The recent retirement of Don Argus as chairman of BHP Billiton has brought a predictable sea of tributes from a wide array of sources. The man widely known as “Don’t Argue” was a titan of Australian business. Leading National Australia Bank through an era of almost unparalleled prosperity in the late 1990s and chairing BHP as it reclaimed its title as Australia’s largest company.

Despite the glowing praise (Andrew Cornell in the Financial Review magazine last month dubbed Argus as having “one of the most storied and admitted careers in Australian business” and Argus was twice named chairman of the AFR’s “Dream Board”), the Don’s career has been one laced with corporate faux paus. Similarly, while hailed as one of Australia’s most patriotic leaders, Argus has been partially responsible for one of the largest wealth transfers away from Australia (in the vaunted BHP-Billiton merger, but more on that later).

Argus was first and foremost a banker, leading the NAB from 1990 following Nobby Clarke’s fine stewardship at the bank. While ostensibly Argus’ tenure at NAB was an outstanding success (Cornell noted “in his time at NAB, the bank outperformed the banking index by 50% … his immediate successor underperformed the other banks by 25%”), that is perhaps unfair on Argus’ successor (Frank Cicutto) and too kind to Argus.

Specifically, it was under Argus’ reign that NAB acquired US mortgage originator Homeside — the acquisition would cost NAB shareholders $3.9 billion largely through interest rate miscalculations. (Homeside was eventually sold to the collapsed Washington Mutual in 2001). Further, the Homeside problems emerged within two years of Argus’ departure as CEO of NAB. The performance of a CEO is not reflected purely in the shareholder return during their tenure, but also subsequently. To credit Argus and criticise Cicutto (who incidentally was selected by Argus to take the CEO role) for the Homeside debacle is the corporate equivalent of shooting the messenger.

After retiring from NAB Argue would join a range of blue chip boards, becoming chairman of BHP in 1999 (he was a director from 1996), as well as being appointed chairman of Brambles also in 1999.

While it may not necessarily have been entirely Argus’ fault, Brambles’ performance under his chairmanship was poor. The company merged with former joint venture partner GKN to create a dual-listed structure, with former GKN boss Sir CK Chow becoming CEO of the Anglo-Australian entity. Shortly after, the company managed to lose 14 million pallets, to which Argus told a Brambles AGM that “I don’t think we have lost the pallets, they are just missing from the pool”. Apparently, those pallets were missing for a long time (and still are), with the company losing $5 billion in market value as a result. Chow was soon after sacked (but not before receiving more than $4 million in remuneration) and the dual-listed structure later abandoned.

Argus was also a director of wine company Southcorp when it undertook the disastrous Rosemount acquisition from the Oatley family. The term acquisition is used loosely, because it was the Oatley family that assumed management of the merged entity (it was more like a reverse takeover). While Argus was not chairman of Southcorp and his role in the merger may have been minimal, he was still a director the company. Within two years of the merger, Southcorp was forced to write off $1 billion (of the $1.5 billion purchase price) and would fire CEO Tom Park (with a $10 million golden goodbye).

Then there is the BHP-Billiton marriage, claimed by many to have been a triumph in corporate manoeuvres but in reality has, by stealth, been Australia’s worst corporate deal (in purely financial terms). Championed by Argus, the deal turned BHP into a global behemoth. The only problem was BHP vastly overpaid for Billiton’s assets.

Under the terms of the merger, BHP shareholders received 58% of the combined entity and Billiton shareholders 42% (Billiton chief Brian Gilbertson became CEO). Where the deal has gone awry for former BHP shareholders is because the assets contributed by BHP (largely iron ore, copper coal and oil) have vastly outperformed Billiton’s contribution  (predominantly aluminum, steaming coal as well as the Raventhorpe and nearby Yabulu nickel projects, which ended up costing BHP $US3.2 billion in write-downs). In other words — virtually all the assets that  BHP-Billiton currently makes its money from came from BHP, while the underperforming assets, such as nickel and aluminum, came from Billiton.

It wasn’t meant to be like this. In fact, BHP merged with Billiton largely for Billiton’s exciting “growth” prospects. At the time Argus told shareholders:

The merger will take BHP into new product areas such as aluminum and alumina, ferroalloys, nickel and titanium and greatly expand our presence in steaming coal. We are particularly excited about the opportunities in aluminum and alumina where Billiton, with its low cost production and good expansion opportunities, is in an outstanding position to meet continuing growth in demand for those products.

It turned out those new product areas were not exciting at all. While BHP doesn’t provide especially detailed segment information, taking a generous approach to the assets contributed by Billiton; in 2009, BHP’s assets provided approximately 87% of EBIT, in 2008 the figure was 74% and in 2007 it was 65%. Based on an average of the past three years, Billiton therefore provides only 24% of the company’s earnings (in reality, that figure almost certainly overstates Billiton’s contribution).

BHP is valued at about $240 billion (based on the Australian and London entities). Therefore, the difference between Billiton shareholders stake (42%) and the amount it contributes to the company’s earnings (24%) represents a transfer of $43 billion away from BHP to Billiton.

Then there was the Rio Tinto merger — another ill-constructed deal, which was scuttled when it became apparent that BHP would be vastly over-paying for Rio Tinto’s assets in a case of déjà vu all over again. (The cost to BHP as a result of the ill-fated consummation was more than $US450 million, largely due to debt commitment fees).

While BHP’s share price has risen 504% since Argus’ Billiton merger, that has largely been due to rampant Chinese demand for commodities, especially iron ore and copper. Since 2001, the iron ore spot price has leapt by almost 500% (from about $US24 per ton to $US140 per ton), while the copper price has risen by more then 400%. Similarly, oil has risen by from $US23 to more than $US85 per barrel. Mining companies are leveraged to commodity prices, so they are expected to substantially outperform base minerals given the operational and financing risks involved in an equity investment.

In nominal terms, BHP’s performance under Argus’ leadership has been strong — but his legacy will be somewhat clouded by the horrendously over-priced Billiton acquisition (which, in financial terms, is only behind AOL-Time Warner in the list of “Worst Ever Mergers”), the Homeside folly and the Brambles and Rosemount disasters.

Don’t Argue? Not a chance.