EDITORIAL: Steinhoff scandal shows wheels of justice grind slowly in business too
News of former CEO Jooste’s payout is a reminder that he remains free and innocent of any involvement in ‘accounting irregularities’ that wiped out R200bn in shareholder value
While no one implicated by the dramatic allegations emerging from the Zondo and Mpati commissions of inquiry is likely to see the inside of a jail cell soon, the commissions are serving a critical role for corruption-fatigued South Africans.
They remind the millions who get up daily and do an honest day’s work for an honest day’s pay that there is right and wrong; concepts that too often seem quaintly old fashioned. And, as important, they remind us that there are consequences to doing wrong. Inevitably many people escape those consequences. But to the extent individuals are named and shamed by the commissions — beyond Angelo Agrizzi’s unrestrained mudslinging — that represents something akin to a consequence. For now.
Last week we were reminded it is not just in the public sector that the wheels of justice turn slowly. News that former CEO Markus Jooste was paid R5m for just two months’ “work” at Steinhoff is a reminder that Jooste remains free and innocent of any involvement in the “accounting irregularities” that wiped out R200bn in shareholder value.
The tens of thousands of Steinhoff shareholders, who are considerably poorer because their executives were at best inept, should not expect to see consequences any time soon.
The reminder was provided by Pepkor, in which Steinhoff has a controlling, 72% stake. In its just-released annual report for the 12 months to end-September 2018, Pepkor disclosed that for October and November 2017 Jooste, who was a non-executive director of Pepkor, was paid R5,073,000 by Steinhoff. That is equivalent to R83,000 a day, assuming the allegedly workaholic Jooste worked every day of those two months.
Judging by the various submissions made to parliamentary hearings during 2018, it’s difficult to imagine that Jooste made much of a contribution to Steinhoff during those 61 days. He appears to have spent all his energy plugging the rapidly growing number of holes in the fabric of “accounting irregularities” that he had wound around Steinhoff. By Monday December 4 when it was evident the inevitable could no longer be postponed, Jooste bailed out and Steinhoff issued the fateful Sens announcement. In the following weeks, SA investors lost R200bn as the Steinhoff share price melted down to R2 from more than R50.
In the context of the R200bn loss, it is tempting to regard the R5m paid to Jooste as insignificant. That would be a mistake. The payment is very significant. Despite having done little, if any, work for Steinhoff during the 61 days and despite Jooste’s alleged central role in the R200bn value destruction the Steinhoff board was bound by legal contracts to pay him the R5m. Jooste’s situation is an extreme case of how remuneration contracts are stacked in favour of executives, even value-destroying ones.
Recall that in the previous year Jooste was paid an eye-watering R122m. Given the mountain of evidence that is already in the public domain, there’s little doubt the 12 months to end-September 2017 was a very busy time for the disgraced Jooste. But little of this “busy-ness” was in any way value-enhancing for Steinhoff. Making a mockery of the notion that executive remuneration has any basis in science is the R40m bonus that’s included in the R122m. Then there’s the R37m retention bonus Jooste picked up just two months before walking out.
Indeed, judging by the evidence before parliament, few of the executives in this company were deserving of the multimillion-rand packages they took for granted.
The tens of thousands of Steinhoff shareholders, who are considerably poorer because their executives were at best inept, should not expect to see consequences soon.
Asked for comment, Steinhoff said it is “giving consideration to reclaiming bonuses paid in the past to certain senior executives… once all investigations have been completed”. Not much urgency there.
Meanwhile, thanks to the generosity of his colleagues on the remuneration committee, Jooste can afford a top-notch legal team.
It’s not only our political system that needs cleaning out. Jooste and Steinhoff are an extreme example of a crony-based remuneration system that needs a complete overhaul if shareholder capitalism is to survive.