While the action brought against star salesman Peter Dixon is being viewed as a test case for executive remuneration, it also has the potential to open old wounds at the maker of Penfolds and Wolf Blass.
The case, filed in the Supreme Court of Victoria, comes after Mr Dixon left TWE for rival Accolade Wines in February. He has since poached five staff from his former employer and is known to be in negotiation with several others.
Peter Dixon (third from the left) was warned about his social media use while head of Asia for TWE. Supplied
“Minimal people have followed Peter Dixon to Accolade, we have no regrettable losses,” TWE said in a statement, while declining to comment on the legal action that does not mention the poaching.
In seeking to make its case against Mr Dixon, TWE have disclosed he was warned twice about his conduct .
In March 2017, TWE wrote to Mr Dixon over “unacceptable behaviour including his consumption of alcohol at work-related events”, according to the statement of claim.
Seventeen months later, TWE conducted a “confidential investigation” into his “conduct and leadership behaviours”.
This resulted in another written warning about his alcohol consumption at work events, “professional judgement” and compliance with the company’s social media policy.
The offending post is believed to have been a photo of Mr Dixon with his middle finger raised during a night out, which appeared on his WeChat feed in May 2018.
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In China, WeChat is a key business tool and the equivalent of Linkedin, WhatsApp and Facebook rolled into one social media platform.
Despite the two written warnings Mr Dixon was still promoted and awarded shares worth $1.3 million as part of his long-term incentive plan in August 2018. He sold the shares shortly after receiving them.
The Australian Financial Review has been told the warnings followed a string of complaints by staff and clients about Mr Dixon's behaviour and such formal warnings typically follow informal cautions.
According to the court documents, prior to tendering his resignation, Mr Dixon sent “confidential documents” to his private email and on the day he gave notice, saved other confidential documents to a USB drive.
When confronted about the incidents, Mr Dixon is said to have admitted to a “stupid mistake” and “poor judgment”.
He is then said to have returned the USB stick, but did not confirm he had deleted all the confidential files that had been taken.
TWE terminated his employment immediately, saying his actions constituted “serious misconduct”, along with a breach of his Employment Contract and Confidentiality Deed.
Publicly, there was no hint of acrimony at the time of his departure. A company spokesman thanked “Peter for his contribution” and said he “decided to depart the company to pursue other career opportunities”.
TWE is seeking to clawback a $1.3 million bonus paid to its former head of Asia Peter Dixon. Sanghee Liu
This is in sharp contrast to the exit of TWE’s former chief operating officer Robert Foye who left "effective immediately" in January, due to a breach of the company's internal policies.
In Mr Dixon’s case it would take more than two months for the board to approve, via email, a finding of “fraudulent or dishonest behaviour” against him for attempting to take confidential information. It asked him to repay the $1.3 million bonus, which he is yet to do.
That demand came on May 22 this year, shortly after one of TWE’s key sales staff in China, Johnson Yang, was poached by Mr Dixon.
A further four TWE staff are believed to have been lured across by Mr Dixon, who is the regional managing director for Asia at Accolade. Others are in negotiations to follow.
Josh Bornstein, the head of employment law at Maurice Blackburn, said this type of litigation was usually very personal and intense.
"As employees become more mobile there is an increasing amount of litigation around restraints of trade," he said.
Accolade is owned by United States private equity giant Carlyle Group, which acquired the operations for $1 billion last year from Australian private equity firm CHAMP.
Accolade owns brands including Hardys, Leasingham, Banrock Station, Houghton, Nottage Hill, Grant Burge and Mud House and is pushing hard to lift its presence in China.
But it lacks a prestige label like Penfolds, which has been a big driver of TWE’s strong profit growth in Asia under a deliberate strategy by the company to position it as a ‘’luxury’’ brand.
Mr Dixon is yet to file his defence, which could make uncomfortable reading for TWE if he goes on the offensive and details his time at the company.
Industry sources say part of Mr Dixon’s sales strategy is to go after TWE’s lucrative corporate business in China, which has been a key component of its success over the past five years.
This is viewed as one of the few areas of growth for foreign winemakers in China, which are battling a slowing economy and a highly competitive retail environment.
In the March quarter the volume of Australian red wine sold in China fell 19 per cent, partially offset by the value of wine sold rising 7 per cent.
“At this stage, it is difficult to say if this [fall in volumes] is retailers or distributors destocking, or a consumption shift,” Citi said in a note to clients.
It is understood Mr Dixon and his sales team at TWE had considerable success in selling Chinese companies large volumes of stock, which were used for entertaining or gifted to staff and clients.
This corporate channel has helped TWE hit aggressive sales targets in China over recent years. The departure of Mr Dixon and members of his old sales team raises questions over future targets at a time when the stock is already under pressure.
The is despite the company reiterating its earnings guidance on May 1 saying it would grow pre-tax profits by around 25 per cent in the 2019 financial year.
Investors remain nervous however about the high multiple the stock trades on, especially after chief executive Michael Clarke sold $7 million worth of shares in the days after the company reiterated its earnings guidance.
The stock price was further dented when Angela Aldrich from New York hedge fund Bayberry Capital Partners slammed TWE in early May for “channel stuffing” and said the stock was 50 per cent over valued.
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