Nutrien Ltd. NTR-T cut ties with chief executive officer Mayo Schmidt after a culture clash over his imperious leadership style, his sluggishness in getting things done and friction involving his chief of staff, according to three sources.
The exit of Mr. Schmidt in January after only eight months on the job shocked investors in the world’s biggest fertilizer company, which lost more than $2-billion in market value after the news dropped. Nutrien did not explain why Mr. Schmidt was stepping down, and analysts criticized the company for being opaque.
Saskatoon-based Nutrien also parted ways with Mr. Schmidt’s predecessor, Chuck Magro – in April of last year – with no warning, and no explanation of what went wrong. The Globe and Mail subsequently reported that Mr. Magro left after he clashed with the board over a major strategic decision involving a potential joint venture with mining titan BHP Group Ltd.
But the departure of Mr. Schmidt was a very different affair. Joel Jackson, analyst with BMO Capital Markets Inc., said a jarring change in corporate culture that occurred after Mr. Schmidt got the job played a big role in his exit. Three other sources corroborated this account.
“There was a lot of friction at the company during his tenure as CEO,” said Mr. Jackson, who learned this after speaking to several people at Nutrien.
Mr. Schmidt did not respond to a request for comment. Megan Fielding, a spokesperson for Nutrien, declined comment.
Mr. Schmidt, who grew up on a Kansas farm, has long been widely known for his pugilistic leadership style. While playing wide receiver for the Miami Dolphins, he internalized the importance of winning, and brought a similar zero-sum psychology to business. A Globe and Mail profile in 2005 described him as a “hard-ass.” He didn’t care about blending into polite Canadian business circles either. During his tenure in the 2000s as CEO of Canadian grain company Viterra Inc., he once took a sheet of talking points prepared by a PR rep and threw it in the garbage.
Back then, his single-minded brand of management was more culturally accepted than in the present day. It also proved to be effective in pure stock and financial performance.
Over about a decade, he transformed Viterra, a one-time regional co-operative, into a $6.1-billion fertilizer, crop chemicals and seed global giant, cutting hundreds of employees along the way. He later led Ontario utility Hydro One for three years.
In mid-2019, 18 months into Agrium Inc.’s merger with Potash Corp. of Saskatchewan, few were surprised when the veteran agribusiness executive surfaced as chair of the merged company, Nutrien. After Viterra was sold to Glencore, Mr. Schmidt had kept one foot in the business, and had been a long-time board member of Agrium. At Nutrien, he would work alongside CEO Mr. Magro.
The Generation-X Mr. Magro had a very different management style from the boomer Mr. Schmidt. Mr. Magro fostered a strong team spirit within the management ranks. And after close to a decade running Agrium and then Nutrien, he’d amassed a loyal group of acolytes internally. He was well liked also within Bay Street’s clubby analyst community.
Mr. Magro was also known by his peers to be an obsessive. He rose at 4:30 a.m. to think about strategy. And early in 2021, he was teeing up a big strategic move at Nutrien.
With the global fertilizer market rapidly improving, giant Australian miner BHP was getting ready to move forward on the construction of Jansen, a stalled multibillion-dollar potash project in Saskatchewan. BHP wanted a partner to share the risk and expense, and Nutrien was the obvious candidate. Mr. Magro knew that buying into the joint venture would be expensive, and could be risky. But he also saw immense opportunity to get in early at the start of an epic new bull market. He planned to sell the retail division of Nutrien to raise the cash needed for the joint venture. Nutrien’s board did not agree. It saw great risk in selling off the low-margin, but highly reliable cash cow retail. The ensuing strategic face-off cost Mr. Magro his job, and catapulted Mr. Schmidt from chair into the top executive position last April.
When Mr. Schmidt was named CEO, the announcement did not indicate it was anything other than a long-term appointment. But the board intended his tenure to last only two years, something Nutrien disclosed in a regulatory filing last month. In fact, near the top of Mr. Schmidt’s to-do list was to help find his successor, three sources familiar with the matter said.
The Globe is not identifying the sources because they were not authorized to speak publicly on the matter.
Many new CEOs in their first few months are eager to impress the market and prove their worth to the board. But rather than getting stuck in, the sources said, Mr. Schmidt clocked out. He took a hands-off approach to the day-to-day, was hard to reach, had little or no contact with the analyst community, was rarely in Canada, (his principal residence is Las Vegas), and the sources said that to even get to Mr. Schmidt, people had to go through his chief of staff, Sandip Lalli.
