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Lessons from Trump for SA’s auditors and directors

Also in the past week: more JSE dropouts, a commendable approach to cost-cutting from the top, and SAB in a froth.
Corporate SA has many examples of ‘Trump moments’, says the author. Image: Andrew Harrer, Bloomberg

We had another quiet week on the JSE, which was handy as it gave us all the opportunity to follow the gripping and bizarre goings-on in the US.

All in all it wasn’t a great week for US President Donald Trump, but he doesn’t seem to notice these things. And he may be able to persuade himself that the release of tapes of his phone call with Georgia’s secretary of state (the recording of which is apparently permissible under that state’s law) was just more proof of how everyone is out to get him and will stop at nothing.

The January 2 phone call made for compelling listening in the same way the news clips of the January 6 storming of the US Capitol in Washington made for compelling viewing.

Read:

For South Africans of a certain age the storming of the Capitol might have brought back memories of June 1993 when the AWB (Afrikaner Weerstandsbeweging) stormed what was then known as the Kempton Park World Trade Centre. At the time the centre was the venue for multi-party negotiations ahead of the country’s first democratic elections.

Hopefully the Washington ‘stormers’ will become as politically irrelevant as the AWB did. But that will probably depend on how many of the approximately 75 million people who voted for Trump in November 2020 thought the violent and flamboyant outing was a bad idea.

Governance case study …

Possibly of more interest to corporate governance enthusiasts was Trump’s call to the Georgia election official.

The excruciating one-hour-and-two-minute call should be required studying for aspiring auditors and putative members of audit committees.

In fact, perhaps all members of listed company boards should be required to listen to the recording at least 10 times before being appointed. It provides an excellent lesson in how to push back against an overly exuberant chief executive who’s determined to have his way.

Admittedly, the Georgia election officials may have realised they could take a firm stance as they had time on their side with Trump due to vacate the presidency in two weeks’ time. But given his tedious repetition of allegations and seeming utter determination to have his way, it must still have been difficult to say ‘no’ to the president.

“Everyone knows we won” and “All we need to find is 11 780 votes” is repeated over and over again for much of the hour.

Many of us would have given up and agreed to ‘look’ for the votes just to make him stop.

But could it be that this is how truculent CEOs operate?

Is this how so much in the way of dodgy accounting practices gets past the auditors and the board? Is this how Steinhoff CEO Markus Jooste persuaded his board and shareholders to pay $3.8 billion – more than twice the market value at the time – for Mattress Firm back in 2017?

Could Jooste’s discussions with the board and key shareholders have been similarly repetitious and unrelenting?

“Everyone knows it’s really worth at least $5 billion to Steinhoff, just ask all our corporate bankers and lawyers” over and over again. Or was it already too late by 2017?

Likewise with Peter Staude’s board at Tongaat when it came to valuing biological assets and property. Everywhere you look you can see evidence of these sort of possible ‘Trump moments’.

Upcoming delistings

Meanwhile back at the JSE we were reminded of how much more eerily quiet it may get in the coming months, with three companies – Accentuate, Mazor and Cartrack – signalling last week that they are on course to delist from the local bourse.

No doubt weak market conditions provide an opportunity for a cheap exit, and no doubt in some cases the costs of being listed may now exceed the benefits.

Sephaku Holdings

Cement producer Sephaku Holdings has taken a different approach to cost control in tough times.

It has managed to secure continued regulatory approval for not appointing a CEO to replace Lelau Mohuba, who stepped down in December 2019. The group’s finance director Neil Crafford-Lazarus will continue to do both jobs, on the grounds that the prevailing operating environment doesn’t warrant the appointment of a standalone CEO.

This must be one of very few instances of cost-cutting starting at the very top.

SAB and the alcohol ban

The pictures of empty ICU beds on New Year’s Eve might curb people’s sympathy for South African Breweries (SAB) in its latest bid to have the court declare regulations banning the sale of alcohol unlawful. But it’s difficult not to imagine there’s a more nuanced way of dealing with alcohol abuse than just banning alcohol sales.

The decision by SAB parent AB InBev to unilaterally suspend the employment and investment conditions imposed by the competition authorities on its 2016 acquisition of SABMiller looks to be a clever and somewhat opportunistic move. It puts additional pressure on government, which must be keen to encourage both employment and investment.

