Shareholders split on Old Mutual’s bitter feud with its fired CEO
Africa's largest privately owned asset manager Allan Gray, whose clients own 10% of Old Mutual, is backing the life assurer's actions against its former CEO Peter Moyo who last week sued the company for R250m. Allan Gray has consulted with Old Mutual and believes the board, as shareholder representatives, should be able to dismiss CEOs without any need for cash settlements. Portfolio manager Jacques Plaut said Old Mutual's board is following the correct course of action. The assurer fired Moyo after the former CEO, through his company NMT Capital, paid himself and other ordinary shareholders a chunky dividend while bypassing preference shareholders which included Old Mutual. Although Allan Gray is supportive, not all shareholders are similarly aligned. Sandton-based All Weather Capital, which has R10bn under management, says the R250m settlement would bring closure to a distraction which it says the board has handled appallingly. Prudential Investment Managers, which owns 4% of Old Mutual, is also in favour of an out of court settlement but says the R250m demand is too high. Old Mutual says it will vigorously defend any claim by Moyo maintaining it was right to fire the former CEO. – Alec Hogg
By Roxanne Henderson
(Bloomberg) – Old Mutual shareholders are split on whether the South African insurer should pony up and settle with Chief Executive Officer Peter Moyo or run the risk of a R250m ($16.5m) damages claim.
All Weather Capital is up for a settlement if it will end the feud. Allan Gray, Old Mutual's second-biggest investor, is against the idea. Sanlam Investment Management wants to wait and see how the court process unfolds, while Prudential Investment Managers reckons a payout of that magnitude would be "egregious."
Moyo fired the salvo when he issued Old Mutual with a summons seeking damages if he can't get his job back. The 174-year-old firm shot back, saying it will vigorously defend any claim, and that it was correct to dismiss the CEO. The battle spilled into the open when Moyo was suspended toward the end of May and then fired three weeks later, which he successfully challenged in court as being unfair.
"We are not opposed to a R250m settlement if it achieves an expedited closure to this unfortunate and costly dispute," All Weather Capital Chief Investment Officer Shane Watkins said in response to emailed questions. The board should then independently re-evaluate whether Trevor Manuel should continue as chairman, he said.
"The board has handled this matter appallingly and changes are necessary and desirable," Watkins said. All Weather Capital holds about 300 million rand of shares in Old Mutual.
While Prudential Investment Managers, which owns 4% of Old Mutual, would prefer an out-of-court settlement to a long legal process with "uncertain outcomes," the price is too high, said the Cape Town-based company's head of equity Johny Lambridis.
'Particularly excessive'
"It appears particularly excessive in a society like ours that is plagued with inequality," he said. It "unfortunately speaks to the fact that executive pay in South Africa and globally has grown to levels dangerously out of kilter with what society seems willing to tolerate and what shareholders are willing to pay."
The amount Moyo is seeking is in addition to the R36m he earned in salary and incentives in 2018, and R4m for his six months notice period, the insurer said. Moyo, 56, has denied wrongdoing and said he should've been through a disciplinary process before being dismissed. His contract was due to expire when he turns 61. At present Moyo and Old Mutual are not negotiating a settlement or payout, the fired CEO said.
Allan Gray, which holds 10% of Old Mutual and has consulted with the company, is fully behind the board.
"We believe company boards, as shareholder representatives, should be able to dismiss executive officers and there should be no need for cash settlements," said portfolio manager Jacques Plaut. "The board is following the correct course of action."
Patrice Rassou, head of equities at Sanlam Investment Management, said Old Mutual's reasons for dismissing Moyo have not yet been tested in court, making for a difficult call on whether the parties should settle.
While the matter has been handled very poorly, "I don't think we have a full picture," he said.
'Massive headache'
Old Mutual's board fired Moyo for an alleged conflict of interest over NMT Capital, in which he and Old Mutual both own 20%. Old Mutual said it should've been paid preference-share dividends before NMT declared ordinary dividends to its shareholders. Those payouts also caused a fallout with the Industrial Development Corporation, which wrote off a portion of a loan to a unit owned by NMT without knowing of a windfall NMT had made from another investment.
The spat – which has seen Moyo been turned away from reporting for work three times – has pitted the fired CEO against his chairman amid allegations and counter-accusations of conflicts of interests, claims they both deny.
Manuel, a former South African finance minister who oversaw the country's longest stretch of economic growth, has said court rulings against the company has created a "massive headache for corporate governance." Moyo, who has accused Manuel of spearheading his dismissal, wants to defend his reputation.
Public Investment Corporation continues "to engage both parties to register its concerns and urging them to find a solution to this dispute," the insurer's biggest investor and the continent's largest money manager said in an email.
"A delay in resolving this dispute will escalate the destruction of shareholder value," PIC said. "Most importantly, the PIC urges the Old Mutual Board to act in the best interest of the company and its stakeholders; and to preserve the remaining shareholder value."