Over the past few months I’ve enjoyed interviewing PPC’s recently departed CEO Ketso Gordhan. He’s a hard working, roll-up-your-sleeves kind of guy who talks straight and puts his money behind his words. Gordhan’s resignation from PPC last weekend wasn’t driven by emotion. For him it was principle. He feels the board overstepped the mark by blocking him from firing a disruptive member of the executive team. He resigned, then last Sunday offered to retract it should the board agree to withdraw its interference. They refused. So now, despite the polite words, it’s war. Gordhan wants his job back. And will be meeting this week with the people who can give it to him – PPC’s shareholders. This interview provides a fascinating peek behind the corporate veil. And for me, what’s being attempted is a first in almost 35 years in financial journalism. – AH
ALEC HOGG: Welcome back to Power Lunch. Last week the surprise resignation of the Chief Executive of PPC, Ketso Gordhan, saw the company’s share price drop nearly eight percent last Monday. It was PPC’s biggest daily fall in its share price in nearly six years. The Weekend Press says he’s planning a comeback under the right circumstances. Ketso is with us in the studio. I’m so glad you’re here. I thought we’d lost one of our favourite interviewees.
KETSO GORDHAN: No, I’m planning to be around for a while.
ALEC HOGG: What’s going on with this Board? As usually happens in these corporate situations, it was painted as pleasantly as possible, but I see you didn’t let the SENS report go out without saying ‘there was a disagreement with the Board of Directors’. You’re leaving, with immediate effect. What was the disagreement?
KETSO GORDHAN: The disagreement has been recorded. It was about a decision I had made to exit a Senior Executive from the business – well within my authority levels to make that decision – but I’m not the kind of person who makes an important decision without at least talking to the Board, and so I talked to the Board. The Board then extended its involvement to the point where it interfered in my ability to make an executive decision and stopped me
ALEC HOGG: How senior was this executive? Who was the executive?
KETSO GORDHAN: Very senior.
ALEC HOGG: On the EXCO?
KETSO GORDHAN: Yes, on the EXCO. The point is not so much about who the individual is. It’s about the principle of governance. I have the right to make the decision. You stopped me. You are then interfering. You then go on to make it very difficult for me to have confidence in the Board and its ability to be my guiding point of reference for the implementation of what is a very complex strategy. Now we’re fighting on two fronts. We have to defend our opposition in South Africa, which is much more competitive: a new entrant with low economic growth and then we have to raise the capital and debt to fund what is quite a big expansion program. What you need most in that situation is a very supportive team at the EXCO level, which we didn’t have and a very supportive Board, which I thought I no longer had.
ALEC HOGG: Did this EXCO member not agree with the strategy?
KETSO GORDHAN: Agreed with the strategy, but had issues with a number of things and for whatever set of reasons, constantly undermined my work. You can deal with that up to a point, but when it endangers the implementation of strategy and what’s in the best interest of the shareholders, then it’s no longer about ‘what is the person’s view’ or ‘who is the person’. It’s about what is best for the business.
ALEC HOGG: Are you going to continue to be involved; or when you packed your desk, did you walk out?
KETSO GORDHAN: I was hoping to start the campaign to get back the minute I walked out.
ALEC HOGG: All right, so that was always in your mind.
KETSO GORDHAN: It was always in my mind.
ALEC HOGG: You weren’t running away.
KETSO GORDHAN: Alec, let me be very frank. Firstly, we had started a process at PPC with our Employees, which I think is rather ground breaking. It’s certainly setting an example for South Africa where you try to close the wage gap, deal with housing issues, and show some significant equity and potential upside for employees. As Thomas Pickety says, the return on equity is always going to beat the return on income and growth, and so the right way to ensure that workers get a fair shake is by making sure they have some equity. However, the equity is not going to be worth a lot, unless we double the share price, which is what we were doing.
ALEC HOGG: Did the Board of Directors not like this process?
KETSO GORDHAN: No, I think they supported it.
ALEC HOGG: They supported it.
KETSO GORDHAN: I think the reason I’m fighting to get the job back is that I’m passionate about that objective. That job is undone. Secondly, the expansion projects into Africa are not just financial and technical. Anybody who’s tried to expand into the continent will tell you it’s all about relationships. Every project we started…as the CEO, I was there on the site, dealing with the partners and showing the appropriate amount of respect in that you don’t send the B-team. You send the A-team. I’m at the centre of many of those expansion projects and certainly, the ones that are yet to come depend very much, on my relationships. That was the second thing that was undone.
ALEC HOGG: But the point of all of this is either you go or the Board goes, or is it ‘members of the Board’ that go?
KETSO GORDHAN: I think we could find a compromise.
ALEC HOGG: Was the Board not prepared to compromise on this? Were they not prepared to say ‘sorry, Ketso. We overstepped our authority. Of course, you can fire the guy if you want to’.
