As Michael Chaney prepares to step down as Wesfarmers’ chairman after Thursday’s annual meeting, his message to investors is to heed the foundation that has made the conglomerate a success over more than four decades.
“Over the 42 years since we listed on the exchange, we’ve outperformed every other company financially, but we’ve done it in a way that’s given us – and preserved for us – a very good corporate reputation, and I think that’s because of the culture that was developed in Wesfarmers,” he says.
Chaney has been with the group most of that time, bar a one-decade break between retiring as chief executive and returning as chairman in 2015. The company mission of providing a “satisfactory return to shareholders” has made the group a corporate chameleon, and predictions about its future almost impossible, he says.
“If you said to me or [chief executive] Rob Scott, ‘What will the company look like in 10 years’ time?’ none of us would give you an answer because it’ll be opportunity-driven.”
Opportunity has driven the group from an ASX debut in the 1980s focused on its fertiliser business to coal mining over the following decade, then to supermarket retailing with the massive acquisition of Coles – and now general retailing in Kmart, Officeworks and Bunnings, with a transition into the minerals industries taking shape.
“Wesfarmers has been successful more by being reactive than proactive, more by having a good balance sheet, and then taking advantage of opportunities as they came along,” Chaney says.
’If you said to me or [Wesfarmers chief executive] Rob Scott, ‘What will the company look like in 10 years’ time?’ none of us would give you an answer because it’ll be opportunity-driven.’
Michael Chaney
He refers to it as “logical incrementalism” where the company makes multiple investments in promising areas, and pursues the successful ones.
It is the opposite strategy of many ASX-listed companies which set a target for growth, or market share, and then do everything possible to meet that target.
“You end up making investments simply because they give you top-line growth, even though they may give you hopeless returns. And there are plenty of examples of that,” Chaney says.
The Wesfarmers approach saw it acquire a promising timber and forestry business in the 1990s called Bunnings. It ended up selling most of it, but keeping its modest hardware business which is now one of the most iconic brands in Australia.
“[Hardware] was tiny when we bought it, and is now producing a few billion dollars of profit.”
Looking at Wesfarmers’ past makes it all the more interesting that Chaney is so cautious on the epochal transformational capabilities of AI.
He is just as happy to talk of the threats the new technology poses to both corporate boards and society at large.
While data centres have become the investment obsession this year, Chaney says the view at Wesfarmers is that AI – at this stage – is a productivity facilitator.
“We don’t currently see a big decrease in employment in the group … rather, AI is changing the way people work. For example, moving people out of back-office to customer-facing roles.”
But the fundamental question of costs versus benefits remains an open one for the group.
“Costs of tokens, for example, can get out of control. Are you really getting revenue benefits that make it worthwhile?” he asks.
“There are issues like whether you should be using large language models or smaller models internally that don’t cost as much, don’t have all the bells and whistles, but still do the job.”
The threats AI can pose are much more obvious to the corporate veteran than its benefits.
“The whole question of cyber risk is one that’s not only increased pretty dramatically in the last couple of years, but will increase even more … And I think it’s a real challenge keeping abreast of it because one thing about AI is that we really don’t know where it’s going to lead us, and there’ll be surprises.”
He cites the recent examples of AI agents unexpectedly breaching IT systems to execute user commands.
“It’s a real surprise when agents are talking to each other, and there are things that are going to happen that make doing business a lot harder. I think boards and management need to be really diligent about the security of their systems and making sure that they have plans in place if problems arise.”
Chaney is also chair of gold miner Northern Star, which is fending off a takeover from South African-based Gold Fields. He has said he will step down from his role at Northern Star at its annual general meeting next month.
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Colin Kruger is a senior business reporter for the Sydney Morning Herald and The Age.Connect via email.From our partners
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