Ms. Lalli was given the senior role as chief of staff at Nutrien not long after Mr. Schmidt became CEO. A high-profile Alberta businesswoman, she previously held senior roles at agrifood giant Cargill Inc. and had recently been president of the Calgary Chamber of Commerce. There, she occasionally clashed with Premier Jason Kenney’s United Conservative Party government over policy. Despite her qualifications, the hiring of Ms. Lalli raised questions internally because of her personal connection to Mr. Schmidt, the sources said. She had served alongside Mr. Schmidt’s wife, Zahra AlHarazi-Schmidt, on the board of Global Transportation Hub, a Saskatchewan Crown corporation, and the two were known to be friends.
At Nutrien, Ms. Lalli was seen by some to overreach on her responsibilities, the sources said. Mr. Schmidt’s decision to allow her to participate in strategy and corporate development meetings was also not well-received, they said.
Ms. Lalli did not respond to a request for comment.
As the months went by, many top managers who had been loyal to the affable Mr. Magro found themselves clashing with the brusque Mr. Schmidt. “A lot of people had trouble getting along with Mayo,” BMO’s Mr. Jackson said.
In addition, it was becoming clear to the board that Mr. Schmidt was not moving fast enough on strategy, and had not helped move along the search for his replacement, the sources say.
“The process to identify the long-term CEO candidate was not advancing as quickly as [the board] wanted,” Mr. Jackson added.
A rarely talked about, but vitally important part of a CEO’s job at a major corporation is promotion, or what the street calls “marketing.” In the case of Nutrien, that involved Mr. Schmidt travelling around North America, courting new institutional investors, and reassuring current ones. Of paramount importance is a narrative that shows the company is moving forward. But as the months went by, amid Mr. Schmidt’s perceived inaction, there wasn’t anything new to tell investors, two of the sources said.
In an environment where a once-in-a-generation bull market was in motion, this caused great frustration at the board level, the two sources said.
The situation had deteriorated to such an extent that by the end of the year, the investor relations team did not want Mr. Schmidt on the road any more representing the company, the two sources added. At that point, it became apparent to the board that the original plan of Mr. Schmidt seeing out his two-year term wasn’t tenable, according to the three sources.
Nutrien was now facing a public-relations nightmare. How exactly does a $60-billion company put a positive spin on cutting ties with its second CEO inside a year? For guidance, Nutrien turned to a crisis-management firm. The strategy adopted in the end was simple: Don’t even try to explain it. On Jan. 4, Nutrien announced that Mr. Schmidt had left the company, thanked him for his service, and wished him the best. Not a word of explanation.
But the secretiveness and Nutrien’s reluctance to explain the exit of Mr. Schmidt backfired. After the news that he was out and would be replaced by Ken Seitz on an interim basis, the lack of transparency blindsided the street.
“Nutrien would be best served by sharing with all of its stakeholders roughly what’s going on and why,” said Ben Isaacson, analyst with Scotia Capital Inc., wrote in a note to clients.
For the most part though, Nutrien has stayed silent, only hinting at the tension behind the scenes over the departure of Mr. Schmidt.
“We recognize this decision and others related to executive leadership have created uncertainty,” the company said in its annual report last month.
Nutrien added that severing ties with both Mr. Magro and Mr. Schmidt was “necessary and in the best long-term interest of the company and its shareholders.”
The turmoil at Nutrien showcases how important thinking long and hard about leadership style and culture is before picking a CEO.
“Lack of CEO fit is like a divorce between spouses,” said Richard Leblanc, professor of law, governance and ethics at York University. “If the fit is irreconcilable, it may be time to admit it and go separate ways. It is better to acknowledge the hiring mistake and act, rather than to press on and cause more harm, distraction – and even damage and talent flight – to the board and senior management.”
Prof. Leblanc adds, though, that in many instances, the lack of fit can be predictable, especially when the candidate’s temperament is already known to the company. Mr. Schmidt had been Nutrien’s chairman for almost two years before becoming CEO.
“The hiring of the CEO is the most important decision a board makes and often it is one of the poorest,” Prof. Leblanc said. “There are many reasons for this, but it is almost always undue influence, skipping proper hiring steps, being overly emotional, and boards being starry-eyed.”
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