KETSO GORDHAN: I had a second bite of the cherry because I tried to retract the resignation. I met the full Board on the Sunday night before the Monday and explained (for the reasons I’m giving you, Alec): that the people, the employees, the projects, and the shareholders. I’m a significant shareholder. I’m the largest individual shareholder in the business. I have one-point-four-million shares, so it’s a significant investment.
ALEC HOGG: And the Board – between them?
KETSO GORDHAN: I’m not sure about the Board.
ALEC HOGG: I don’t think its one-point-four-million. Looking at the names, these are Professional Directors, rather than investors.
KETSO GORDHAN: I don’t think there are significant shareholders on the Board. I have been partnered in the last two or three days by Paul Stuiver, the former CEO.
ALEC HOGG: We saw him in the Sunday Times. You didn’t talk to the Sunday Times, but he did. You spoke to City Press. Was that a strategy?
KETSO GORDHAN: No, he spoke to both, actually. The point I’m trying to make is that it was under his watch that this strategy of keeping South Africa going while we expand, started. He concluded the first of the four deals we are doing. I took over the reins from Paul and what’s interesting in the media coverage (and I’m happy to say it openly – that Paul and I are exactly, on the same page), which is that the Board has not been particularly helpful in getting this very complex strategy implemented. What we need is a more commercial Board and maybe a more robust Board where you debate these issues.
ALEC HOGG: What do you mean by ‘a more commercial Board’? Do these guys not really understand business? I look at them, and I see there’s no entrepreneur amongst them.
KETSO GORDHAN: We spend very little time talking about the business.
ALEC HOGG: What do you talk about then?
KETSO GORDHAN: Tim Ross is probably one of the most valuable Board members. He’s the Chair of the Audit Committee. Interview him on your show and I’m sure he’ll tell you about a number of Board meetings where the business was not discussed and Paul will confirm that. What we’re really saying is, let’s get a couple of people on the Board who can guide the strategy, question the strategy, and add real value. If we can find just two or three people that can do that, nothing would make me happier than to go back. I remain as committed as I have been to the shareholders, and the most important shareholders group, which is the Employees and I’m very confident that we can deliver significant value. Alec, we’ve said internally, that we think we can double the share price by 2019.
ALEC HOGG: Well, you’ve put your money where your mouth is. I’ve seen you travelling. You’re not the ‘I’ve retired’ type of CEO. You’ve been around, but where does the process go from here? Who are your other big shareholders in this company?
KETSO GORDHAN: The big shareholders in South Africa are the PIC, Foord in Cape Town, Sanlam, Old Mutual, and Allan Gray.
ALEC HOGG: Have you spoken to them?
KETSO GORDHAN: I’ve spoken to many of them and I’m meeting all of them in the next few days.
ALEC HOGG: So far, what has their reaction been?
KETSO GORDHAN: I think this is a new thing for shareholders. I don’t think we’ve seen much shareholder activism in South Africa and we would like (I would like) a situation where shareholders, the Board, and I can have – in typical South African style – a negotiated settlement.
ALEC HOGG: But you don’t really want to have a Board of Directors who aren’t commercial, as you said before.
KETSO GORDHAN: I think if we add a couple of people to the Board – and there’s a rotation coming up in January when the next AGM takes place – there’s no need for a big bloodbath. I think we can manage this in a very mature and respectful way, and get an outcome that is in the best interests ultimately, of shareholders and Employees.
ALEC HOGG: What about your CFO? That’s the story. The talk is that the CFO, Tryphosa Romano – she has to work closely with you – is actually not on your side.
KETSO GORDHAN: I am not going to comment. I’m trying to make this about what is in the best interest of the company. I’m all about the company and I’m all about the shareholders. I’m a significant shareholder and I’m saying we have a vision. If you talk to the ordinary workers, what they say is ‘we have a five-year dream’. This is the ordinary workers on the shop floor. ‘We want to achieve that dream’, so I know for a fact Alec, that workers in PPC are generally unhappy. I’m sure they will communicate that to the Board and shareholders in due course. We have a special bond. We have a special relationship. It sounds as though I’m talking about a small number of people, but there are 2500 workers. I see them twice per year and we have a very meaningful conversation about what we are trying to achieve and where the business is going.
They’re up to date. If you ask them about Algeria, they know why we are in Algeria, so we were on a very exciting journey. It’s been rudely interrupted, but I would like it to continue.
ALEC HOGG: Well, there was a movie, called ‘Girl, Interrupted’. This is going to be ‘CEO, Interrupted’ when you come back. We look forward to seeing you in the next set of results, Ketso if it all works out. Ketso Gordhan is the former (for the moment, anyway) Chief Executive of PPC. This is ground breaking. Certainly, I’ve been doing this job for nearly 35 years. I’ve never seen anything like this before, where a Chief Executive of a South African listed company leaves the business, goes to shareholders to say ‘reappoint me, but make sure that the Board works within their parameters’. Fascinating – shareholder activism and if it’s Ketso Gordhan that the shareholders are supporting, we will certainly know very soon. Either them or the Board.
