Black CEOs ranks thinned by Dloti’s exit
Thabo Dloti’s resignation on Monday as Liberty’s CEO is a blow to the financial sector, which has too few black CEOs of his calibre as it is. He had vacated his post with immediate effect, the market was told on Tuesday.
After his departure, only three of the largest listed financial services companies will have a black CEO: Peter Moyo at Old Mutual, Sim Tshabalala at Liberty’s parent, Standard Bank and Andrew Darfoor at Alexander Forbes.
Dloti joined the insurance group from rival Old Mutual in 2010, first as CEO of asset manager Stanlib and then as group CEO in 2014. Freshly armed with the CEO of the year accolade from the Association of Black Securities and Investment Professionals, Dloti quickly set to work, reporting normalised headline earnings 10% higher in his maiden results for the six months to June 2014.
But full-year earnings dipped 2%. The following year, they rose 4%.
And then the infamous fall from grace, when the insurer reported a 38.8% drop in normalised headline earnings for the 2016 financial year, driven by weak investment markets, a plunge in earnings at Stanlib and business strain. In the chairman’s review of the annual report, Jacko Maree said the results were “disappointing”.
Liberty was the worst performer in its peer group measured on an earnings per share basis, with this number plummeting 46%, while rivals MMI and Sanlam generated earnings 2.52% and 5.64% higher, respectively. Discovery’s earnings fell 34.5% as it invested in new initiatives.
Liberty’s poor performance was the subject of a board meeting on May 15, which was attended by all members of the board, Maree says.
“The results were not great,” he says. “The board was pressuring management to improve results.… We decided Thabo Dloti, CEO of Stanlib, resigned two weeks after a board meeting. we need to get things done quickly because board members are not happy.”
These results had dragged down parent Standard Bank’s targeted return on equity, with the bank reporting a 15.3% return but telling shareholders it had aimed for higher up in its target range of 15% to 18%.
At the board meeting, Dloti’s and the board’s views diverged on what the insurer should immediately focus on.
Nine days after the board meeting, following a call with management, analysts at investment bank JP Morgan revised their price target for Liberty to R120 from R125 and cut their earnings forecasts.
The downgrades were motivated by loss of market share, higher policy lapses, weaker shareholder investment portfolio performance and diminishing margins.
This probably clinched the decision for Dloti.
So what’s next? Maree says David Munro, a career banker who takes over as CEO, is expected to “restore Liberty to its former glory”.
Dloti will still be paid his salary and benefits for the next three months, in line with his notice period, says Maree.
Dloti’s cash package, excluding retirement contributions and other benefits, was R5.4m in the financial year to December 2016.
Adjusted for inflation at 6.4%, his pretax golden handshake could be worth more than R1.4m.