However the threat to cut jobs has hung over SAB since before Covid and alcohol bans intruded so grimly into its life in March 2020. In February 2020 the Food and Allied Workers’ Union threatened to file a complaint with the Competition Commission to block a plan to retrench hundreds of workers because of the “prevailing economic conditions” in SA.

Read: SAB suspends commitments on jobs, investment

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COMMENTS   28

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Auditors are getting paid R4,000 per hour not to be pushovers. They should earn it and stand up to corporate bullies. But of course, it is far easier just to go with the flow.

Haha, you clearly don’t know any auditors very well. The vast majority spend huge amounts of energy and expertise doing a great job and resisting “the easy route”. And R4k per hour? Geez, then everyone would be an auditor!

No, I do all too well. That is the problem. But regardless of my opinions, if auditors were doing such “great jobs” as you say, then why did we have the following auditing scandals: Steinhoff (US$ 7 billion in the financials), African Bank, Tongaat Hulett, Waste Management Scandal (1998) Enron Scandal (2001) WorldCom Scandal (2002) Tyco Scandal (2002) HealthSouth Scandal (2003) Freddie Mac Scandal (2003) American International Group (AIG) Scandal (2005) Lehman Brothers Scandal (2008) etc???

Jnrb

You gave a couple of examples.

Let’s say there are 3000 companies listed in SA and the US. From these 3000 , in the last 20 years we had 60 000 sets of financial statements released , yet you will seriously struggle finding 100 cases of fraud , and probably max 20 cases of large scale fraud.

The point is , people don’t understand ratios.

Most shark attacks (on people) happen in shallow water , does this mean you are more likely getting attacking in shallow water vs deep sea ? No , most people get attacked in shallow water, because that is where most people swim.

The point is, auditors give reasonable assurance and not absolute assurance. That’s it. If a company is seriously set on committing fraud , they’ll try find a way . Some people are just dishonest thugs , that’s life.

Does auditing need a revamp/larger independence ? Yes , most definitely, but let’s not throw the baby out with the bath water

Auditors get R4000 per hour FROM clients. They earn it by providing CLIENTS services.

If they were getting paid R4000 from 3rd parties than its a different stories.

At most auditors assist clients to be compliant with IFRS, Tax, regulation side.

In the audit industry only 0.1% (the partners) earn R4000 per hour. About 98% is article clerks straight out of university and the rest supervisors and managers who earn way less than R4000 per hour.

It was left wing that encourage and opened the door

Please understand misleading articles and instead read genuine news.
Try the .theepochtimes

Opened the door to what?

Genuine news you say? Haha

So you’re saying the left rigged the election? Post some links of the court rulings seeing that is what you are implying!

Money Web, why can you not also condemn the left? Both side are to blame. Could this be because you have a left agenda? Food for thought.

She probably failed to mention this is not a critique of Right Vs Left in the US. She is drawing an example of how to push back, using the recent Trump events. There’s plenty of injustice to go around, from both sides

Both sides are to blame for what?

Dave, another thought: Trump’s election was the result of people getting fed up with politicians. The ones choosing politics as a career, must be some of the worst breeds of bottom dwellers around. They have huge ego’s, have never done an honest day’s work, but excel at talking, talking and talking, while looking after their own myopic interests. The system allows them to milk the voters by taxing and growing the state machinery, but delivering less and less (just look at the condition of roads and other infrastructure world wide). And it doesn’t matter where you go, regardless of party, country or political dispensation, you’ll find the same animals. The world managed to eliminate kings, queens and tsars in the past (for basically the same reason). Perhaps it is time to revamp our current system, coming up with a system that does not attract the kind of character that is currently drawn to politics. Trump, as a non-politician, was an experiment, which ended up in a disaster, because of the man. There will be more experiments, while people search for something better.

I know it is very fashionable in certain circles to hate Trump, but what exactly did he do which was so wrong? Why was he a “disaster” as you put it?

I would go so far as to say its because he has been highly effective in delivering on his campaign promises, that the entrenched elite have exerted so much effort in trying to destroy him.

Almost 3 years of Russia collusion being 100% true as claimed by the Dems and MSM oly to be proved false and a Dem setup to undermine Trump.

That whole campaign was treasonous, yet Trump always gets the blame.

@Batman: I fully agree with your opinion on politicians. Politicians worldwide have reached the end of their evolutionary usefulness. I often wonder what would happen if every single ‘elected’ party government official were to be suspended for a year without pay in every country in the world and do no work, while all countries were run only by qualified professionals in their cvil services. My guess: GDP would increase; public administration costs would obviously reduce drastically; the world would generally have a more peaceful year.

