| Type | Public (ASX: JHX) |
|---|---|
| Industry | Building materials |
| Founded | Melbourne, Australia 1888 |
| Headquarters | Ireland |
| Key people | Louis Gries, CEO Russell Chenu, CFO |
| Products | Columns Commercial Facades Weatherboards Fencing and Lattice |
| Revenue | A$1.5 billion |
| Employees | 2500 |
| Website | James Hardie |
James Hardie Industries Ltd. is an industrial building materials company headquartered in Ireland and listed on the Australian Securities Exchange which specialises in fibre cement products. James Hardie manufactures and develops technologies, materials and processes for the production of building materials. For over 20 years, Hardie has also operated a research and development facility devoted solely to fiber-cement technology. The company was a key player in asbestos mining and manufacturing in Australia through most of the twentieth century.[1] The 2009 book Killer Company is about James Hardie Industries.[2]
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James Hardie immigrated to Australia in 1888 from Linlithgow, Scotland, and created a business importing oils and animal hides. Andrew Reid, also from Linlithgow, came to join Hardie in Melbourne, and became a full partner in 1895. When Hardie retired in 1911, he sold his half of the business to Reid.
James Hardie Industries Ltd was first listed on the Australian Stock Exchange in 1951.
In December 2001, the company shareholders unanimously voted to restructure and relocate the company in the Netherlands as a parent company. This had the effect of separating the company from the stigma of its asbestos liabilities.[3]
On 19 February 2010, James Hardie moved their corporate domicile from The Netherlands to Ireland, in a transaction designed to transform James Hardie Industries NV into an Irish Societas Europea company, and James Hardie Industries NV became James Hardie Industries SE. The final stage of the move was completed on 17 June 2010.[4]
For much of the twentieth century, James Hardie was one of a number of companies involved in the manufacture, distribution and mining of asbestos and its related products such as building products, insulation, pipes and brake linings. In Australia, there were asbestos plants in New South Wales, South Australia, Victoria, Queensland and Western Australia. Many of these asbestos products - including the building material known as "Fibro" - caused people to develop various pleural abnormalities such as asbestosis and malignant mesothelioma.[5] While other companies were involved in similar asbestos-related activities, most notably [CSR], more than 50% of claims made to the NSW Dust Disease Tribunal in 2002 were brought against companies in the James Hardie group.[6] Prince et al.[7] claim that this is due to the range of mining and manufacturing interests that James Hardie had throughout its long operating history. The Australian Council of Trade Unions [8] estimated that 4600 claims for mesothelioma would be made against James Hardie from 2006 onwards, with claims expected to peak in 2010 or 2011 at 250 per year. The total number of past and future claims made against James Hardie for asbestos-related diseases is estimated to be more than 12,500, of which 8103 will be claimed after 2006.[9]
James Hardie and its subsidiaries had been providing compensation for victims of its operations since the 1980s. Though some earlier claims had arisen, the proliferation of cases from the 1980s onwards forced James Hardie to acknowledge that it had known asbestos to be dangerous. James Hardie nonetheless maintained that it had done everything possible to protect workers.[10][11] In 1978 the company began putting warning labels on its products explaining that inhalation of the dust could result in cancer [12] and in March 1987 James Hardie ceased all asbestos manufacturing activities.[13]
James Hardie had been structured as a parent company operating through subsidiaries since the 1930s. All asbestos operations, including the provision of compensation, were undertaken by James Hardie's subsidiaries, principally James Hardie and Coy and Hardie-Ferodo (later known as Jsekarb).[14] Between 1995 and 2000, James Hardie (the parent company) began to remove the assets of these subsidiaries (since renamed Amaca and Amaba respectively), whilst leaving them with most of the asbestos liabilities of the James Hardie group.[15] In 2001 these two companies were separated from James Hardie and acquired by the Medical Research and Compensation Foundation (MRCF) which was essentially created in order to act as an administrator for Hardie's asbestos liabilities. Then CEO of James Hardie, Peter McDonald, made public announcements emphasising that the MRCF had sufficient funds to meet all future claims and that James Hardie would not give it any further substantial funds. Indeed, the net assets of the MRCF were A$293 million, mostly in real estate and loans, and exceeded the 'best estimate' of $286 million in liabilities which had been estimated in an actuarial report commissioned by James Hardie.