam and beating the average estimate in a Reuters poll of analysts.

(Reporting by Joshua Franklin; Editing by Michael Shields)

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Tyson Foods eyes higher wages as U.S. labor market tightens

CHICAGO Tyson Foods Inc (TSN.N), the biggest U.S. chicken company, said on Wednesday it may raise wages again for workers at all of its poultry plants, a sign of an intensifying battle for employees in a tightening labor market.

The increases would come after Arkansas-based Tyson boosted base wages for poultry workers by between 3 and 3.5 percent in November, said Hector Gonzalez, vice president for human resources operations. The base rate is a pay level workers can reach after finishing a probationary period.

Under a pilot program, Tyson gave workers at one poultry plant a bigger increase in November and further raised pay at another facility in January, Gonzalez said. The company will evaluate how those increases help attract and retain workers and affect their performance, he said.

“The pool of available labor is shrinking,” Gonzalez said.

Employers are competing for workers as the number of Americans on unemployment rolls has dropped to a 17-year low.

Last year, companies including Wal-Mart Stores Inc (WMT.N), a Tyson customer, raised wages for hourly workers under pressure from the competitive job market and labor groups calling for higher wages at retail chains.

Tyson rivals Sanderson Farms Inc (SAFM.O) and Pilgrim’s Pride Corp (PPC.O) did not respond to requests for comment about wages.

Asked whether Tyson would pass on the cost for higher wages to customers, Gonzalez said the increases were an investment that executives “hope to get back in a lot of ways, particularly through operational efficiencies.”

At some facilities, Tyson is “looking for a dramatic improvement in the numbers of quality applicants to help staff our plants and avoid creating a scenario where we can’t meet the demand of our customers,” he said.

Tyson said it did not have an estimate for the cost of the wage increases.

In January, the company raised the starting wage at one union-represented poultry plant to $12 per hour from $10 and the base rate to $14 from $11.70.

In November, employees at a separate plant saw the starting wage rise to $13 from $10 and the base rate rise to $15 from $11.65, Tyson said. That increase was made in lieu of the 3 to 3.5 percent increases at other plants.

Tyson declined to give the locations of the two plants.

The company has also shortened the time for workers at the plants to reach the base rate to six months from a year, Gonzalez said.

(Reporting by Tom Polansek; Editing by James Dalgleish)

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Toshiba plans to replace auditor PwC after earnings impasse

TOKYO Toshiba Corp, the troubled Japanese conglomerate, wants to replace auditor PricewaterhouseCoopers Aarata (PwC) to resolve an impasse over full-year earnings and remain listed, two sources briefed on the matter said.

PricewaterhouseCoopers was hired in June last year as part of major changes at Toshiba following a $1.3 billion accounting scandal. Ernst Young ShinNihon LLC, its auditor at the time, was fined for failing to spot irregularities.

Months later, Toshiba announced a separate $6.3 billion writedown after dramatic cost overruns at its U.S. nuclear business. That has since prompted its Westinghouse nuclear unit to file for bankruptcy, and Toshiba to put its prized memory chip division on the block.

Toshiba and its auditor have been at odds since the surprise writedown and earlier this month the company filed twice-delayed business results without an endorsement from PwC, putting its listing on the Tokyo Stock Exchange in jeopardy.

Toshiba needs shareholder approval to sack its auditor, but Japanese companies are allowed to hire auditors temporarily if the incumbent quits.

The sources, who cannot be named as discussions are not public, said Toshiba was planning to remove PwC but gave no details.

Toshiba spokesman Yukihito Uchida said the company was considering options, but nothing had been decided. A PwC spokeswoman declined to comment.

The Nikkei business daily said Toshiba wanted to hire a second-tier accounting firm, since the other two of the big four, Deloitte Touche Tohmatsu and KPMG Azsa, have potential conflicts of interest given past business deals.

At a news conference earlier this month, Chief Executive Satoshi Tsunakawa had said there were irreconcilable differences with the auditor over the validity of past reports.

The head of the audit committee, Ryoji Sato, had stopped short, however, of announcing a change of auditor. There were, he said, “various options”.

Toshiba’s auditors have questioned practices at Westinghouse, where massive cost overruns at four nuclear reactors under construction forced its Japanese parent to estimate a $9 billion annual net loss. They continue to probe.

“Our investigation, which includes checking 600,000 e-mail messages, did not find anything that would impact our accounting reports. Even if we continue the investigation, the situation won’t change,” CEO Tsunakawa said earlier this month, about the decision to report without the auditor’s approval.

Toshiba is currently working on a financial statement for the year ended in March. The TSE’s filing deadline is May 15 – if Toshiba misses that, it could be delisted.

(Reporting by Taiga Uranaka in TOKYO Laharee Chatterjee in BENGALURU; Editing by Stephen Coates and Clara Ferreira Marques)

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McDonald’s drops plan to sell shares in Japan unit

TOKYO McDonald’s Corp (MCD.N) has put on hold plans to sell shares in its Japan unit, which recently returned to profit for the first time in three years after a series of food scandals shook consumer confidence in the chain.

