7-Eleven: Russ Withers and Warren Wilmot resign following wages scandal

Above: 7-Eleven’s former chair Russ Withers, general manager of operations Natalie Dalbo and former CEO Warren Wilmot answer questions at a Senate Committee hearing in Melbourne,

Embattled convenience chain 7-Eleven had little choice but to install a new executive management team amid the ongoing underpayment scandal, according to one leadership expert.

7-Eleven Australia yesterday revealed Russell Withers has resigned as chairman of the company’s board and will hand the reigns over to Michael Smith, who previously served as the board’s deputy chair. Withers will remain on the 7-Eleven board as a non-executive director.

Warren Wilmot stood down as the company’s chief executive and will be replaced by Bob Baily on an interim basis while the company recruits for the role.

7-Eleven said in a statement Wilmot opted to resign “following the recent realisation of the extent to which 7-Eleven franchisees had underpaid workers”.

The franchise company said Withers, who is also a majority shareholder of the business, had intended to hand over the chairmanship of the board to Smith in 18 months’ time but has chosen to “bring that transition forward” as a result of Wilmot’s resignation.

“Over the longer term Michael will need to forge a very close working relationship with our new chief executive so it makes sense for that process to commence from the outset,” Withers said in the statement.

Peter Gahan, founder and director of the Centre for Workplace Leadership, told SmartCompany this morning from a corporate governance point of view, Withers and Wilmot “did not have any other choice but to stand down”.

“Many of the issues that have been raised here go to the heart of fiduciary duties,” Gahan says.

“The board has responsibility for making sure the company is run well and in accordance with the law, including corporations law and work health and safety law.”

However, Gahan says standing aside does necessarily mean it is the “end of the story” for the individuals involved.

“They still may, subject to what pans out, have personal liability as a consequence,” he says.

In particular, Gahan says there is “a lot at stake” for Withers, who together with members of his family, established 7-Eleven’s Australian operations in 1977.

“He has stepped down as chairman but he will remain on the board as the most significant shareholder in the organisation,” Gahan says.

“There will be questions if you like about the extent to which the incoming chief executive can operate independently. [Withers] will need to ensure while he undertakes his role and performs in accordance with his responsibilities as a director, he doesn’t impinge on that separation.”

Gahan says Baily and Smith will have their jobs cut out for them.

Baily is a non-executive director of The Good Guys, Best Friends Pet Holdings and City Pharmacy and is the co-founder and former managing director of Best Friends. He is also the former chairman of the Australian Association of Convenience Stores.

Gahan says Baily appears to have an “appropriate track record” to lead 7-Eleven.

“The hope is in the first instance he will begin to put in place things that will enable them to prevent [the underpayments] from continuing,” he says.

“The next step will be working with franchisees and other key stakeholders about how they are going to manage the consequences, for both the franchisees and the parent company.”

Gahan believes the company has made a “strong move” in appointing Smith as the chair of the board but he says as the former chair of the Australian Institute of Company Directors, Smith’s appointment comes with high expectations.

“There is a lot at stake as he has presented himself as an exemplary governance guy,” Gahan says, adding Smith will need to be decisive and to respond quickly.

“It has broader consequences than just 7-Eleven,” Gahan says.

“They have to show leadership in a really ethical way.”