The Motley Fool's readers have spoken, and I have heeded their cries. After months of pointing out CEO gaffes and faux pas, I've decided to make it a weekly tradition to also point out corporate leaders who are putting the interests of shareholders and the public first, and are generally deserving of praise from investors. For reference, here's my previous selection.
This week, I'll turn your attention overseas to the largest producer of aluminum in the world, RUSAL, and highlight why smart strategic planning and a big heart make CEO Oleg Deripaska an incredible CEO.
Kudos to you, Mr. Deripaska
Many investors often wrongly assume that U.S.-based Alcoa (NYSE:AA) is the largest aluminum producer in the world. In actuality, RUSAL is the largest aluminum producer by output, and it's been investing quite heavily in new smelting capacity with the assumption that Russia, China, Brazil, and other emerging markets would have an insatiable demand for infrastructure improvements.
That plan hasn't worked out as expected. Both Alcoa and RUSAL have had to aggressively cut back production in order to stave off weaker aluminum prices and a glut of supply that still hasn't abated due to stockpiles of aluminum yet to be shipped.
Furthermore, weakness in China's GDP figures is threatening the entire commodities industry. Coal producer and exporter Peabody Energy (NYSE:BTU) has had to cut back on production with tempered demand from Asia and weaker global coal prices cutting into its bottom line. Similarly, we've seen copper giant Southern Copper (NYSE:SCCO) also cutting its production estimates for the full-year. Southern Copper has primarily blamed mining issues for the slowdown, but even copper demand has slowed from China. With less demand for some of the prime components needed to make steel and for use in heavy-duty infrastructure projects, it's no wonder why aluminum producers like RUSAL and Alcoa have been scrambling for answers.
The good news is that Deripaska and RUSAL aren't sitting idly by and flooding the market with aluminum production even though they are on the brink of opening another 300,000 metric tons of smelting capacity. To the contrary, RUSAL actually announced this week that it would cut production by 8.5% instead of the planned 7% despite global demand for aluminum inching higher. RUSAL understands that higher aluminum prices are needed to make extra smelting capacity viable and it's willing to endure weak times now for a huge payoff in say two to three years.
A step above his peers
In addition to running a tight ship when it comes to production capacity and cost-cutting, RUSAL does a very, very good job of taking care of its employees as you'll see below.
One employee benefit that stands out like a sore thumb to me is its housing program. For those of its 72,000 employees who qualify, RUSAL works with a large Russian mortgage lender to secure extremely low interest rates to purchase a home, and then RUSAL steps in to pay for at least 50% of an employee's monthly mortgage! How cool is that?
In addition to its housing program, RUSAL helps its younger employees through the Schools of Success program which is focused on encouraging innovation through project and social improvements within the company. Promotion with RUSAL is also very much geared toward seniority and is almost always done from within. In today's economy, that's a rarity.
Perhaps the most amazing aspect of all is the incredible act of kindness that Deripaska just demonstrated to his employees last month. You see, Oleg Deripaska isn't hurting for cash with a net worth of some $8.5 billion. However, as a sign of good faith to the employees that helped make him the wealthy man he is today, he decided to return the entirety of his $3 million bonus and divvy out $25,000 in stock to 120 lucky RUSAL employees. As I said, RUSAL employees are well taken care of.
Two thumbs up
While the aluminum market could certainly be better, RUSAL is setting itself up for big gains in the not-so-distant future when global aluminum pricing improves and supply stabilizes. With a mountain of benefits for employees that really speak to a high quality of humanitarian care and a CEO willing to dole out $3 million of his own money to his employees, I feel very confident in giving Oleg Deripaska two thumbs up.