How succession should (and should not) be done

Italtile should give a class on how to pass the leadership baton, with ArcelorMittal and Absa among the first to sign up. Plus a look at some share sale action at Truworths and Exxaro.
A lot to teach. Image: supplied

Members of boards across the country, and in particular nomination committees, should be forced to print out the Sens statement released by Italtile last week and paste it on their office walls.

The statement related to the planned retirement of CEO Jan Potgieter and provided shareholders with the essence of the group’s succession plan. The manner in which it was done will also have provided shareholders with great comfort that their investment is in good hands.

The statement contained in clear and precise terms what was behind Potgieter’s decision and what that decision triggered, namely a clear plan not just for Potgieter to be replaced by Lance Foxcroft but for Foxcroft to be replaced by Tshepo Molefakgotla.

In one excellent statement, the Italtile board has demonstrated not just that it has succession planning under control but also employment equity.

Read: Italtile CEO Jan Potgieter to retire and emigrate

There’s the added bonus that Potgieter is not due to relinquish his CEO position until end-December this year and will remain with the company as a non-executive director.

ArcelorMittal shows how not to do it

Contrast that with the announcement from ArcelorMittal a few days later.

Its CFO Desmond Maharaj seems to have just suddenly decided to decamp “to pursue personal opportunities outside the company”.

The “pursuing personal opportunities” explanation is a surprisingly common one and is guaranteed to terrify shareholders who aren’t sure whether to interpret it as evidence the executive was kicked out for some dark reason or decided to run from a sinking ship.

ArcelorMittal’s board and in particular its nomination committee seems never to have considered the prospect that one of its senior executives would leave.

This is despite the fact the board acknowledges that appointing the CEO and executive officers is one of its primary responsibilities.

ArcelorMittal’s Sens announcement noted: “The process to find a successor will commence immediately and the company will consider appropriate internal and external candidates.”

Absa, and the board that should ‘pay back the money’ 

Worse still are the companies like Absa whose board seems to have been taken totally by surprise when long-serving CEO Maria Ramos announced her pending departure and then surprised all over again when Ramos’s replacement Daniel Mminele “stepped down”.

Absolutely no sign of a succession plan there.

All the Absa board members should be forced to print out the Italtile Sens  in very large print and paste it on their walls. An interim CEO has been slotted in for now.

Presumably, the board is casting around for a candidate that can be poached from another institution.

How is it possible that one of the big four banks in this country doesn’t take succession seriously enough to make a plan?

How is it possible that the South African Reserve Bank allows this?

Do they not see any form of systemic risk?

Is it time shareholders demanded that the non-executive directors of this financial institution returned their extremely generous board fees?

After all, securing leadership is a fairly fundamental requirement of even basic governance.

Read:

Of course, the absence of a succession plan helps to foster the myth that our top executives are irreplaceable which in turn helps to justify the excessive amounts of money they are paid.

Much more likely is that the absence of a robust succession plan – along the lines of Italtile – indicates a board that is dominated by the reigning CEO and aided and abetted by an inept chair.

Truworths, making hay

Talking about companies and a lack of succession planning brings us to Truworths, which last week announced it had splurged R554 million on buying back its own shares between November 2020 and early May 2021.

The repurchase may, or may not, have been a factor in the comparative strength of the Truworths share price in recent months.

Given the disappointing performance of its international acquisitions, shareholders might be happy enough with the decision to plough lots of money into share repurchases instead.

The extremely long-serving CEO Michael Mark, who’s been at the helm for over 30 years, is one of those shareholders; he holds 2.4 million Truworths shares.

Read: Through the looking glass

Exxaro exec demonstrates his commitment

Exxaro shares were flying around like confetti last week as executives were paid out shares on the vesting of generous long-term (three-year) incentive programmes.

At the same time, CEO Mxolisi Mgojo was taking the opportunity of the relatively strong share price to offload a substantial chunk of his stake.

In just a few days last week he sold off R107.5 million worth of Exxaro shares.

Lest investors fear Mgojo is preparing to abandon the coal company, the Sens statement noted that the transactions are a result of “the diversification of Mr Mgojo’s personal portfolio, however he still remains fully committed to Exxaro through his shareholding in Dynamo Holdings as part of the BEE structure”.

“Fully” – just not as fully as previously.

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I love Ann’s articles! They always seem to hit the nail squarely on the head

This time in fact there maybe just a hint of the hammer not being big enough for this rusty nail within a portion of corporate SA. There are entire sectors never mind particular companies that required equal reflection on leadership, construction ! with one exception of course. And she forgot to mention OM.

End of comments.

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