In case you missed the press and a couple of my opinion pieces in the recent past, the South African insurance giant Old Mutual suspended and then fired its Chief Executive Officer, Peter Moyo, on June 17, 2019.
There were a lot of crossed wires dangling from the untidy termination, as the Board accused the CEO of conflict of interest, which he countered with a counter claim that the Chairman of the Board, former South African Finance Minister Trevor Manuel, also had major conflicts of interest with the organisation during his chairmanship. Several bloodied noses and one board director resignation later, the Board has fired Mr Moyo despite a court injunction reinstating him to office and we are all waiting and watching with bated breath.
We will never know what kind of discussions have gone on and continue to be had in the Old Mutual board room. One thing for sure is, of the two protagonists in the case, one remains at home twiddling his thumbs while the other continues to hold his chairmanship seat. But could a chairman who has been accused of conflict of interest by a CEO reasonably lead a board in any discussions that touch on the status of that CEO, up to and including the CEO’s termination?
This is not to say that the allegations against the chairman are true, but the ensuing crisis is not the place for brinkmanship on the part of the chairman of a very public and very large institution. In the United States corporate governance practice, the role of CEO and chairperson is often held by one entity. Following the financial crisis of 2008, this practice came under great scrutiny by shareholder activists who felt that the dual role played led to failure of a number of the large financial institutions that collapsed or were affected. The role and merits of the ‘Lead Director’ came under greater focus as a critical tool for unlocking potential deadlocks created by a chair/CEO whose management leadership was under scrutiny.
Lead directors emerged in the late 1980s in the US as a way to bring balance to a board led by a dual chair/CEO. The Lead Director would be selected from the cohort of independent directors and would be involved in setting the agenda, chairing executive sessions and helping to shape board room dynamics. In some cases, the Lead Director is designated as the vice chairman of the board. Anthony Goodman, in an April 2011 Financial Times article, writes that “the Senior Independent Director, formalised in UK corporate governance practice in 2003, was created as a counterweight to concerns about over-mighty board chairmen. So, the tendency towards building empires obviously does not begin and end in the CEO’s office.”
Clearly, the recognition that a super-chairman can emerge in some boardroom situations does not rest entirely in the United States and the British recognised this danger when they created a similar role.
Back at Old Mutual, a company whose annual report establishes a commitment to good corporate governance, the role of Lead Director seems to exist. Looking at their latest annual report for the year 2018, a Mr G Palser holds the role of acting Lead Independent Director. In the current crisis situation, assuming that he was still on the board in that position, the Board would be looking at him to provide sagacious leadership and drive the discussions around the CEO’s termination as well as the communications surrounding the highly publicised Chairman’s conflict.
The Lead Director in this situation would have to assume that leadership, but would require a noble chairman to yield that leadership to him. Where such nobility is lacking, it would then require a strong cohort of both non-executive and independent non-executive directors to demand that the leadership is yielded to him. It is noteworthy, however, that on their website, Mr Palser is no longer a director, nor do any of the independent directors have the designation of Lead Independent Director.
If the board is fragmented, deep schisms are bound to transpire. The resignation of Nombulelo Pinky Moholi from the Old Mutual board in mid-September 2019 can only be viewed in light of these schisms. Ms Moholi, a previous CEO of the South African telephone giant Telkom, and director of Woolworths and Anglo American Platinum said she resigned for personal reasons. Unless a tell-all book is written by an insider, it is difficult to know what the current board dynamic at Old Mutual looks like at the present moment, but if ever there was a time for individual board director wisdom and courage for the Old Mutual directors it is now. Particularly since Mr Moyo has sued to have them declared as “delinquent directors”.