‘Molefe timed his Eskom exit for financial gain’
RATINGS AFRIKA: EVENTS POINT TO UNSOUND GOVERNANCE
Affidavits show Eskom board thought it could amend pension fund rules without involving trustees.
The events at Eskom since November 11, when then-CEO Brian Molefe’s departure was announced – including the purported R30 million early retirement payout and subsequent reinstatement – constitute “a breathtaking level of unsound governance both in a corporate and a personal sense”, says Ratings Afrika corporate governance expert Charl Kocks.
Kocks was evaluating the conduct of Eskom’s leadership, as described in affidavits by Public Enterprises Minister Lynne Brown, Eskom chairperson Ben Ngubane and Molefe in response to the Democratic Alliance’s application to have Molefe’s reinstatement reviewed and set aside. Ratings Afrika comments only on the extent to which actions or inactions constitute sound governance.
Kocks says governance is sound if it takes into account all stakeholder interests, then results in fair actions.
He says it’s clear from the affidavits that Eskom’s board of directors were under the wrong impression that they could amend the pension and provident fund rules without involving the fund’s board of trustees. They did this to benefit individuals appointed on five-year contracts, who wouldn’t otherwise gain from a clause that allows for early retirement from 50, as they wouldn’t meet the 10year tenure rule.
He questions why Eskom’s board seemingly didn’t find the concept of “early retirement” within a fixed-term five-year contract “to be illogical”.
The board and Eskom’s people and governance committee found it acceptable to amend pension fund rules to benefit persons such as Molefe financially “in a manner unrelated to reasonable compen- sation for services rendered... The manner wherein they proposed to do so would provide income tax benefits to the recipient that are arguably inappropriate.”
Kocks says that when a pension fund is used in this manner and the fund’s trustees are effectively ignored in the process of favouring a specific employee or class of employees in an unbalanced way, the function and independence of the pension fund is being corrupted (in the sense of abusing the intended purpose and due process).
Molefe didn’t act in the interest of Eskom, but in his own, when he announced on November 11, 2016 that he’d leave, but delayed his actual departure to January 1, 2017.
Molefe, in his affidavit, states that he turned 50 on December 28. Kocks says Molefe mistakenly believed that “very substantial financial benefits” would accrue to him if he were to take “early retirement” at that age, rather than to resign in November.
“This decision alone was most certainly not in the interests of Eskom, but very much in his own interest,” Kocks says. “We cannot commend such actions under any circumstances.”