It’s no wonder there’s such deep mistrust of ‘corporates’ and their ‘profits’ by average South Africans and those in government. We read the rhetoric (and sometimes vitriol) daily. The two sectors in the firing line and most ‘mistrusted’ are, one could easily argue, mining and construction.
Mining is a topic for another day.
In the events of the last two weeks, we have a textbook example of a company operating in a sector that many in this country love to hate and that government simply doesn’t trust anymore. The thing is, you can’t be found guilty of price-fixing of World Cup stadia (and related infrastructure) without finding yourself with a fairly substantial reputation problem.
Sure, there are nuances and details about things like ‘cover pricing’ (most people have no concept of what that is) and the number of tenders actually affected versus the overall volume of work. But, being found guilty and paying very steep fines tends to crystalise a particular view among citizens.
Last year, Murray & Roberts (M&R) CEO Henry Laas described the impact of collusion on the trust in and perception of the industry as “catastrophic”. He cited this “mistrust” as one of the reasons for government’s slow movement on its infrastructure programme.
Now, this is not intended to be a lynching of, or hatchet job on Laas. It must be highlighted that he was the first construction company chief executive to speak in 2013, following the settlement of the Competition Commission’s fast-track investigation. At the time, he frankly admitted to the media that “the industry owes the public an explanation.”
Laas has also done a very good job at steering the group through a tricky period since he took over from Brian Bruce in 2011. In recent years, he’s also successfully transitioned the group away from ‘construction’ to oil and gas (with an increasing focus on internationalisation). Pity about the bottom falling out of the oil market, though… But I digress.
Laas’s honesty, openness and willingness to engage back in 2013 (and since) makes the events of the last two weeks even more perplexing, especially in its ‘communication’ to shareholders.
The collapse of the M1 bridge (officially called ‘pedestrian bridge construction support structure’) on Wednesday, October 14 at 15:30, was undoubtedly a catastrophe and one of the highest-profile accidents in the construction industry’s history.
Now, one would think that a company with 113 years of experience operating in the sector would have a solid crisis communication plan. Perhaps it does. However, in the week that followed the accident, it wasn’t entirely clear that it did.
Six media statements were issued by Group Communications Executive Ed Jardim, in the roughly 36 hours following the accident. The first came two hours later (at 17:30), with another two that evening. These were largely unspecific and one can appreciate this, given the situation. A further three update statements with more detail were released over the course of the day (Thursday) following the collapse.
Investors, however, were left waiting until 09:17 on that Thursday morning, when the first announcement appeared on Sens. Laas provided an update on Talk Radio 702’s The Money Show later that evening, around 27 hours after the bridge collapse.
From that point on, silence. Until a Sens announcement titled “Market update on the collapse of the pedestrian bridge construction support structure” was published at 16:40 on October 20. A full four working (and trading) days later.
It’s no surprise that we saw wild gyrations in M&R’s share price in the hours and days following the accident. Investors hate uncertainty. I questioned this on Twitter and some wondered why I was concerned about shareholders and ‘the market’ when two lives had been lost and many had been injured…. The loss of life and the injuries are tragic, there’s no disputing that. But, my question was asked within the context of M&R being a public company, listed on the JSE. In this context, it is answerable to its shareholders.
Radio silence for four full days is probably not the best course of action. Of course, we know from that update that engagement with its legal counsel and insurance broker was paramount in the hours following the collapse. In such a crisis situation, perhaps decision-makers at the company preferred to err on the side of caution.
But there are facts in the ‘market update’ announcement to Sens that could’ve unquestionably been communicated to investors and the broader market sooner:
- “Immediately on becoming aware of the incident at around 15:40 on 14 October 2015, the Company established a crisis management team (‘CMT’) consisting of a number of directors, including the Chairman of the Board, Group Chief Executive and Financial Director, as well as the Group Investor and Media Executive.
- “Our Group Chief Executive, Henry Laas, personally visited a number of the injured on the evening of the incident to enquire after their wellbeing and to express his sympathies. Henry Laas and other executives conducted further hospital visits to the injured from Thursday, 15th October 2015 and continue to do so on a regular basis.
- “On becoming aware of the incident at around 15:40 on 14 October 2015, the Chief Executive Officer of our Infrastructure & Building business platform, Jerome Govender, as well as the Group Health Safety and Environment (‘HSE’) Director, Thokozani Mdluli, immediately travelled to the site
- “The Company formalised its internal investigation process under the Group HSE Director. The Company’s investigation team comprises an external consultant (who is an expert in tap-root investigation), an external forensic engineer, the in-house legal representative, legal counsel from Webber Wentzel, the Chief Executive Officer of the Infrastructure & Building business platform, as well as the Managing Director of Murray & Roberts Infrastructure.”
These are but four examples. None of this information is prejudicial to the process or the investigation. These are simply facts and reports of actions taken.
Eventually, six working (trading) days later on October 22, the company hosted a conference call for investors about the collapse. The transcript (available here) shows that Laas effectively repeated the timeline of events as detailed in the Sens announcement, before taking questions from analysts and the media.
Without wading into details of the JSE’s Issuer Regulations regarding disclosure, its general principles state that listed entities are “to ensure that full, equal and timeous public disclosure is made to all holders of securities and the general public at large regarding the activities of an issuer that are price sensitive.”
M&R shares plunged 7% on the day of the accident. Surely that tells you all you need to know about whether this information is ‘price sensitive’? Watching market reaction in the days (of silence) following the accident, as well as around the time of the announcement on October 20 further illustrates the uncertainty. Waco International, owner of Form-Scaff, the provider of scaffolding to the site, postponed its JSE initial public offering because of the bridge collapse for goodness sake! Still not material enough?
Are two Sens announcements – four days apart – after such a high-profile accident sufficient? Why did it take the company four working days to admit explicitly that: “The Board recognises that this is a tragic event with severe reputational consequences for the Company”? Wouldn’t that be the very first admission it would make to the market? Why did it take six working days to offer investors, analysts and the media the opportunity to engage with executives on a conference call?
The first official (and explicit) confirmation from the company that Laas had been on site on the day/night came via a media statement at 10:30 on the morning following the accident. Investors were officially notified four working days later. How is this acceptable?
Remember, this is a company operating in a sector that’s reputation is still (severely?) tarnished. And Laas admitted to Moneyweb on the day following the accident that the “company is very aware of the ‘astronomic impact’ of Wednesday’s bridge collapse on its reputation”. Surely it would want to over-communicate? Its actions (well, more correctly, its inaction) simply don’t make sense in the context of what executives were saying.
Surely it would want to be more transparent? Surely it knows it has years of effort ahead to rebuild trust with the public, investors and government? Surely Laas’s movements, presence on-site and meetings with families of the victims were not exactly a state secret? Surely there’s some humanness in all of this? Surely we shouldn’t have to be asking these questions two weeks later? (And it’s a whole other indictment on the media that these questions are not being asked.)
Surely, surely Murray & Roberts could’ve done better?
* Hilton Tarrant works at immedia. He can still be contacted at firstname.lastname@example.org.