The fast food giant has “made the decision to not proceed with the transaction at this time,” Chief Finance Officer Kevin M. Ozan told investors on a conference call on Tuesday.

The decision followed a review of its stake, Ozan said.

“We believe the market is poised to maintain its strong momentum,” he added.

McDonald’s Holdings Co Japan Ltd (2702.T) expects operating profit in the current fiscal year to grow to 9 billion yen ($80.92 million), a 29.9 percent rise on the previous year.

The Japan unit has had success in capturing the attention of local consumers with recent innovations including a burger-naming election, French fries topped with chocolate and a tie-up involving hit smartphone game Pokemon Go.

(Reporting by Sam Nussey; Editing by Christopher Cushing)

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Trump tax plan will sharply slash corporate tax rates

WASHINGTON U.S. President Donald Trump is proposing to slash the corporate income tax rate and offer multinational businesses a steep tax break on overseas profits brought into the United States, officials said late on Tuesday.

With financial markets eagerly anticipating a White House tax plan, Trump will also call for a sharp cut in the top rate on pass-through businesses, including many small business partnerships and sole proprietorships, to 15 percent from 39.6 percent, an administration official said.

He will propose cutting the income tax rate paid by public corporations to 15 percent from 35 percent, and allowing multinationals to bring in overseas profits at a tax rate of 10 percent versus 35 percent now, the official said.

Trump’s proposal will not include a controversial “border-adjustment” tax on imports that was in earlier proposals floated by Republicans in the U.S. House of Representatives as a way to offset revenue losses resulting from tax cuts.

Trump’s tax blueprint will fall short of the kind of comprehensive tax reform that Republicans have long discussed, and serve chiefly as a guidepost for lawmakers in the House and Senate.

“We’re driving this a little bit more,” a senior White House official told a group of reporters late on Tuesday.

The plan is not expected by analysts to include any proposals for raising new revenue to offset that lost by the tax cuts, and so, if enacted, it would potentially add billions of dollars to the federal deficit.

Trump sent Treasury Secretary Steve Mnuchin and National Economic Council Director Gary Cohn to Capitol Hill on Tuesday to brief lawmakers on the plan to be unveiled on Wednesday afternoon, likely by Mnuchin.

Mnuchin has been leading the administration’s effort to craft a tax package that can win support in Congress, although the proposals would have a long way to go before becoming law, even with Republicans in control of both the House and Senate.

Mnuchin has said the cuts will pay for themselves by generating more economic growth but fiscal hawks, potentially some in Trump’s own Republican Party, along with Democrats, are certain to question these claims.

Trump also may cap the individual top tax rate at 33 percent, repeal the estate and alternative minimum taxes and cut taxes for the middle class, analysts said.

Whether Trump will include provisions that could attract Democratic votes, such as a proposal to fund infrastructure spending or a child-care tax credit as proposed by his daughter Ivanka, is still the subject of speculation.


Mnuchin and Cohn, both veterans of investment bank Goldman Sachs (GS.N), went to Senate Republican Leader Mitch McConnell’s office on Tuesday evening, where they all met with House Speaker Paul Ryan, and the chairmen of the House and Senate tax committees, Orrin Hatch and Kevin Brady, respectively.

Hatch called it a “preliminary” 30-minute meeting and participants described it as positive and productive.

As Mnuchin left the Capitol he told reporters there is “no question” the Trump administration and Republicans in the Senate and House agree on the “fundamental principles of tax reform.”

The senior White House official said Trump would like to see Congress pass tax reform by the middle of autumn.

Trump has struggled to advance his domestic agenda, including taxes. With his 100th day as president approaching on Saturday, he has yet to offer formal legislation to Congress or win passage of a major bill he favors.

Some Washington policy analysts said the White House plan could clash in some ways with a broader tax plan shaped months ago by House Republicans, and complicate the consensus-building needed for full tax reform, a political feat not accomplished since 1986 when President Ronald Reagan pulled it off.

The House Republican plan, championed by Ryan and Brady, proposed a 20 percent corporate tax rate. Many U.S. corporations, especially large multinationals, already pay well below the statutory 35 percent tax rate but have been campaigning for a formal rate cut for many years.

The Ryan-Brady plan did include “pay-fors,” including a proposed “border adjustment” tax that would favor exports and discourage imports.

When asked after Tuesday’s briefing if Republicans had ruled out including a border adjustment tax in a tax overhaul, Hatch said: “I wouldn’t say that. The House hasn’t given up on that but they’ve acknowledged it needs some work.”

Separately cutting the top tax rate for pass-through businesses, which account for most U.S. companies, could benefit Trump himself, said Frank Clemente, executive director of Americans for Tax Fairness, a Democratic activist group.

“In trying to slash taxes for pass-through business entities, Trump is seeking to dramatically reduce his own tax bill,” he said in a statement.

(Additional reporting by Susan Cornwell, Richard Cowan and Ginger Gibson; Editing by Kevin Drawbaugh and Bill Trott)

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