Leadership matters: And how does the future for iiNet Limited look?

Michael Malone is leaving iiNet: what does it mean for shareholders?

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iiNet Limited (ASX: IIN) is an Australian telecommunications company of considerable note. Like a number of great Australian businesses iiNet grew from a garage. That Perth garage belonged to the parents of founder Michael Malone, who last week announced that he would leave the company. “It will be incredibly hard for me to move on,” he said, “but I plan to keep a strong relationship with the company and all of its staff, many of whom are close friends.”

Well might we all take a moment to reflect on the positive impact the Western Australian telco has had on our society. First of all, it provided an alternative to Optus and Telstra Corporation Ltd (ASX: TLS) when there was none. Second, it continues to provide great customer service, giving Australians the option of dealing with a straight-talking telco that delivers what it says it will, communicates well, and whose customer service reps are far more likely to leave you with a smile than a scowl. Thirdly it fought Australian Federation Against Copyright Theft’s (AFACT) in the high court (partly) to protect the privacy of subscribers.

I’ll leave my arguments regarding the utilitarian benefits of decentralised distribution of content for another day and quote Mr Malone at the time of company’s legal victory; “Increasing the availability of licensed digital content is the best, most practical approach to meet consumer demand and protect copyright.” The bottom line was that iiNet wasn’t voluntarily going to pass customers’ details on to Hollywood studios who had the likely intention of suing those individuals.

After “three weeks wandering around in the mountain with no telephone access or internet,” Mr Malone has now decided that “the time has come to move on.” This is fair enough, and for now iiNet’s acting CEO and chief financial officer David Buckingham will continue to pilot the ship. Mr Malone was happy to sing Mr Buckingham’s praises, pointing out that: “He has been the driving force behind our recent acquisitions, delivered profit growth year after year, and has a clear vision for the company’s future.”

I can’t help wondering why the board has announced they will search for a new CEO, when it would seem preferable to search for a new CFO and just allow Mr Buckingham to continue in the CEO role. Having said that, it’s probably a good thing that the board did prompt Mr Malone to make his mind up about leaving the company, as uncertainty can be destabilising.

Foolish takeaway

The lasts words can go to iiNet Chairman Michael Smith, who said, “Michael [Malone] is a legend and a telecommunications visionary; he has been the foundation of iiNet’s success. We are committed to ensuring his legacy and story lives on through a continued commitment to service excellence, challenging the status quo, thinking for ourselves and growing.” His departure is a loss for iiNet shareholders because across many industries, one rule holds true: company founders are often the best leaders, in part because they are emotionally tied to the success of the company.

Motley Fool contributor Claude Walker (@claudedwalker) does not own shares in any of the companies mentioned in this article. He welcomes Foolish feedback.

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