EDITORIAL: Old Mutual saga drags on
Latest debacle suggests there has been weak oversight by the board for two decades
There was something sadly familiar about Old Mutual’s first annual general meeting as a primary-listed JSE company. That it was overshadowed by boardroom controversy and speculation that a senior executive might be taking advantage of his powerful position made it all feel as though not much had changed since 1999.
For twenty 20 long years there has been no sign of anyone at Old Mutual taking responsibility for a series of strategic missteps
That was the year the recently demutualised South African insurance and investment entity headed off to launch its primary listing in London. Mike Levett, executive chairman at the time, described the move as a “win, win, win” situation for Old Mutual, for its policyholders and for Southern Africa. A key part of that winning story was easier access to capital to fund an ambitious growth plan.
As it happened, the primary winners of the move were the group’s executives who over the next two decades received generous sterling-denominated remuneration packages. The first to win was long-serving Levett himself who collected R150m at the end of his two-year stint in London. That seemed an eye-watering amount at the time but was dramatically overshadowed by the R223m package paid to Bruce Hemphill in 2018 to unwind the value-destroying London adventure.
For 20 long years there has been no sign of anyone at Old Mutual taking responsibility for a series of strategic missteps that have certainly not created wins for the group’s shareholders or for South Africans in general.
In the absence of any useful detailed information it is difficult not to see the latest unsettling developments in the context of Old Mutual’s past 20 years. It certainly didn’t help that the controversially suspended CEO Peter Moyo rather promptly told Bloomberg he was demanding a “complete” payout deal before he even considered accepting an exit offer.
There was no suggestion that the situation was deeply unfortunate and needed to be resolved as speedily as possible for the good of Old Mutual and all its stakeholders. The primary concern of the man who had recently received a remarkably generous R50m remuneration package from his employer seemed to be the maximisation of his exit package.
Of course, as one leading banker is reported to have said many years ago, if you want loyalty get a dog. And it has to be said the Old Mutual board does not appear to have handled the situation well. Reputations on both sides have been damaged.
Whose will emerge stronger will of course depend on the details of the circumstances that led to the board announcing it had suspended Moyo with immediate effect. A material breakdown of trust and confidence relating to the management of conflicts of interest, was the stated reason. The board stressed the decision was not the result of performance or financial misconduct related to the Old Mutual business.
The cause of the breakdown was NMT Capital, an economic empowerment investment vehicle that Moyo, a well-regarded player in the local business community, had co-founded years earlier and in which Old Mutual had invested almost R300m. On Moyo’s appointment as CEO of Old Mutual in 2017 a formal protocol was implemented to deal with any conflicts of interest between this entity and Old Mutual. That apparently wasn’t deemed sufficient and so a board subcommittee (the related party transaction committee) was set up to monitor potential conflicts of interest.
In one version of events the suspension was not sudden. There had been multiple engagements on the issue.
That Old Mutual did not insist in 2017 that Moyo suspend all involvement with NMT while he was CEO, and thereby avoid any possibility of conflict, seems bizarre. Here was a company that was struggling to emerge from a fraught 20 years while trying to deal with a tough local trading environment. Surely a fully committed, full-time CEO was a basic requirement. This level of commitment would help to justify the extremely generous remuneration package.
Perhaps the move does mark the end of 20 years of weak board oversight. It might just be that the Trevor Manuel-led board has finally decided to take a firm stand on governance issues.