Listed airline group Comair has commenced a massive shake up of its board, with no fewer than eight of its members resigning in the past year.

At its AGM in October, the board – including both retiring chair Pieter van Hoven and incoming chair Lindsay Ralphs – faced some very uncomfortable questions about its governance and independence.

The questions were largely prompted by shareholder Danny Tuckwood. Tuckwood is a director of Metaco, a leadership consultancy firm acquired by Comair in July 2018 and unexpectedly disposed of less than a year later in what the firm contends were “questionable circumstances”.

Tuckwood questioned the independence of four independent non-executive directors in particular: Martin Moritz, Rodney Sacks, Van Hoven and Dr Peter Welgemoed. Respectively, they had until last year served 40, 39, 46 and 25 years on the board.

According to Tuckwood: “Ralphs expressed a ‘very severe concern about the lack of independence’ and again recommended that the Board Charter be changed, a request which he says was previously ignored by the board. He said there was a ‘major conflict between us [Bidvest] as a shareholder and the board’ and promised a voluntary annual review of board members. The lack of independence made Bidvest ‘uncomfortable’ he said.”

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At the AGM, Ralphs admitted that a “massive shake-up” of the board was necessary.

Action since the AGM has been swift.

• Welgemoed resigned on December 3
• Sacks resigned on December 31
• Moritz resigned on January 2.

* Doyle works at British Airways and was a director for just 14 months (December 2017 to February 2019).

Of the four under question, only Van Hoven remains on the board.

Derek Borer, company secretary and alternate to Captain Martin Louw and Sacks, resigned from the alternate positions in the last month. Given that the lack of an arms-length relationship with the board (as required by the King Code) was questioned at the AGM, it is likely Borer will soon step off the board completely.

Earlier in the year, non-executive directors Sean Doyle (who works at British Airways, which holds a 11.5% stake in Comair), Phuti Mahanyele-Dabengwa and Ronald Ntuli all resigned.

Erik Venter resigned as CEO with effect from July 31 last year, while financial director Kirsten King has announced her resignation, effective February 28.

Board down from 16 to 9

Even following the appointments of two non-executives and two executive directors (joint CEOs Wrenelle Stander and Glenn Orsmond) during the year, the board now comprises 10 members from 16 at the start of 2019. Assuming the (imminent?) departure of Van Hoven and Borer, this number will drop to just eight. The appointment of a new financial director will see this number increase to nine.

It was not just Tuckwood who had a bone to pick. Shareholders were clearly displeased at the planned reappointment of these directors, among other matters, at the AGM. Seven of 18 resolutions received more than 31% of votes against them. Remuneration seems to be a particularly thorny topic.

With only three sizeable shareholders – Bidvest (26.91%), Allan Gray (15.01%) and British Airways (11.5%) – it is likely that one or more of these voted against these resolutions. According to proxy vote results from the 2018 AGM, Allan Gray voted in favour of all the resolutions tabled at that meeting.

Joint CEO structure

Tuckwood also questioned the joint CEO structure. He notes that: “It has previously not worked at Comair, and the recent removal of the joint Sasol CEOs is another case in point.”

Tuckwood highlighted his concerns that “there was no division of responsibility and accountability between the two CEOs, and no clear guidelines on how their performance will be individually assessed and remunerated”.

He says chair Van Hoven “said the positions of joint CEOs was considered by the Comair board in great detail. He confirmed there was no division of roles and that both CEOs manage jointly. The question about how bonuses were awarded was met with a long silence. Finally, Van Hoven sidelined the issue, stating that the chairman and deputy chairman will evaluate the process ‘as they go’, based on their engagement with the CEOs – thereby further compromising the independence they insist they maintain”.

Tuckwood further notes that “despite having no specific job description, one of the joint CEOs [Stander] received a 40% personal performance bonus and 20% discretionary bonus after only eight months with the company”.

This sticking point has been resolved too.

Comair announced early last month that with effect from December 15 “Wrenelle Stander will assume the role of group CEO of Comair Limited, while Glenn Orsmond will assume the role as CEO of the airlines division”.

(Somewhat confusingly, Stander was previously responsible for the airline division while Orsmond was responsible for the “non-airline business and financial services”).

Audit refresh?

Tuckwood took further issue with the independence of the group’s auditors, BDO South Africa, which Comair has had for 52 years. He asked the members of the audit committee if they had “applied their mind to ensure the independence of their auditors”. He contends that “Van Hoven said that the audit committee had debated the reappointment of the auditors and resolved to reappoint them”.

New chair Ralphs then said he agreed “wholeheartedly” that the auditors should be rotated. It is therefore probable that a new auditor will be announced soon, to take over from July 1.