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As Glencore grows, investors ask about life after Ivan

Glencore CEO Ivan Glasenberg smiles as he leaves after the company's annual shareholder meeting in the Swiss town of Zug May 9, 2012. REUTER
Glencore CEO Ivan Glasenberg smiles as he leaves after the company's annual shareholder meeting in the Swiss town of Zug May 9, 2012. REUTER

By Clara Ferreira-Marques and Sinead Cruise

LONDON (Reuters) - Glencore Xstrata boss Ivan Glasenberg, a former coal trader who has been at the helm for over a decade, is known for his pre-dawn runs, cut-throat competitiveness and a grueling travel schedule that shows no signs of slowing.

Yet while no one expects the imminent departure of Glencore's top shareholder - at 56, not far above the average CEO age - the takeover of $46 billion miner Xstrata has prompted investor questions over how a company so closely identified with a boss will manage his succession.

This includes not just the process of earmarking future leaders, but that of rebuilding the board and bringing in a new chairman willing to act as a counterweight to both Glasenberg and a culture born of almost four decades as a private company.

"On the one hand you don't want to stifle the entrepreneurialism, aggression, dynamism that people associate with Glencore versus the style of the other mining companies," said analyst Paul Gait at Sanford Bernstein.

"But on the other hand, you do want to put into place the processes and protocols that you associate with a bluechip company," he added.

Glencore - the world's largest diversified commodities trader and fourth largest miner - fiercely values loyalty and insiders argue it has a deep pool of internal talent.

Every one of its current, mostly long-standing divisional heads, they say, is a potential CEO, even if the company has a strategy of keeping employees to specific commodities throughout their careers. This, Glencore says, is key for a business that demands detailed technical knowledge and a deep understanding.

But the key public role played Glasenberg since Glencore's listing in 2011 makes it hard to separate his straight-talking, pugnacious appeal from that of the now much broader company.

And yet, in swallowing Xstrata, Glencore has gone from a trading giant to a much larger mining and trading behemoth.

"There is key man risk - and that is the board's big problem," said one veteran industry source familiar with Glencore.

Analyst Chris LaFemina at Jefferies agrees: "Even though the bench is deep, the perception about his importance means there is an issue if he were to leave."

"Losing him at Glencore would have the biggest negative impact on perception on the market - not that there is any reason to think that will happen any time soon," he said.

And there really is, industry veterans say, talent to choose from.

Glencore's divisional heads are well regarded and according to a second source with direct knowledge of Glencore, outsiders often do not realize the extent to which these executives - all shareholders - are familiar with each others' businesses.

"People underestimate how much the senior partners talk, they all take a view on each others' commodities," he said.

But there are still questions about internal progression.

"NO BEACHES"

Glencore insiders often portray the company as an almost Darwinian meritocracy - established players slow down and are eventually toppled by ambitious bright young things.

Indeed, after news last month of the imminent departure of aluminum boss Gary Fegel - a rare senior level exit and the first since the merger closed - insiders and industry sources hinted he had slowed down, and was overtaken in the process.

For his part, in recent interviews, building on a narrative that feeds the Glencore brand, Glasenberg has said he does not adhere to modern worship of a work-life balance. "No beaches", he told the Wall Street Journal last month.

"People ask why is Ivan so hands on? Why is he travelling around? Because if he doesn't lead by example, if he slows down and starts just managing the company and not working flat out, for sure the people below will start the pressure," said a senior executive familiar with Glencore. "He can stay in this job as long as he gives it 100 percent."

But that hands-on dominance is also part of the problem that has worried some shareholders - one that worked well in a trading firm with a strong entrepreneurial, if collaborative spirit - but perhaps less appropriate in one with 150 mining and metallurgical sites and almost $240 billion in revenues.

The number of employees virtually tripled, compared to Glencore's size at its IPO, to 190,000, including contractors.

Ultimately, Glencore will appoint a new boss through the normal, board process, considering external candidates - even though few would expect an outsider. That could be years away.

But in the short term, it faces the pressing issue of how to set up the necessary structure, specifically rebuilding a board decimated after shareholders voted out every Xstrata director at last month's annual general meeting.

Xstrata chairman John Bond - a City veteran bruised after his support of a highly unpopular Xstrata executive pay plan - was replaced in the role by former BP boss and Glencore senior independent director Tony Hayward, but only on an interim basis. Hayward has indicated he does not want the job permanently.

"What matters now is to secure the appointment of an independent chairman who commands the support of both external and internal shareholders," said the head of corporate governance at one of Glencore's 20 largest investors. "These things take time, but this is an opportunity to address the governance structure."

That chairman will also face the next big cultural change for Glencore: after private to public, it will be the shift from a company where employee ownership has been a defining characteristic, to one where that is more dispersed.

The executive familiar with Glencore said it would have to look at other companies like Google and Facebook, who have similar challenges - and similarly emblematic bosses.

"The ownership culture is key," he said. "That is what they have got to keep - make (the younger generation) behave like owners, even though they may not be owners to the same extent."

(Editing by Philippa Fletcher)

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