EDITORIAL: Steinhoff has made a mockery of corporate governance
Steinhoff, once the world’s second-largest furniture retailer has proven to be the ultimate iconoclast
With the possible exception of chair Heather Sonn, nobody emerges from Steinhoff’s 2017 annual report with an enhanced reputation. And it’s not just individuals. The reputations of institutions and systems have also been sullied by the remarkable events at Steinhoff.
Once the world’s second-largest furniture retailer, Steinhoff has — presumably inadvertently — proven to be the ultimate iconoclast. It has driven a coach and horses through the notion that paying eye-watering amounts of money to auditors means you can trust results that have been audited; it has made a mockery of the much-touted benefits of the King Code; it has made the role of the independent director laughable and it has raised questions about the astuteness of one of the country’s most highly regarded businessmen.
And as the company and regulatory authorities in SA and Europe struggle to call former CEO Markus Jooste and his handful of alleged accomplices to account, Steinhoff will make a mockery of the notion of justice, that blatant wrongdoing should carry grim consequences.
At this stage, despite much grandstanding by parliamentarians and prosecutors, it is far from certain that anyone connected to the systemic destruction of one of the JSE’s largest companies will end up behind bars. It is not merely a question of resources, which enables the inevitably wealthy wrongdoers to drag legal battles into eternity, it also goes to the slippery heart of financial crime.
The prospect of watching on as the company battles to do nothing more than retrieve Jooste’s self-awarded bonuses would inflict huge damage on the already fragile psyche of South Africans. Surely this was fraud? How was that bonus payment even possible? Did Jooste take it as cash out of the till? If not cash then who countersigned the necessary payment document? Or could it be true that Jooste had sole signing powers?
And given that all the internal safeguards appear to have failed on this payment, did no bank official query it? Can it be that easy to plunder a multinational company that is listed in two jurisdictions and pays huge fees to auditors and armies of other advisers?
Deloitte, which has been in the firing line for the past 17 months, is to be commended for the remarkable work packed into this 343-page document. It may be 12 or so months late and conclude with the appropriately damning statement that no opinion or assurance can be given on the contents, but it contains a veritable treasure trove of information.
And while it had to maintain a dispassionate professional approach, it has managed to squeeze in some extremely damning details, in particular with regard to related party transactions. Those who were disappointed by the somewhat flimsy and legally constrained overview of the PwC investigation — Steinhoff is still to make the full report available — will be thrilled.
It has set a new standard for annual reports of listed companies and should become compulsory reading for all students of accounting, auditing, and corporate governance.
In recent years the benefits of annual reports have been utterly diminished by the spread of the glossy but hopelessly insubstantial Integrated Annual Report.
There are no glossy pictures in Steinhoff’s, it is packed with useful and important information. To reread the 2016 Steinhoff annual report after the 2017 edition helps to emphasise just how powerful a job Deloitte has done this time around. The report may help to repair some of the damage done to Deloitte’s reputation but it will also raise questions about the reliability, and therefore value, of standard audit work.