Orica director and former BHP executive Alberto Calderon has been appointed interim CEO at the explosives maker in the wake of the sudden exit of Ian Smith.
Mr Smith stood down last week amid complaints by employees about a series of incidents involving unacceptably aggressive and confrontational behaviour.
Orica's board changed its mind and said on Monday Mr Smith would leave immediately, after announcing last week he would stay until a replacement was found.
"The board and Mr Smith agreed that in the interests of minimising further distractions and enabling Orica to move on, Mr Smith will leave the company immediately," Orica said in a statement.
The company also cancelled a strategy briefing for investors scheduled to occur in Sydney on Monday, which it said last week would still go ahead and be hosted by Mr Smith.
He will walk away with $2.5 million, representing one year's base pay of the two years left on his five-year contract, and accrued leave.
He will receive no other entitlements including short or long term incentives, after receiving more than $1.5 million in bonuses last year.
Mr Smith, a former Newcrest CEO, admitted to the media last week he had gone too far and regretted his behaviour, particularly in an incident in late January that led to two senior employees quitting.
Chairman Russell Caplan also hinted to reporters that the January event was the final straw after trying to manage Mr Smith's behaviour.
Mr Calderon was once a politician, serving as a minister in the Colombian government and was considered a contender to become BHP's chief executive during his time there, which included being head of aluminium, nickel and corporate development.
"The importance of ensuring stability and operational continuity at Orica has been at the forefront of my discussions with the board," Mr Calderon said.
The market reacted positively, sending its shares 55 cents higher to $19.16 by 1600 but still below the $19.21 they were at before last week's news.
IG market strategist Evan Lucas said Mr Calderon had a strong reputation but it would remain a volatile time for Orica until a permanent CEO was found.
"He can't really instigate any sort of changes, he can't really do anything," he said.
Orica, the world's biggest supplier of mining explosives, is being hurt by the slowdown in mining activity globally and said it could not provide profit guidance for this year because of that volatility.
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