From Darwin to Davos, Dow Chemical’s Andrew Liver is The Accidental CEO
WHEN DARWIN-BORN ANDREW LIVERIS ACCEPTED AN OVERSEAS JOB TRANSFER HE THOUGHT IT WOULD BE TEMPORARY. HE WAS WRONG: TODAY HE RUNS THE GLOBAL COLOSSUS, DOW CHEMICAL
WHEN Dow Chemical chief Andrew Liveris visited Australia recently he got plenty of headlines. There were his pithy views on local politics and his arguments that Australia’s open door energy policy is doing huge harm to local manufacturing. However, few knew that the 60-year-old Darwin-bornbusinessman, one of Australia’s most successful business exports, was also back in the country to attend a ceremony in Canberra with huge personal significance, receiving an Order of Australia. Liveris was at the annual business gathering in Davos in Switzerland when the award was announced on Australia Day this year. He couldn’t work a visit to Canberra to collect the award into his “insane’’ travel schedule until August.
The low-key ceremony at Government House in Canberra with Liveris, his Broken Hill-born wife Paula and two of his three adult children, was an emotional event for Liveris who oversees an international business empire which turns over some $60 billion a year and which ranks in the Fortune top 50 US companies.
“I was in the moment and I didn’t think I would feel emotional in the moment, but I did,’’ Liveris, recalls an in interview with The Deal. “It was really just the realisation that a career in this great company that I work for and my Australian background could intersect such that I could play in role in helping Australia progress, in the international business community in particular. I don’t think that it is unfair to say that Australia celebrates its sports stars and movie stars internationally on a reasonably common basis. We have always felt good about exporting our sporting and entertainment but exporting our business talent and having it recognised is not that common.’’
Getting the award had a particular family significance for Liveris whose father died when he was 15. Twenty four years ago, his uncle “Les” Liveris, who became his mentor and pivotal figure in his life after the death of his father, was also awarded an Order of Australia. A former senior official in the Department of Immigration in Darwin, Les received his AO for public service and service to the community in 1980. Liveris jokes that him being the second in his family to receive an AO puts “a lot of pressure on my kids”.
Liveris runs a company that employs 54,000 people and has a presence in 160 countries. His external commitments include being a director of IBM, serving on President Obama’s Business Roundtable, a trustee for the United States Council for International Business and a member of the international board of the Special Olympics. It’s a long way from his carefree early childhood in Darwin in the 1960s and early 70s.
The grandson of a Greek migrant who came to Darwin on a trading ship in 1915 and stayed on a whim, Liveris grew up playing in the streets of the city with children of different races and cultures. He credits that upbringing with teaching him informality and inclusiveness that he has carried through his adult life. “Growing up in a Greek immigrant family allowed me to walk that line between being Anglo Saxon at school and Greek at home,’’ Liveris says.
There were lots of muddy roads and tadpoles in puddles after the heavy rains, basketball in local courts down by the fire station and trying to explain the baklava – the sticky Greek pastry and walnut sweet – in his lunch box to Anglo kids at school. “My upbringing was very mixed – I had lots of Chinese friends, Aboriginal friends, half-caste friends and I think that really, really helped me in my life,” he says. “I have been very inclusive all of my life, I have never understood division based on skin colour and all of these nonsense things’’.
Liveris has spent almost all his working life with Dow, rising to the ranks of chief executive in 2004 and chairman in 2006. His world includes face-to-face meetings with world leaders such as Chinese president Xi Jinping and US president Barack Obama. In many ways Liveris is very much the accidental chief executive. His brilliant career happened almost despite his more modest ambitions. After Cyclone Tracy devastated Darwin on Christmas Eve 1974, Uncle Les moved the Liveris family to Brisbane. Andrew got a government scholarship to study chemical engineering at the University of Queensland. It was a lecturer, Professor Don Nicklin, who encouraged Liveris to look for work with American companies, whom he admired and thought offered better prospects than the local scene. Liveris joined Dow as a young graduate working in its office in Melbourne. He was promoted through the local ranks and soon offered a regional role in Hong Kong. He thought the overseas job would be temporary. His goal was to one day return to his dream job as chief executive of the Australian operations.
