Bruce Whitfield writes that last year there was an almost unprecedented changing of the guard at the top of high-profile SA companies. Nearly 50 CEOs of publicly listed, state-owned and public interest companies have left their jobs over the past 14 months.
It was, in short, a talent rout, as business confidence has slumped to its worst levels since PW Botha’s Rubicon speech of 1985.
About 10% of the JSE’s 360 listed companies underwent change at the top. Some were nudged, some were pushed and others ran screaming. At least one resisted every effort to leave the corner office quietly, refusing to conform with the unwritten code of CEOs everywhere — know when your time is up.
There were breakdowns, meltdowns, a couple of retirements, some went "to spend more time with their families", and there was a worrying exodus due to emigration.
While a huge number of SA bosses vacated their positions — the highest figure since 2002 — more than 1,500 uncoupled from their high-paying jobs in the US last year too, according to headhunters Challenger, Gray & Christmas.
This suggests that being a CEO isn’t the cushy gig it’s often made out to be.
It was Absa’s Maria Ramos who kicked off 2019’s resignations; this year, it’s the turn of Tiger Brands CEO Lawrence MacDougall.
While some boards have chosen to use the opportunity to bring in CEOs with a "new broom" mandate to clean up the mess left by their predecessors, not all have chosen to use the economic downturn to properly re-engineer the firms in their care.
Tiger Brands is a case in point. FD Noel Doyle was one of two dozen executives sanctioned by Tiger as part of an ethics cleanup, after 2008’s bread price-fixing scandal.
Yet now Tiger argues, following a global search, that Doyle is the most suitable candidate.
This is a company that has yet to satisfactorily explain its link to the national listeriosis outbreak, traced to its Limpopo factory, that left more than 200 people dead in 2017/2018. There is an ongoing class action against the firm.
Doyle, who is only 53, could now conceivably spend a decade at the helm of Africa’s biggest food producer. It’s some comeback: he left Tiger after the price-fixing scandal to run Renew-it, a network of panel-beating businesses, before spending three years as boss of Nando’s SA. In 2013, he was readmitted to the Tiger Brands C-suite, where he rose to become COO, then CFO, and now he’s got MacDougall’s job.
The headlines, so far, have hardly been flattering. While Doyle has an opportunity to prove his detractors wrong, it can often be tougher for an insider to do a thorough cleanup than an outsider with no historical baggage.
Take Grant Pattison, the former CEO of Massmart, who led the strategy to save Edcon from foreclosure over Christmas 2018. He has had to be decisive in turning around SA’s largest clothing retailer, which must still demonstrate to its backers that it has the right to exist.
Pattison consolidated Boardmans into Edgars Home and Red Square into Edgars Beauty, and has just announced the sale of CNA to investment outfit Astoria.
He is a great example of a new CEO who does not have to make any apology for the actions of his predecessors. When he took to social media in January to personally intervene in a series of customer service complaints, he was able to do so without any of the baggage of the past.
"Our customer contact centre has been badly outsourced for the past several years. At the end of January it will be insourced again. We believe service levels will improve as we take control again," he said.
The same goes for EOH CEO Stephen van Coller, who assumed the leadership of the former JSE high-flyer last year.
Van Coller joined EOH out of the highly regulated banking industry via a short stint at MTN and has been able to be aggressive in the group’s cleanup. Just how high a mountain he has to climb became painfully clear this year, as EOH’s share price has shed 46%.
That also goes for Steinhoff CEO Louis du Preez, who doesn’t have to make excuses for the behaviour of Markus Jooste and his accomplices in the biggest corporate fraud in SA history, deemed by PwC after a year-long investigation to be worth around R105bn. (Unlike EOH, however, Steinhoff’s stock shot out the lights this week, soaring 55%.)
Elsewhere, Mteto Nyati has managed to convince the market that he has free rein over one of SA’s oldest listed family businesses, Altron. He has been selling off assets that may previously have been thought of as an essential part of the company legacy. Today, Altron is a smaller but more profitable business, with earnings for the six months to December growing 19%.
