Shareholders to Old Mutual board: Fix the drawn-out Moyo impasse

As the impasse between Old Mutual and axed CEO Peter Moyo intensifies in court over whether he can get his job back, the insurer’s largest institutional shareholders have asked it to get its house in order.

In what is shaping up to be a nasty punch-up between both parties, Old Mutual shareholders have raised concerns about the “sloppy” manner in which the board has handled Moyo’s sacking from South Africa’s second-largest insurer.

Asking not to be named, a representative of an asset management firm which is an Old Mutual shareholder, told Business Maverick:

“We are concerned about the sloppy way the board has managed the dispute. Damaging things have been said publicly from both sides. Instead of finding a solution to the impasse, the board keeps fighting him in court.”

To recap: Moyo was suspended on 23 May 2019, hours before the Old Mutual annual general meeting, due to “a material breakdown in the relationship of trust and confidence”. Old Mutual fired Moyo on 18 June, accusing him of wrongfully pocketing dividends worth R30-million linked to NMT Capital, an investment holding company co-founded by Moyo, and in which Old Mutual holds a 20% stake.

Moyo challenged his dismissal at the high court in Johannesburg. On 30 July, judge Brian Mashile ruled in Moyo’s favour, temporarily reinstating him as CEO and blocking Old Mutual from appointing his successor. Old Mutual is appealing against the judgment, saying Moyo cannot resume his duties until the appeal process is concluded.

The asset management firm has asked the Old Mutual board, led by chairman Trevor Manuel, to find a “workable solution” to the protracted dispute, including a financial settlement to Moyo, which would see him walk away from the insurer.

“There is no way Moyo can work with the current 14-member board, due to the severe breakdown in their relationship,” the firm’s representative said.

Shareholders against golden handshake

Allan Gray, which is Old Mutual’s second-largest shareholder with a 9.8% shareholding, has struck a similar tone, saying it doesn’t believe that the relationship between the insurer and Moyo is workable. Allan Gray has met Old Mutual’s board, asking it to “plan for all contingencies”, considering the ongoing dispute at the high court.

“We hope that the courts rule in Old Mutual’s favour and that Moyo leaves the group without a large financial settlement,” the Cape-Town based asset manager said in response to questions from Business Maverick.

A group of pension funds, which have a collective shareholding in Old Mutual of less than 1%, are also against a financial settlement. Mehluli Mncube, who represents the five pension funds invested in Old Mutual, said they have asked the board to put the settlement through a shareholder vote if it is being considered.

If Old Mutual accedes to the pension funds’ demand, it would be a rare move because as there are no rules in South Africa that give shareholders the right to reject a golden handshake offered by a board to an axed CEO.

“We don’t want shareholder funds to be used for a golden handshake because the company knew about this conflict of interest relating to Moyo’s NMT Capital and thought it could manage it well. But it didn’t,” said Mncube.

After all, shareholder value has been eroded. Old Mutual’s share price has fallen about 17% to R17.97 a share (close on 16 August) since Moyo was suspended on 23 May.

The pension funds Mncube represents were among the shareholders that voted overwhelmingly against the implementation of Old Mutual’s remuneration report at the insurer’s recent annual general meeting. In a non-binding vote, about 69% of shareholders voted against the implementation of the report.

Shareholders were vexed that Moyo received total compensation of R50.5-million in 2018, which comprises a R15.4-million reward he received after the company completed its managed separation in June 2018.

Other large shareholders that didn’t want to comment on the Old Mutual and Moyo saga, saying it would be “inappropriate” or they don’t “comment on individual companies”, include Prudential Investment Managers, Sanlam Investment Group, and the local arm of BlackRock. The Public Investment Corporation, which is Old Mutual’s largest shareholder (with a 10.8% holding), adopted a similar stance.

Old Mutual and Moyo returned to the high court on 16 August for a hearing about, among other things, a declaratory order that the insurer seeks to not comply with a high court judgment that reinstated Moyo as CEO, pending the conclusion of an appeal process.

In response, Moyo has launched a counter-application to declare the board to be in contempt of court for “failing” to comply with the judgment. Judge Mashile is expected to make a ruling on the order applications within two weeks. DM