EDITORIAL: Steinhoff’s plan to pursue Markus Jooste sends clear message
You could almost feel millions of South Africans sighing with relief last week when it emerged that Steinhoff is going after former CEO Markus Jooste not just for his bonuses but for his basic pay as well.
There might have been a bit of grandstanding in the decision to target the basic pay awarded to Jooste and his CFO, Ben la Grange, but the unprecedented move does send the right message and removes suspicions that the former CEO still has allies at the group.
There’s little doubt the directors responsible for cleaning up after Jooste are angry. In part this is because some of them have been deemed guilty by association; in part also maybe because they have witnessed the widespread anger and personal tragedies that have rippled out from the implosion that destroyed R200bn of shareholder value in a matter of weeks in December 2017.
For 19 months we have looked on in stunned amazement as details emerged of the most intricate corporate heist ever perpetrated on SA investors. For much of that time it seemed as though no-one would be formally accused of anything, let alone end up in court.
At least the Steinhoff summons means Jooste will now have to provide a detailed account of the circumstances that led to the collapse of the share price that fateful December.
That this was happening at the same time as various commissions of inquiry were trawling through details of the alleged ransacking of the state by former president Jacob Zuma and the Guptas reinforced the belief that the rich and powerful are untouchable. That belief makes the tens of millions of ordinary South Africans who are neither rich nor powerful feel like schmucks. Importantly, it corrodes the social capital needed for a society to function effectively.
In this context the National Prosecuting Authority’s presentation to parliament in March was a decidedly chilling affair. It left one with little doubt that, even with the best will in the world and considerably more resources, a criminal charge was years away and a court appearance probably decades. Those who doubt that should pause to consider that the trial of disgraced Tigon CEO Gary Porritt only commenced a full 14 years after he was first arrested. It continues to drag on today with little sign of ending anytime soon.
At least the Steinhoff summons means Jooste will now have to provide a detailed account of the circumstances that led to the collapse of the share price that fateful December. A retelling of the story he aired in parliament in May 2018 will not suffice. The notion that he was duped by his Austrian partner didn’t seem even to persuade parliamentarians who have little or no legal or financial training. It will not stand up to the vigorous scrutiny we can expect from lawyers reinforced by forensic auditors. The bonuses that were paid fraudulently are likely to be their best bet, given that each year the board and shareholders did ratify all payments. A fraudulent payment cannot be ratified.
Not that this will all go Steinhoff’s way. Jooste’s lawyers will demand further particulars, and letters will be sent back and forth. And what if Jooste has spent the past 19 months ensuring whatever funds he has cannot be touched by SA authorities?
If there is no settlement and Jooste ends up in court defending his right to some or all of this R870m, he can be expected to lead Steinhoff’s lawyers on several wild-goose chases. After all, he is the only person who knows all the details of what led up to the December 2017 crash.
The Steinhoff board, which has done remarkably well with the appallingly bad hand it was dealt, understands the public anger. In a broader context, its legal action provides an opportunity for an interrogation of boards’ ability to claw back bonuses. Jooste represents an extreme case, but if a principle is established, perhaps remuneration committees will be a little more hesitant about paying out bonuses willy-nilly. Deloitte’s 2018 remuneration report revealed the shocking reality that hefty bonuses were paid to JSE executives in all but the worst case of underperformance.
Tongaat and Old Mutual are just two of the companies likely to be closely watching Steinhoff’s overdue but welcome action.