If it gets to court, the pending Leighton shareholder case claiming damages for the non-disclosure of losses by Leighton will dig deep into boardroom politics and the tribal nature of the Leighton company. The case will make the public aware of the divisions in Australia’s largest contractor and take everyone inside boardroom debates.

Earlier this year, there was a Leighton board split over several issues including whether — and what — writedowns and loss recognitions should take place. The long-standing CEO Wal King took a different view on the writedowns to what turned out to be the majority of the board. It was one of the issues that saw King replaced by David Stewart last January.

On April 11, Leighton announced it was expecting a loss of $427 million for the 2010/11 financial year.

The announcement followed a review of its operations, which led to a $282 million drop in profit from its desalination plant project at Wonthaggi in Victoria, a before-tax loss of $430 million on the Brisbane Airport Link tunnel and a $295 million writedown on its equity in the Middle East-focused Habtoor Group.

As I commented last month (Leighton’s blood let isn’t over and Putting Leighton on alert), in King’s long reign at the top of Leighton he organised the construction operations into tribes. The Holland tribe took a tough line on union issues and the Thiess tribe worked closely with the unions. In the board dispute, the 55% major Leighton shareholder, German-based Hochtief, backed Stewart, who was part of the Holland tribe. Effectively, the Holland tribe took control of Leighton and that was reflected in the writedowns, although all new CEOs like to start with a clean slate.

Inspired by King, the Spanish group ACS has since taken control of Hochtief and Stewart was removed as CEO eight months after his appointment. King is back pulling some of the control strings.

All attention is now on the desalination plant where, under Stewart, the Holland tribe replaced the Thiess tribe and wants to remove 160 electrical union members, many of whom it regards as “trouble makers”. The head of the union, Dean Mighell, now publicly claims that the contract is some six to eight months behind schedule, in sharp contrast to what Leighton is telling the stock exchange.

If Mighell is even half right, Leighton directors will be given a very tough time.

The new Leighton CEO, Hamish Tyrwhitt, has to choose between supporting the Holland tribe strategy at the desalination plant or going back to the Thiess strategy. The Holland people believe that, by removing the “trouble makers” and changing the shifts, they can complete the plant on time. That strategy is having problems in the courts but over time Leighton will probably overcome them.

The Thiess strategy would be to bring back the electricians and link with Mighell and his people to get the plant completed with full union backing.

The Holland tribe recently won a major Perth hospital contract because its enterprise agreement gives it a big advantage in costs over most other big contractors.

And just to complicate matters, the Victorian Premier Ted Baillieu has announced that he is looking at a set of rules for future state projects that would effectively ban many of the union friendly but costly methods used by the Thiess tribe at Leighton. Other Liberal states are looking at the same rules as they seek to reduce the cost of infrastructure building.

There are some very big issues before the new Leighton CEO.

*This first appeared on Business Spectator.