At Eskom, CEO André de Ruyter has, since his appointment, exhibited traits which suggest that at last the utility may have a leader able to get to grips with the fundamental issues threatening the state-owned power monopoly. Unencumbered by political aspiration or party loyalties, he may just have a fighting chance of saving Eskom. (Not all that long ago it was world-class, producing excess energy at one of the lowest rates on the planet.)
De Ruyter also doesn’t have to kowtow to the egos of his predecessors and can cut to the chase in a way an insider might find difficult.
When new CEOs are outsiders they have the space to overhaul businesses in an unemotional way.
The new Tongaat Hulett CEO, Gavin Hudson, arrived at the scandal-ridden sugar giant with an impressive CV from SABMiller. He soon instituted a forensic investigation, which led to the company’s suspension on the JSE.
That PwC investigation found that all kinds of corners had been cut and profits inflated — something that may yet lead to the prosecution of former executives, including former CEO Peter Staude.
Hudson has now convinced the JSE to lift the suspension after months of investigations.
David Constable: Cost overruns and project failures at the Lake Charles project. Picture: Robert Tshabalala
Admittedly, it hasn’t been fun: Tongaat’s share price lost 64% of its value this week as the suspension was lifted, having warned investors to prepare for significant losses.
But appointing an outsider isn’t always the right thing to do.
Take SAA, which is dealing with the legacy of hiring American businessman Coleman Andrews to run the airline two decades ago.
Notoriously, Andrews left with a R246m package. And SAA is still a wreck.
Sasol is still grappling with the cost overruns and project failures at Lake Charles in Louisiana made during the tenure of David Constable, the Canadian executive hired to take over from Pat Davies more than a decade ago.
Insiders say Davies favoured De Ruyter to succeed him, but was overruled by the board, who wanted someone with international experience.
Ideally, companies should grow talent from within. This provides continuity and, if the strategy and execution are solid, shareholders should benefit.
But perhaps the best argument is that when something goes wrong, that’s when you need a new broom. EOH, Tongaat and Steinhoff are all examples of this.
So what will Old Mutual do? The life insurer has advertised for a new CEO following its year-long court battle with Peter Moyo, who was first suspended, then fired, for failing to properly manage a complex set of fully disclosed conflicts of interest.
In an unprecedented battle, Moyo fought to win his job back, and while he might still continue to fight to be reinstated, the company is pressing ahead to find a new leader. At the moment, Iain Williamson is acting CEO — a job he’s done before. And he still may get the job on a permanent basis.
Over at Walmart, they’ve taken a different approach. Eight years after its ill-fated purchase of Massmart, Walmart finally parachuted in one of its own executives to fix the firm, which will report losses in excess of R1bn for 2019. Mitchell Slape has, so far, acted quickly, announcing the closure of DionWired and a final attempt to rescue Game. The stock has responded well so far — up 10.7%.
It’s also just good business that when strategy fails, a CEO should go. Local boards need to become more decisive on this point, using the current slowdown to recalibrate their firms.
For Ian Moir, the Scottish executive brought in to take over from Simon Susman at Woolworths a decade ago, the writing was on the wall long before his announcement in mid-January that he will make way for fresh thinking. His mistake was to buy Australian retail chain David Jones and to keep throwing money at the problem, rather than looking at it differently.
Now an outsider, former Levi’s executive Roy Bagattini, is taking over and he will have to make serious calls about the future shape and geographic spread of the company.
For others, it’s also a case of moving on to better things. SA Football Association acting CEO Russell Paul has snapped up the chance to be tournament director of the 2022 World Cup in Qatar. (Though you could ask if being part of anything touched by Fifa is really better at all.)
So there are contrasting strategies adopted by SA’s largest companies to replace CEOs who are rushing for the door. In five years’ time, we’ll know which plan worked.
Read the original of the above article by Bruce Whitfield at BusinessLive (paywall access only)
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