Lessons from a backlash over a CEO’s sexist comments

A new benchmark has been set for what is considered by many investors in Australia and New Zealand to be beyond the pale for remarks by a chief executive.

A controversy over misogynistic comments by the founder of Trans-Tasman chemical logistics and manufacturing company DGL shows how damaging it can be to a listed company when its chief executive goes rogue.

The comments drew flak from Kiwi prime minister Jacinda Ardern, triggered a sharp share price slide and may have even contributed to delisting of the company from New Zealand’s stock exchange.

It started like this. Simon Henry, the founder and controlling shareholder in the company once known as Dangerous Goods Logistics, gave an extraordinary interview with the National Business Review, which compiles New Zealand’s rich list.

Henry opted to compare his fast-growing business to the meal kit delivery business My Food Bag, which had floated at the same time as DGL but which had since nearly halved in value. He aimed his barbs in particular at My Food Bag’s founder Nadia Lim, who, he said, had used her “sensuality” to sell the company.

“I can tell you, and you can quote me,” Henry told the NBR reporter, “when you’ve got Nadia Lim, when you’ve got a little bit of Eurasian fluff in the middle of your prospectus with a blouse unbuttoned showing some cleavage, and that’s what it takes to sell your scrip, then you know you’re in trouble.”

The reputational damage for DGL was spectacular, suggesting comparisons with the famous gaffe by British businessman Gerald Ratner who referred to the products of his British jewellery chain as “total crap”.

Ardern described the comments as “insulting to all women”, while Nicola Willis, deputy leader of the opposition National party, said Henry had a “completely outdated world view”. Some investors who said they would no longer buy DGL stock and Ixom, one of its biggest customers, expressed concern at the “insulting” language.

Lim, one of New Zealand’s best known entrepreneurs after she appeared on MasterChef and Dancing With the Stars, said that the remarks by Henry could have a wider impact on younger women and people of colour who may hear such things and feel less capable than their peers.

A terse apology by Henry was proffered to Lim and the board of the company announced a review of DGL’s culture. The board statement described Henry’s comments as offensive and unacceptable.

“In Australia, a few companies have been criticised for being woke lefties. This is the opposite of that and you can see the value destruction it has caused,” says shareholder activist and journalist Stephen Mayne. “It is a salutary lesson: stick to your knitting and don’t get involved in needless ‘culture war’ fights in the era of ESG [investing along environmental, social, and governance principles].”

DGL had previously appeared to be the epitome of a quiet success story, a business valued at more than A$1bn ($719mn) that was built up by rolling up the fragmented market for storing, transporting and making fertilisers and pesticides for the agricultural sector and purification chemicals for water companies.

The company had floated in May last year at the height of Australian and New Zealand pandemic lockdowns and delivered a more than fourfold rise in its share price. However, shares in the company crashed by a third in the weeks following the comments being made public. That wiped out at about A$400mn of DGL’s market value.

More sparks flew when DGL said last week that it would cull its listing in New Zealand to save costs as trading in its stock was negligible there, transferring the shares to the Australian exchange where it was also listed. The head of the NZX instead suggested that the move was a reaction to the backlash over Henry’s comments, despite DGL saying the delisting had been in the works well before he opened his mouth.

In a market where takeovers of listed companies by private equity is at a record high, a dented DGL might look like a prime takeover target. But Henry has previously dismissed private equity ownership as an unpalatable option.

The incident is also a reminder of the risks investors take when a chief executive is dominant. Henry not only has a controlling 57 per cent stake, but has operational control as chief executive and sits on a board of directors that only runs to five members. A lot rides on the judgment of the CEO.

nic.fildes@ft.com