OPINION: Old Mutual should engage Moyo properly, or everybody loses
Old Mutual Limited is a savvy company when it comes to communication.
Its Twitter page is constantly pumped with good news about its successes. This is demonstrated, too, when you use a search engine on the internet and you are hit with positive news about the company's successes.
But when news of chief executive Peter Moyo’s suspension came out the story was different. High on the list of my search results were negative stories such as “Old Mutual CEO exits in ‘conflict of interest’ board dispute” and “Trevor Manuel sheds light on the suspension of Old Mutual CEO.”
CNBC Africa reported that South Africa's second-largest insurer's share price was trading at more than 5percent lower in early trade at R20.59, because Old Mutual had suspended one of the continent's best known chief executives.
One sensed that there was something amiss when Old Mutual issued a statement in May, announcing the immediate suspension of Moyo. It has now emerged that Moyo fell out of favour with chairperson Trevor Manuel after querying why the insurer was paying his legal fees.
There seems to be an unseen force silently stalking black executives and killing off their jobs. Black organisations like the Association for the Advancement of Black Accountants of South Africa need to make their voices heard or they face the wrath of the new breed of seemingly “black” directors desperately introducing a new culture in business.
The use of terms like “material breakdown in trust and confidence” by Manuel to provide explanation why they were parting ways with Moyo sounds so unbelievable.
Moyo has been an inspiration to most of us. He gave black business people opportunities of unimaginable proportions in the private sector. He lifted us and ensured that we played a greater role in the private sector.
I for one would not have made strides in the private sector if Moyo had not given me a job at Ernst & Young Management Consulting Services where I subsequently became a director under the direction of Moyo and other partners.
Just one hour before the close of the market on the day of the announcement, chairperson of the board and former finance minister Manuel explained, as the market was reeling from the shock of Moyo’s suspension, the intended separation and allegedly used terms such as “doing something wrong” and “a breakdown in trust”, attributing them to “our labour laws”.
The company's statement said the suspension was due to a conflict of interest between the two parties and a material breakdown of trust and confidence.
The market did not take him seriously and, indeed, should not, because he was referring to “one of the country’s highest-profile chief executives from one of Africa's biggest finance companies.” No mean pick here.
Moyo has said that there has been no wrongdoing on his part, adding that “the disagreement was the result of differences over the approach to engagement rather than the relationship itself.”
Moyo plans to take the South African insurer to court.
Should investors be concerned with the firing of Moyo?
Often investors will find recurring themes where listed shares are declining in price and these themes are typically related to one of three things: market movement as a whole, industry action in which the firm operates, or firm-specific issues.
However, in most corporate environments when there are changes in top management as people retire or move on to different jobs, the majority of times these moves are amicable and will have no lasting impact on the company. But this does not seem to be the case with Old Mutual.
Usually, well-run boards will strategise to deal with a top manager in such a situation.
Behind-the-scenes discussions take place and deals are made in order to manage investor confidence and limit the behaviour of opportunists and speculators who thrive on such blunders in order to trade based on rumours and bad management. Good communication is key.
The type of language and actions that a company uses can affect its share price in a big way - just as what happened with Old Mutual.
In the case of Old Mutual, it seems that last month's action by the board led to the decline in the share price. The "government speak” used in their communication compounded the problem.
Darryl Dioso, founder and managing partner of Resource Management Solutions Group, said: “Employee engagement is the degree to which an employee feels that they are truly part of a company, have a voice in its decisions and feel respected.”
Old Mutual’s bad handling of its problems with Moyo puts it in a catch-22 scenario, pitting Moyo against the board, which is bad for investor confidence in the company. Everybody loses.
Sello Mashao Rasethaba is the chairperson of the African Entrepreneurs Council.