James Hardie Industries

James Hardie Industries Ltd.
Public
Traded as ASX: JHX
NYSE: 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
Number of employees
 3,100[1]
Website www.jameshardie.com.au

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 fibre-cement technology. The company was a key player in asbestos mining and manufacturing in Australia through most of the twentieth century.[2]

Working with products containing asbestos - including the building material known as "Fibro" - caused people to develop various pleural abnormalities such as asbestosis and malignant mesothelioma.[3] The 2009 book Killer Company[4] and the 2012 TV docu-drama Devil's Dust are about James Hardie Industries. In May 2012 the High Court of Australia found that seven former James Hardie non-executive directors misled the stock exchange over the asbestos victims compensation fund.[5]

History

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.[6]

James Hardie Industries Ltd first listed on the Australian Stock Exchange in 1951. For much of the twentieth century, James Hardie was the dominant manufacturer in Australia of asbestos cement sheet and other related building products which used asbestos as a reinforcing material.[7]

James Hardie was one of a number of companies involved in the mining of asbestos, and by the middle of the twentieth century had become the largest manufacturer and distributor of building products, insulation, pipes and brake linings containing it. In Australia, it ran asbestos plants in New South Wales, South Australia, Victoria, Queensland and Western Australia. Working with the products containing asbestos - including the building material known as "Fibro" - caused people to develop various pleural abnormalities such as asbestosis and malignant mesothelioma.[3]

In December 2001, the company shareholders unanimously voted to restructure and relocate the company in the Netherlands as a parent company. This was part of a strategy to separate the company from the stigma of its asbestos liabilities.[8]

On 19 February 2010, James Hardie moved its 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.[9]

Asbestos products and controversy

History

In 1978 the effects of pleural abnormalities and other asbestos-related diseases were beginning to show up in the former mine workers. Journalist Catherine Martin's front-page story for The West Australian won a Walkley award and she produced a series of another nine articles highlighting the impact on workers and their families. Martin was made a Member of the Order of Australia on 12 June 1982 for services to journalism.

While other companies were involved in similar asbestos-related activities, most notably CSR Limited, more than 50% of claims made to the NSW Dust Diseases Tribunal in 2002 were brought against companies in the James Hardie group.[10] Prince et al. claim that this is due to the range of mining and manufacturing interests that James Hardie had throughout its long operating history.[10] The Australian Council of Trade Unions has 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.[7]

Bernie Banton AM was the widely recognised face of the legal and political campaign to achieve compensation for the many sufferers of asbestos-related conditions, which they contracted after working for James Hardie. Bernie Banton suffered from asbestosis, pleural mesothelioma and Asbestos-Related Pleural Disease (ARPD), which required him to carry an oxygen tank wherever he went.[11]

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.[12][13] In 1978 the company began putting warning labels on its products explaining that inhalation of the dust could result in cancer[14] and in March 1987 James Hardie ceased all asbestos manufacturing activities.[15]

As concern grew about the serious adverse health effects of asbestos, in the mid-1980s James Hardie developed an asbestos-free fibre cement technology, without the dangers associated with asbestos.[16]

The MRCF and move to the Netherlands

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).[2]:3 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.[2]:3 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.[17] The Jackson Report found that this 'best estimate' was 'wildly optimistic' and the estimates of future liabilities was 'far too low'.[18] 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 through the issue of partly paid shares to MRCF obliging the new Dutch parent company to meet a call for funds if it were needed. The value of the call at the time was $1.9 billion.[2]:3[19] The move to the Netherlands therefore proceeded. However, the tax benefits which James Hardie expected to receive as a result from its move did not eventuate following the revision of tax laws in the United States in 2001 and later with the United States signing a new trade agreement with the Netherlands in 2006. While the move to the Netherlands resulted in tax savings of $US85.5 million over seven years, in 2009 James Hardie had to pay the Australian Taxation Office $AU153 million after an audit of the 2001 move showed James Hardie had violated the Income Tax Assessment Act. Also in 2009, the U.S. Internal Revenue Service alleged that James Hardie had not been in compliance with the US-Dutch treaty since it had been implemented in 2006 and claimed $US37 million in unpaid taxes plus $US10 million in interest and penalties.[8]

Shortly after the move, an actuarial report found that James Hardie asbestos liabilities were likely to reach A$574.3 million.[20] 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$751.7 million in 2002 and then A$1.573 billion in 2003.[21] The funding shortfall became of increasing concern in 2004 as it became clear that eligible victims would miss out on receiving compensation after it was revealed that in March 2003 James Hardie had cancelled the partly paid shares that were intended to be a safety net for the fund.[19][22] 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.[23]

Inquiry

On 12 February 2004, a judicial inquiry into the matter was commissioned by the NSW government. The findings[24] 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.[17] However, the inquiry found that James Hardie was under no legal obligation to provide compensation.[25] Despite this finding, there was immense political and social pressure on James Hardie to negotiate a compensation deal;[26] governments were boycotting James Hardie products[27] and unions were threatening to instigate a global union movement against the company based on a black ban of James Hardie products.[28]

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.[29] 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,[30] 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[31] 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.[32]

After 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.[33] 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.[34]

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.[35]

