A2 Milk shareholders were shocked when the company announced at 8.56am on Monday that CEO Jayne Hrdlicka "has agreed to step down from her role", effective immediately.
This was only 17 months after she started at the company.
• A2 Milk boss Jayne Hrdlicka exits job suddenly
• A2 Milk chair says Jayne Hrdlicka's departure was not performance-related
• Jayne Hrdlicka's exit raises more questions for delicately poised a2 Milk
The first responses were a sharp drop in the company's share price, followed by these questions: Did she jump or was she pushed? What impact would this have on the company's long-term share price? Would she receive a huge payout? Were a2 shareholders effectively funding her ability to be a long-term president and chairman of Tennis Australia?
The past five days have given the opportunity to answer these questions and assess Hrdlicka's a2 legacy.
Carla Jayne Hrdlicka was raised in Kansas, in the United States, as a member of a highly successful Czech Republic immigrant family. She graduated from Colorado College with a BA in Mathematics and Economics and went on to receive an MBA from Tuck School of Business at Dartmouth College, New Hampshire.
Hrdlicka joined the US management consultants Bain & Co in 1987, followed by two executive positions in the publishing sector between 1991 and 1997. The first was in North Carolina, followed by a position in Sydney, Australia. She re-joined Bain & Co in Australia in 1997 and remained there for 13 years.
In August 2010, Hrdlicka acquired two new positions. She was appointed a non-executive director of supermarket giant Woolworths, where she remained until 2016, and started as a senior executive at Qantas.
Two years later, in mid-2012, Hrdlicka was promoted to chief executive of Jetstar, Qantas' budget airline. She remained in that position until November 2017.
The Qantas annual report for the June 2017 year showed that Jetstar had underlying Ebit (earnings before interest and tax) of A$417 million for the year, compared with A$452m for the June 2016 year.
The earnings decline was because the carrier only "partially offset the impact of booking and service fee charges and softer freight yields".
Hrdlicka's total remuneration for the June 2017 year was A$2.8m compared with A$3.0m for the previous year.
Three major announcements were made regarding Hrdlicka in the second half of 2017:
• On August 28, Qantas announced Hrdlicka would move from CEO Jetstar to CEO Qantas Loyalty. This indicated that her star had faded, as CEO Qantas Loyalty is a lower paying position than CEO Jetstar
• On October 23, Hrdlicka was elected non-executive president and chairman of Tennis Australia
• On December 14, a2 Milk announced that she would be the company's new managing director and CEO.
It was a huge achievement for Hrdlicka to be elected president and chairman of Tennis Australia, given her US background and the fact that this is one of Melbourne's most sought after and prestigious appointments. It is also a long-term post, as before Hrdlicka, only 10 individuals have held this position since 1904.
Tennis Australia is also a big business, mainly because it runs the hugely successful Australian Tennis Open. The Melbourne-based organisation generated revenue of A$315m for the 12 months to June 2017, the year before Hrdlicka's appointment, while a2 Milk reported revenue of $549m for the same 12-month period.
A2's announcement on December 14, 2017 stated that "Jayne was more recently employed for over 5 years in the role of CEO of the Jetstar Group". This was technically correct, but it failed to mention that she had recently moved to a lower paying position at Qantas.
At the time, David Hearn, the highly regarded a2 chairman, was asked whether Hrdlicka would have the bandwidth to fulfil her obligations at a2 Milk, as well as Tennis Australia. His response was that the Australian Tennis Open, which was Tennis Australia's main undertaking, was a two-week event and he was happy that she could handle both positions, as well as commuting from her Melbourne home to a2's Sydney office and playing an important role in the upbringing of her two young sons.
Hrdlicka left Qantas on February 11, 2018 and the Qantas 2018 annual report showed that on departure, she forfeited 247,919 shares, trading at around A$5.80 at the time.
Hrdlicka started at a2 on July 16, 2018, on a base salary of A$1.5m and a potential bonus of up to A$1.8m per annum. She was also granted 245,787 performance rights (effectively shares in the future) on commencement.
A condition of her engagement was that the new CEO and a2 were required to give each other six months' notice of resignation or termination respectively.
Hrdlicka was in the spotlight on September 21, just over two months after she joined the NZ company, when she revealed she had sold 357,232 a2 Milk shares for $4.36m or $12.21 each. These were part of an additional 508,340 shares she had been granted to compensate for the forfeiture of Qantas shares on termination of her previous employment.
Shareholders were shocked by the sale, even though she explained they were to meet tax obligations and to fund commitments she had made prior to her joining a2. Heard was also stunned and it was the first clear indication that Hrdlicka was going to do things her way, regardless of best practice and convention.
Hrdlicka's position was made clear at 8.56am on Monday, when a2 announced she was leaving and the highly regarded "former CEO Geoffrey Babidge has accepted the role as interim CEO commencing immediately".
Hrdlicka was quoted as saying: "The reality is that the next three-five years will continue to require the CEO being present in our core markets of China and the US and that, combined with running a New Zealand company based in Australia, required more travel than I had anticipated when I joined the company. The board and I agreed that this next phase is going to be too difficult to manage alongside my other commitments while also managing the health and wellness priorities of my family and me."
One of Hrdlicka's other commitments is Tennis Australia, as she was re-elected president and chairman for a further two-year term at the end of last month.
This raises the question: Did the a2 Milk board request Hrdlicka to choose between the NZ company and Tennis Australia, and did she go because she was re-elected to the latter position a few weeks ago?
But surely the issue goes far deeper than this.
Hrdlicka's share sale in September 2018 was a disaster, as illustrated by the accompanying table, and a huge embarrassment to Hearn and his fellow directors. The figures shows that a2's short seller interests went from 3.25 per cent before the share sale announcement to 3.82 per cent five days later and 6.85 per cent at the end of 2018.
There is a five-day lag before the Australian regulator releases short selling figures, and it will be interesting to see if this figure rises or falls from the 8.79 per cent level before the Hrdlicka announcement on Monday.
The a2 board must have been dissatisfied with Hrdlicka because if they didn't want her to leave they would have convinced her to see out her six month notice period, as required by the employment contract. The big question now is her exit payment, with some observers predicting that she could receive up to $20m in cash and shares for her 17 months at the New Zealand company.
Clearly, Hrdlicka will be determined to obtain a huge payout as her income from Tennis Australia, although not disclosed, is probably much lower that at a2 Milk and she will find it difficult to obtain a high-paying executive position after her a2 experience.
A2 shareholders can take some comfort in the fact that interim CEO Babidge is a proven performer and directors won't give shares to a new full-time CEO that he or she can sell without any restrictions.
- Brian Gaynor is a director of Milford Asset Management.