“I was on a management track. Clearly I was someone considered to be of potential and I was being transferred to Hong Kong to help run an Asia-Pacific business out of Hong Kong. But leaving Australia for my wife and I was always going to be temporary. The design was never to make my way to headquarters and be the CEO of the company. I’m sure, in some wild dream, I might have fantasised about that (but) when we left in 1985 and had our second child (in Hong Kong), coming back to Australia was very much on the cards if that’s what someone wanted me to do. My dream job was to be the general manager of Dow Australia. But I got promoted beyond it. The next job I got was a promotion and by the time it (the Australian job) came up there was no way I could do it, that would have been a demotion.’’
Liveris’ promotion to the US meant he was not coming home to Australia any time soon. It provoked a round of familiar questions for any rising executive looking offshore. He and his wife discussed whether the kids should be raised Australian, did they want to send them to boarding school in Australia. Did they keep property here? Did they abandon his career and return to Australia, or stick with it for a while, make some money and return to Australia to live? In the end Liveris and his wife both felt they could have the best – or at least enough – of both worlds to satisfy the conflicting demands. They kept their Australian passports and their Sydney property, regularly upgrading as prices rose. “But both of us never felt that we had given up anything by being overseas. We had our family; we had our relatives back here. We kept coming back on holidays, they kept visiting us.”
Liveris kept being promoted within Dow and things started to become serious. “When I became vice-president it became very clear that suddenly I was in the top 100 jobs, then I was in the top 50 jobs then the top 20. Obviously you are getting to the peak of the needle. And by then I thought, ‘You know what, even if I don’t get the CEO job at Dow I will go and get the CEO job somewhere else’.’’ By 2002 Liveris was a rising star in the company. The board put him and three other candidates through the mill for the job of chief operating officer. The understanding was that whoever got that job, the chief executive role was theirs to lose. Liveris got the job and went on to become chief executive in November 2004. Taking over the top job, his goal was to transform Dow, moving it away from the lower-value commodity chemical business and expanding the specialty and custom parts of the business higher up the value chain. Ten years on it is still a work in process, with the pressures of the market creating endless demand for the company to innovate, cannibalise and reinvent.
“My industry was being decimated by the commoditisation trend,” he explains. “It meant that you had to get out of those businesses or you would have to run them for cash. You wouldn’t invest for the future. That dynamic is the plan I presented to the board; that we had to move away from being 90
per cent exposed to that (commodity chemical businesses) to somewhere less than 50. We are way more than that – so I would say we are very successful.’’
Even so, the rate of change and of commodification of innovations in the chemical industry, as in the information technology industry, is increasing. And it is not just private sector competitors driving that. Nation states – Liveris points to Chinese state-owned enterprises – are pushing into the space, trying to create jobs and competitive advantage for themselves in the industry. “The image I give our staff is, ‘Imagine you have this semi-trailer truck coming up behind you and you are on a bicycle. If the bicycle is your innovation engine, you are going to be run over by the commoditisation trend. What you have got to do is get a very fast sports car and race ahead of that innovation truck so that you are never run over.’ But never forget that the innovation of today is the cannibalisation of tomorrow. Even though you have invested huge capital for the first version, you
“I NEED FREE MARKETS TO SELL MY GOODS. I WOULD LIKE TO BE IN A POSITION OF INPUT AND INFLUENCE ON WHAT FREE MARKETS LOOK LIKE”
deliberately cannibalise yourself for the second version because the consumer at the end wants another product.’’
Liveris, too, has had to adapt and change as a chief executive since 2004 and as chairman since 2006. “Ten years in I like to say I am on my third or fourth version of myself,’ he says. In July 2008 Liveris announced a $US16 billion deal to buy US specialty chemical company, Rohm and Haas, only to be hit with the global financial crisis soon after. What looked like a sound strategic move turned almost turned into a bet-the-company crisis as credit markets froze. Liveris was forced to cut the dividend. The company got through it but Liveris says that trying time changed him.
