Diminishing ‘law’ of greater power
The focus may spread to Steinhoff’s operating assets
Sheet ’appens,” said Stephan, the sales assistant at the Conforama store on the outskirts of a medium-sized town in the south of France. He was explaining to my friend that he relied entirely on Google to find out what was going on with Steinhoff, the German company that owns Conforama. No mention of SA shareholders.
“The bosses don’t tell them anything,” translated my friend. “He doesn’t think they know what’s happening, just that there’s problems at the top companies.”
There’s talk that some stores may have to close, which means job losses, so there wasn’t joy around over the Christmas period.
Stephan’s phlegmatic attitude might just be a Gallic response to adversity or it may stem from the knowledge that retrenched workers in France stand to receive a two-year payout.
To date, discussion of the Steinhoff scandal has focused on the destruction of shareholder wealth. But in the coming weeks and months the focus and the destruction may spread to the group’s extensive operating assets.
Destruction may not be inevitable. If Stephan and his colleagues’ jobs are to be protected, a lot of key people at Steinhoff and among its funders have to work fast and smart to limit the toxic impact of the head office’s accounting practices. Even then, it’s hard to imagine the group won’t be broken up.
Stephan’s store was doing quite a brisk trade that afternoon, just three days after Christmas. I’d popped in a few days earlier; it was deserted. Someone said the French do not shop for furniture and white goods in the days before Christmas so I returned later, with a French speaker. It looked like a healthy business.
Soon after, I bumped into someone from London whose primary concern was not his job or his share portfolio. As a horse racing enthusiast he was worried about what might happen to (Steinhoff-owned) Poundland’s 10year sponsorship of the Epsom Derby.
The sponsorship agreement, which may have been inevitable given Steinhoff’s close ties with Investec, a major sponsor of the Epsom Derby, and Markus Jooste’s near-obsession with horseracing, was announced in May 2017. To some people’s horror the sponsorship gave Poundland naming rights over the famous hill in the middle of Epsom racecourse where generations of racegoers have been able to watch the Derby for free. Apparently the event organisers believe Jooste’s disappearance from the group and the holding company’s troubles will not threaten the arrangement.
An existential threat to one of the world’s largest retail groups has all manner of repercussions in places far from the home of its major shareholders. How ironic it is that as the power and reach of companies and major institutional investors and their advisers grow, their sense of responsibility appears to diminish. Shareholders hold the shares but are not the owners. They are not engaged, they do not attempt to rein in management. If things get awful they sell unless they’re trapped by index-tracking. But walking away is always an option.
No wonder “sheet ’appens”.
If things get really awful for shareholders, then walking away is always an option