EOH could be flirting with a breach of King guidelines
EOH may be flirting with a breach of corporate governance principles by appointing Asher Bohbot — founder and former CEO of the technology group – as nonexecutive chairman, analysts say.
EOH said on Monday that Bohbot, who stepped down as CEO in May 2017 to take a six-month sabbatical, had replaced Sandile Zungu as nonexecutive chairman. Bohbot rejoined the company in December.
However, the King report on corporate governance recommends a three-year cooling-off period before a former CEO can be considered for chairman.
This is partly because that person may unduly influence the new CEO, leading to clashes on strategy, or might resist reviews of decisions taken under their tenure as CEO.
"The JSE keeps a sharp eye on companies’ ticking of the boxes and application of the principles and practices [of the King codes], so it would be that one can actually substantiate or motivate the decision," said Annamarie van der Merwe, CEO at iThemba and a member of the King committee. However, a company could appoint a former CEO as chairman in certain instances where it made sense for shareholders.
"The board must apply their minds to what they honestly believe is in the best interests of the company at this point of time," Van der Merwe said.
EOH did not give reasons for Bohbot’s appointment in its statement to shareholders, and declined to comment as the group is in a closed period. The CEO of a prominent asset manager told Business Day on condition of anonymity that EOH "is just totally uninvestable for us, there are corporate governance failures everywhere. There’s no independence on that board."
EOH is not the only company under scrutiny for chairman appointments. Naspers shareholders have expressed similar concern about former CEO Koos Bekker in the position.
The company said it would split in two, with one division retaining the EOH brand and the other launching its own "brand and identity" within the coming two months.
Further, empowerment firm Lebashe Investment Group would inject R250m worth of equity into EOH and provide it with a R3bn bond facility.
EOH would issue 40-million new unlisted redeemable A shares to Lebashe to increase black ownership.
The A shares would have the same voting rights as ordinary shares, but reduced dividend rights.