In 2009, the Supreme Court of New South Wales found that former chairwoman Meredith Hellicar and ex-directors Michael Brown, Michael Gillfillan, Martin Koffel, Dan O'Brien, Greg Terry and Peter Wilcox had misled the stock exchange in relation to James Hardie's ability to fund claims. They were also banned from serving as board members for five years. Former chief executive Peter Macdonald was banned for 15 years and fined $350,000 for his role in forming the MCRF and publicising it.[36] The former directors, excepting Macdonald, appealed and the NSW Court of Appeal subsequently overturned the ruling against these directors in 2010.[5] ASIC appealed against the ruling in the High Court of Australia in October 2011. In May 2012 the High Court upheld the landmark 2009 New South Wales court decision and found that seven former James Hardie non-executive directors did mislead the stock exchange over the asbestos victims compensation fund.[5]

Timeline

Timeline of key events from the Devil's Dust TV program:[37]

See also

References

  1. ↑ http://www.jameshardie.com.au/our-people/
  2. 1 2 3 4 Australian Council of Trade Unions (2007) James Hardie Asbestos Victims Compensation Background Facts
  3. 1 2 Handen Zeren, E., Gurmurdulu, D, Roggli, V. et al. (2000). 'Environmental Malignant Mesothelioma in Southern Anatolia: A Study of Fifty Cases'. The National Institute of Environmental Health Sciences 108(11): 1047-1050.
  4. ↑ Angela Welsh. Review: Killer Company The Walkley Foundation, 27 October 2009.
  5. 1 2 3 "High Court rules against Hardie". Sky News. 3 May 2012. Retrieved 3 May 2012.
  6. ↑ "James Hardie (1851-1920)". 150 Years: 150 Lives. Brighton General Cemetery (Vic). 1 September 2008. Retrieved 17 January 2012.
  7. 1 2 "James Hardie Asbestos Victims Compensation: Background Facts" (PDF). The City of Newcastle. Archived from the original (PDF) on 2 October 2013. Retrieved 2012-11-11.
  8. 1 2 Sexton, E. (2009, 14 March) 'Dust to Dust' The Sydney Morning Herald [online] Available from: http://business.smh.com.au/business/dust-to-dust-20090313-8xww.html
  9. ↑ http://www.ir.jameshardie.com.au/jh/corporate_governance.jsp James Hardie move to Ireland
  10. 1 2 Prince, P., Davidson, J., Dudley, S. (2004) In the Shadow of the Corporate Veil: James Hardie and Asbestos Compensation (online) p.1, accessed 27 November 2012
  11. ↑ About us: The Bernie Banton Story - Crusader for asbestos releated diseases at Homepage of ADRI - Asbestos Diseases Research Institute. Retrieved 29 June 2013.
  12. ↑ Haigh (2006), pp. 137-138
  13. ↑ Jarron (2009)
  14. ↑ Sexton, E. and Stephens, T. (2004, 25 September). 'Lives in the Dust'. The Sydney Morning Herald p. 27.
  15. ↑ Haigh (2006), p. 130
  16. ↑ "James Hardie Investor Relations - History". Retrieved 9 July 2012.
  17. 1 2 Jackson (2004), p. 9
  18. ↑ Jackson (2004), p. 12
  19. 1 2 Sexton, Elisabeth (3 August 2004). "Lawyer's notes add to Hardie's asbestos saga". The Age. Retrieved 20 June 2013.
  20. ↑ Jackson (2004), p. 30
  21. ↑ Jackson (2004), p. 31
  22. ↑ Ackland, Richard (30 July 2004). "Where the line of duty falls for legal advisers". Sydney Morning Herald. Retrieved 20 June 2013.
  23. ↑ Jackson (2004), p. 461
  24. ↑ Jackson (2004)
  25. ↑ Jackson (2004), p. 37
  26. ↑ Jarron (2009), pp. 57–62
  27. ↑ Sexton, E. (26 October 2004b). 'Hardie Promises to Support Victims'. The Sydney Morning Herald p. 2.
  28. ↑ Skulley, M. (2004, 30 July). 'Building Unions Black-Ban Products'. The Australian Financial Review p. 8.
  29. ↑ Higgins, E. (2004, 21 September). 'Hardie Report 'Not End of Fight. The Australian p 3.
  30. ↑ Tax Laws Amendment (2006 Measures No. 1) Act 2006 Cth.
  31. ↑ Sexton, E. (2006, 24 June). 'James Hardie Compo Deal in Doubt After Tax Ruling'. The Sydney Morning Herald p. 5
  32. ↑ No author (2007, 7 February) 'James Hardie compensation deal approved' The Sydney Morning Herald [online] Available at: http://www.smh.com.au/news/business/james-hardie-compensation-deal-approved/2007/02/07/1170524167926.html
  33. ↑ Sexton, Elisabeth (21 November 2007) "Fresh Go at Hardie Granted". The Sydney Morning Herald p.2 Retrieved on 3 May 2012 (on-line version)
  34. ↑ Australian Securities and Investments Commission (2007b). 'ASIC Commences Proceedings Relating to James Hardie' [online], Available from: http://www.asic.gov.au/asic/asic.nsf/byheadline/07-35+ASIC+commences+proceedings+relating+to+James+Hardie?openDocument
  35. ↑ Hall, E. (5 September 2008). 'ASIC Drops Criminal Pursuit of James Hardie'. Transcript from Radio National programme The World Today [online], Available from: http://www.abc.net.au/worldtoday/content/2008/s2356428.htm
  36. ↑ "James Hardie directors lose final appeal". Sydney Morning Herald. 12 November 2012.
  37. ↑ "Devil's Dust".

Bibliography

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