MTN’s succession bungle
THE unexpected departure of any executive in a blue chip company is almost certain to make news. The departure from MTN of the CEO of its South African division, Ahmad Farroukh, falls within this category, but with some notable exceptions.
These should be cause for some discomfort among investors who are used to carefully managed succession appointments, and MTN would do well to take note and do better next time.
The announcement of Mr Farroukh’s departure was made only after a leak of the fact to the Sunday Times. In that announcement, MTN said he would depart at the end of the month.
Therefore, it was remarkable that at the weekend Etihad Etisalat of Saudi Arabia announced that Mr Farroukh was to become its CEO effective from Sunday.
Either the Saudi company moved really fast and he was hired without so much as an interview, or his departure was not as sudden as it appeared. Alternatively, he failed to inform MTN of his intention to take up a post at a company where restraint of trade may apply. What- ever the case, what was communicated to the market when Mr Farroukh left rings a little hollow.
There are clear gaps in the communication and that’s not good.
Succession planning is part of corporate strategy, in particular at executive level. Vacancies appear for all manner of reasons, including sudden death.
Companies that get their planning right ensure that there are adequate notice periods when an executive decides to leave. They also try to ensure that a successor is named when a departure is announced, or before the executive has departed.
By MTN’s standards, this was unusual as it has handled its successions well in the past. Part of what supports a company’s share price is a sense of purpose and direction, and in this instance, the company cannot be said to have covered itself in glory.
In the greater scheme of things, this is unlikely to prove disastrous, but listed companies belong to their shareholders, and giving them real information on time is key. This does not appear to have happened in this instance, and hopefully this will not be repeated.