[16] After this separation, James Hardie moved offshore to the Netherlands for what it claimed were significant tax advantages for the company and its shareholders. To make this move, the company had to assure Australian courts (as it was listed on the Australian Stock Exchange) that the MRCF would be able to meet future liabilities. The courts were assured of this and that more money would be made available to its Australian asbestos victims if it were needed.[17] The move to the Netherlands therefore proceeded. However, the tax benefits which James Hardie expected to receive as a result from its move have not eventuated.[3]
Shortly after the move, an actuarial report found that James Hardie asbestos liabilities were likely to reach A$574.3 million.[18] The MRCF sought extra funding from James Hardie and was offered A$18 million in assets, an offer the MRCF rejected. The estimate of asbestos liabilities was promptly revised to A$751.8 million in 2002 and then A$1.573 billion in 2003 [19] In discussing the shortfall with the MRCF, James Hardie refused to accept further responsibility for the liabilities on the basis that the MRCF and James Hardie were separate legal entities.[20] The funding shortfall became of increasing concern in 2004 as it became clear that eligible victims would miss out on receiving compensation.
On 12 February, a judicial inquiry into the matter was commissioned by the NSW government. The findings[21] were very critical of James Hardie and its management. Amongst other findings, it found that the actuarial reports commissioned by James Hardie which estimated liabilities at A$286 million were inadequate because they used a financial model which made unfounded predictions on the value of investments held by Amaca and Amaba, the figures were subject to numerous unspecified conditions and they did not account for the effect of separating Amaca and Amaba from James Hardie.[22] However, the inquiry found that James Hardie was under no legal obligation to provide compensation.[23] Despite this finding, there was immense political and social pressure on James Hardie to negotiate a compensation deal;[24] governments were boycotting James Hardie products[25] and unions were threatening to instigate a global union movement against the company based on a black ban of James Hardie products.[26]
Following the results of the inquiry, James Hardie entered into negotiations with governments and trade unions in an effort to establish some sort of compensation system for eligible victims of James Hardie's products. In December 2004, James Hardie agreed to pay compensation to the victims of its products through a voluntary compensation fund. The details of the fund were to be legally determined by June 2005 but progress was stalled and the company refused to disclose the date the deal would be finalised.[27] Further conflicts between the company and the then Federal Government over tax deductibility of donations to the voluntary fund saw finalisation of the deal further delayed. It was not until November 2006, after the federal government had created 'black hole' tax legislation,[28] which made the contributions of James Hardie into the voluntary fund tax deductible, and had granted the voluntary fund tax-exempt status, that James Hardie finalised the compensation deal. There was immense pressure on the Federal Government from state governments, union leaders and victims to remove the tax problem. Sexton [29] claims that the Federal Government agreed to these conditions to avoid being seen as blocking the compensation. The final step in giving the voluntary fund a legal structure was approval of the scheme by James Hardie shareholders. In February 2007, 99.6% of shareholders voted in favour of the scheme and it began operating days later.[30]
Subsequent to the inquiry in 2004, prosecutors were considering bringing civil and criminal charges against the CEO and other senior executives for making fraudulent statements as to the liquidity of the MRCF.[31] In February 2007 every member of the 2001 board and some members of senior management were charged by the Australian Securities and Investment Commission (ASIC) with a range of breaches of the Corporations Act 2001 (Cth) including breach of director's duties by failing to act with care and diligence.[32] The case is currently being heard before the NSW Supreme Court. ASIC also undertook investigations into possible criminal charges against the company's executives but in September 2008 the Commonwealth Director of Public Prosecutions decided there was insufficient evidence and charges were not pursued.[33]