The “China meltdown’’ in which concerns about China’s growth roiled markets and forced Dow to make some asset sales was another. More recently Dow has been in a public battle with activist investor Daniel Loeb and his Third Point hedge fund over Liveris’ plans to sell more assets to streamline the business. But it is the bounty of cheap US energy that has perhaps best defined Liveris – at least in the latter part of his tenure.
Cheap and plentiful shale gas has put the US on a path to potential energy self-sufficiency and sparked a renaissance in manufacturing. He has made it a mission to spread the word on cheap energy and reviving manufacturing. He wrote a book, Make it in America – the Case for Reinventing the Economy, in 2011 and regularly attracts headlines – particularly in Australia – for his views. The US restricts its gas exports. Liveris argues that Australia, with its plentiful supplies of gas, should also keep a significant proportion at home to provide a low-cost source of energy for its domestic manufacturing industry.
With soaring energy prices wreaking havoc on manufacturing – a study by Deloitte for the country’s main energy users and manufacturers predicts a $118bn contraction in the industry over the next seven years as users are forced to compete with highpriced export markets for gas to run power stations – Liveris wants that bounty harnessed for Australian users. He stops short of advocating a national reservation policy for Australia – with gas to be set aside at prices below the higher marginal prices paid by Korean, Chinese and Japanese utilities. But he argues that state and national governments in Australia need to be smarter about energy policy – something now in prospect with a federal government green paper on the issue announced last month.
While it was a small ceremony in Canberra to receive his Order of Australia, you could not have missed Liveris in the days around that visit. He created international headlines for his criticism of Australian politics as “scary’’ and an “embarrassment on the world stage’’. He opened a new factory in Victoria alongside Premier Denis Napthine, fronted an Australian Institute of Company Directors forum in Brisbane, attended a meeting Australian Davos Connection forum and managed to watch his beloved St Kilda AFL team play against the Western Bulldogs. That visit was just a slice of an hectic travel schedule that has him on the road 240 days of the year.
There is, he says a method to the hectic schedule. Liveris believes he needs to have an active input into the debates around his industry. “Dow is an energy intensive trade exposed manufacturer,’’ Liveris says. “I need free markets to sell my goods. I would like to be in a position of input and influence on what free markets look like. I need market access in Japan or China and (if) the US is negotiating a free trade agreement, I am a voice in that conversation. Rather than having someone else that negotiates that and I get the rules, I would like to participate in the rules and be under the tent.’’
Liveris says the licence to articulate and advocate on the company’s behalf was a core part of his pitch to the board when he was vying for the top job. It was a part of a broader mission to reinvent the company to get it off the back foot and again playing offence. “So I get to organise events with President Obama and I get to be in the room when all of those discussions are going on,’’ he says. “I can make my points about tax reforms, on energy policy, trade, you name it, any of the issues that matter to Dow.’’
It’s a role that seems to come naturally to Liveris, who speaks knowledgeably across a range of subjects, can be forceful when he needs to be, and always uses plain, accessible language. “I also realised that I had an attribute – whether it was a gift from God or I learned it – that I am articulate and I can simplify and I can help people understand complex issues,’’ he says. “And I can do it on TV. I can do it in an interview like this and I can debate. I don’t know where I learned all of that and maybe it was innate skills. But I can tell you I do my homework, I know my topics, explain my point of view. Those things matter to Dow and I chose what to do based on that.’’
Liveris won’t rule out a career in politics when he eventually retires from Dow and corporate life. He plans to return to Sydney, where owns property, meaning Australians are likely to hear and see a lot more of him.
Liveris has made it a mission to spread the word on cheap energy and reviving manufacturing
With German Chancellor Angela Merkel at this year’s AmCham Germany annual meeting
In an early promotion, Liveris helped run the Asia-Pacific business out of Hong Kong
A young Andrew Liveris, right, as part of a petrochemical team in Adelaide in 1981