Ann Crotty
It was “absolutely unacceptable” that Woolworths Holdings did not provide a satisfactory explanation for its reason to appoint Simon Susman as chairman, shareholder activist Theo Botha said yesterday.
Susman has worked with Woolworths since 1982 and was chief executive for 10 years until November last year when he was appointed deputy chairman. He is set to assume the position of chairman next month.
Most corporate governance guidelines, including the recommendations of the King 3 code, discourage firms from appointing a former executive director to the position of chairman.
In particular, the guidelines discourage a long-standing chief executive from being transferred to the role of chairman on his executive retirement.
Botha told Business Report yesterday that there were very good reasons for this, the principal one being the danger of the chairman intruding on the role of the chief executive.
He said: “This danger is well demonstrated by what happened at Sappi when Eugene van As resigned as chief executive and was immediately appointed chairman; he effectively remained as a key executive making it very difficult for the new chief executive to do his job properly.”
Ian Moir, an Australian who worked for Woolworths subsidiary Country Road for several years, was appointed chief executive in November.
In a bid to address corporate governance concerns about Susman’s position as chairman, the board has appointed Tom Boardman as the company’s lead independent non-executive director.
Concerns that Susman might be an extremely engaged chairman may be heightened by the fact that the chairman’s fees have been increased significantly.
In his chairman’s statement, outgoing chairman Buddy Hawton merely noted that Boardman was being appointed lead independent director because Susman “will be classified as a non-independent chairman”.
The King code acknowledges that a company may have “sound reasons” for appointing a chairman who does not meet all the criteria for independence, but it should be prepared to justify its decision in addition to appointing a lead independent director.
Woolworths’ flawed approach to the position of chairman undermines what, from the 2011 annual report, looks like a highly commendable approach to sustainability and good governance.
Given the controversy surrounding its decision to exit the franchise operation in South Africa, shareholders might have benefited from a more detailed description of how the group persuaded 54 of its franchisees, equivalent to 75 percent of local franchise turnover, to sell out to Woolworths.
The annual report merely notes that “18 franchise stores remain, and we are committed to working with the franchisees to ensure a mutually rewarding relationship to the end of their contract terms”.