But yes, that is but a pipe dream. Turkeys definitely would never vote for Xmas.

MoneyWeb is a MEDIA company. Like any media house, it’s an unwritten rule that they MUST be leftist, otherwise they will appear ‘unfashionable’. Don’t ask me why.

They’d rather be dead, than supporting ‘the right/conservatives’.

JNRB.take your blinkers off and have a good look. The chronic corruption, nepotism and just downright mismanagement under Trump was plain to see. 350k dead American’s due to Covid under his watch. The man is a walking disaster that only cared about himself and to some degree, his family.

Really? 350,000 out of 331 million is just 0.10574% for a global epidemic. If you want to blame someone, blame China. First, they were in denial and then they let people leave Wuhan when they could have stopped it. As for corruption, bring your evidence instead of making false claims. Hunter Biden should rather be investigated for corruption. Who are the people who hate Trump? Well, for starters, there are socialists, communists, flag burners, Antifa, liberal judges, people who throw rocks at the police, CNN and MSNBC, and the guy in Minnesota who wants to marry his goat. Most of these people hate America. They want to defund the police and open the countries borders to anyone to come and loaf on welfare.

The problems are that board members with the CEO are the ‘clan’ where they trust and believe each other. Just take the Steinhoff and Tongaat case. where the CEO’s lead the members by the nose. In Steinhoff case the chairman had his own agenda of enrichment where the rest of the board members just looked away. I just dont see the AWB link at all. Why not try the Ossewabrandwag of the 1930’s as a link? The CEO’s are in most instance deal with the auditors and board members like it! They like the meetings, the pay and that the CEO is another mate. The secret is to keep this network going and get paid. The problem dont lie with the auditors but with the fact that board members walk away free in each instance. The CEO or the chairman are never in the fire line and that should happen by the board members

The problems are that board members with the CEO are the ‘clan’ where they trust and believe each other. Just take the Steinhoff and Tongaat case. where the CEO’s lead the members by the nose. In Steinhoff case the chairman had his own agenda of enrichment where the rest of the board members just looked away. I just dont see the AWB link at all. Why not try the Ossewabrandwag of the 1930’s as a link? The CEO’s are in most instance deal with the auditors and board members like it! They like the meetings, the pay and that the CEO is another mate. The secret is to keep this network going and get paid. The problem dont lie with the auditors but with the fact that board members walk away free in each instance. The CEO or the chairman are never in the fire line and that should happen by the board members

For a lot of pale skinned Saffers/Ex-Rhodesians/when We’s, Trump can do no wrong. He is their idol as he legitimizes their rac1st views and tendencies that they cannot openly express in SA. Thank god this loon has been assigned to the scrapheap of losers and the world can go back to normality and civility.

Calling someone a “racist” is so boring. You can do better than that. As for “the world going back to normality”, do you think it is “normal” that schools prescribe books to children about a 15 year old boy called “Samuel” who now wants to wear a dress and be called “Samantha”? Is it normal for Mexican drug cartels to cross the border and sell drugs to school kids whilst pretending to emigrate to the USA for a better life? Is it normal for the LGBT faction to be over-represented in all positions of power without any regard for meritocracy? Is it normal for a country to be
flooded with illegal immigrants who all demand food stamps and handouts?

Good thing Trump was ousted: it was under his watch that the USA experienced its longest stock bull-run in a long time!

😉

You could do better by investing in African countries ruled by despotic governments…

Trump’s reality tv show is coming to an end.

Trump, so sad, so pathetic – I did not realize he was spending time with Zuma.

Apparently the punishment of China with economic tariffs was a form of encouragement for the Bank of China to invest Billions of Dollars into Mr. Trumps’ real estate projects.

Isn’t it strange how some people love trump and some people hate him to the point where you have online and real life arguments over him.
Maybe it can be explained by he did some good things and he did some bad things and everyone is just too blind/stubborn to acknowledge that.
Turn a blind eye to the bad and only acknowledge the good or turn a blind eye to the good and only acknowledge the bad.

Everyone needs to take a look at themselves and adjust their blindness.

All cheap salesman talk, everything is always going tremendous.
How does it feel to get FIRED Mr. Trump?

End of comments.

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