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More evidence of the need for a fresh approach to corporate governance

This time courtesy of EOH and PPC.
EOH, Steinhoff, Tongaat – anyone who looked at the corporate governance section of their integrated annual reports would have found no hint of the toxic issues that were about to seep into the public arena. Image: Moneyweb

It does seem that tough economic times – overshadowed by an unprecedented pandemic – brings out the best and worst in companies.

Last week EOH CEO Stephen van Coller provided fascinating insight into corporate governance when he spent a few hours describing to the Zondo Commission of Inquiry into allegations of state capture how a company can unwind. Of course at this stage it’s not very clear how ‘wound up’ EOH ever was, but Van Coller provided an excellent account of what to look for if you have concerns about a company’s governance.

It is now frighteningly apparent the one thing you don’t bother checking up on is the corporate governance and King IV section of a company’s integrated annual report. Anyone who did that at EOH (or for that matter Steinhoff and Tongaat) would have found no hint of the toxic issues that were about to seep into the public arena.

Lip service

As recently as 2017 this is what EOH’s board had to say about its governance: “The board is committed to driving the strategy, based on an ethical foundation, to support a sustainable business, acting in the best interests of the Group, society, the environment and its stakeholders. The Board’s responsibility is to set the tone for an ethical organisation and has discharged its responsibilities by ensuring that a robust and resilient GRC (Governance, Risk and Compliance) framework is in place.”

That doesn’t quite describe what Von Coller found on his arrival at EOH in September 2018. Apparently executive committee meetings were rare events, and minuted ones even rarer. At last week’s commission hearing Van Coller described a governance framework that might as easily have described Steinhoff and Tongaat.

Perhaps Van Coller and Tongaat’s Gavin Hudson should get together, after the dust settles, and draw up an effective corporate governance framework for SA companies.


Also providing an interesting insight into corporate governance last week was the court case relating to a battle between cement and lime producer PPC and former group manager of corporate affairs Siobhan McCarthy. At the heart of the court battle is a forensic investigation report that may, or may not, have played a role in the departure of former PPC finance director Tryphosa Ramano.

Read: PPC forensic investigation report takes centre stage in court case

McCarthy, who provided crucial information to the investigators, wants sight of the report. She believes it may have been instrumental in upending her own career prospects at PPC. The company is refusing to make it public.

For context, it’s worth noting that Ramano’s reign at PPC, beginning 2011 and ending October 2019, coincided with a near-collapse in the group’s fortunes.

In fairness, it was an extremely tough time for swathes of SA manufacturing companies but PPC was hit worse than most. It also coincided with the sort of churning of senior executives associated with Donald Trump’s Whitehouse. And then there was the not-small matter of the restatement of the financial 2018 and financial 2019 results following Ramano’s departure.


Whatever about the legal rights and wrongs of this court case, there are a few issues that are rather disquietening.

Here we have yet another forensic report that has played a critical role in a company’s trajectory but is being held onto tightly by the executives in charge who are then able to use it selectively as they want.

In this case, it appears that having paid for an investigation PPC has been told the resulting report may only be used “by yourselves and your appointed legal representatives … and may not be used or distributed for any other purpose without our prior written consent”. If that sounds familiar, it’s more or less the same ‘explanation’ provided by Steinhoff.

Use of this so-called ‘legal privilege’ needs to be restrained or we risk creating even more cynicism about our corporate leaders.

Unfortunately, as with Steinhoff, the bulk of PPC shareholders have given up hope. Just over 50% of them bothered to attend the recent AGM so there’s little chance of them demanding sight of a report they paid for.

And what should we make of the fact that Ramano received a multi-million-rand payoff when she eventually quit the decimated company, while McCarthy and a few of her colleagues are having to fight legal battles to get what they believe they’re entitled to. And unlike the new executives at PPC, they’re having to use their own resources.

Virtual reality not for Woolies?

Also on the issue of corporate governance last week we had yet another leading JSE-listed company flaunting the Companies Act without any fear of rebuke.

Back in April, during the early Covid-lockdown days, it was reasonably easy to understand that while companies were grappling with the dramatically new conditions and new technology, virtual shareholder meetings would only be able to accommodate written questions. Remarkably, few companies – Old Mutual and Sibanye being outstanding examples – were able to sort out the technology needed to allow spoken questions.

But now, eight months later why aren’t all shareholder meetings providing this facility?

Section 63 of the Companies Act is clear: it allows for virtual meetings, as long as “all persons participating in that meeting [are able] to communicate concurrently with each other without an intermediary …” Written questions require an intermediary.

The Woolworths AGM last week only provided for written questions.

Similarly, the previous week Sasol would only allow written questions at its four-hour long AGM. Mind you, spoken questions might have dragged that particular meeting on for a few days.


And then there’s Prosus. The new big question for this headline-grabbing company is whether or not the $5 billion share repurchase programme will be taken into consideration when computing the executives’ next round of eye-watering remuneration packages.

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As was famously said of Denmark, there is something rotten in the state of South Africa. The stench is appalling. How is this going to change?

‘Perhaps Van Coller and Tongaat’s Gavin Hudson should get together … and draw up an effective corporate governance framework for SA companies.’

Excellent suggestion. I would attach more weight to even their off-the-cuff comments than the king of codes.

I always thought there was a governing body who oversaw, good governance, factually correct reporting, and how companies manager written submissions.
Obviously I’m misinformed about these checks and balances and that these executives are more inclined to feather their own nests rather than share growth with the shareholders who bear more risk than the executives. Do these executives even have KPA to which their emoluments are hooked?
Corporate SA seems to be very similar in approach to SoE’s – they all have the “gimme syndrome”

I think a sizable factor at play here (that is conveniently avoided) is the damaging, long-term IMPACT of SKILLS EXIDUS out of SA.

Try finding an aptly skilled & experienced CEO in this country, is not that easy….like trying to pick the best candidates left behind in SA.

People forget that the skills that have left SA are not only those in the IT/medical doctor/engineering space….if affects the availability of quality corporate leadership as well…..middle to senior management. Not just management, quality management.

While there is justification for critisism against SA’ corporate leadership for all its lacking governance, etc. Why not create one’s own conglomerate & good luck trying to find quality senior staff like CFO’s, Technical Directors and CEO’ to run it for you without a single oversight.

That is the real reality.

Contrast the 100 page glossy say-nothing AFS our companies put out with the no-nonsense plain text detailed business analysis that for example Apple puts out every quarter.

The hired help seem more focused on window Dessing than what their actual job is : MAXIMIZE RETURN ON INVESTED CAPITAL.

End of comments.





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