Moyo ruling paves way for new Old Mutual CEO
• Court decision sent group’s share price up as much as 5.45% to R20.14, to close 3.25% higher
Old Mutual’s high court victory against Peter Moyo paves the way for the insurer to finally appoint a new leader, after an eight-month battle with the axed CEO that caused reputational damage and shaved billions off its market capitalisation.
On Tuesday, a full bench of the high court in Johannesburg upheld Old Mutual’s appeal, finding that the insurer had lawfully dismissed Moyo.
The court overturned the first high court judgment that Moyo had been illegally fired and which temporarily reinstated him. That reinstatement was overturned.
The ruling sent the group’s share price up as much as 5.45% to R20.14. Old Mutual gave back some of those gains to close 3.25% higher at R19.69, matching its largest one-day gain in June 2019, which in turn was its biggest rise since December 2018.
At the heart of the case was the question whether Old Mutual had followed proper procedure in axing Moyo and had adhered to the terms of his employment contract.
On Tuesday, the judges found that the contract clearly allowed either party the right to terminate the employment relationship with six months’ notice or six months’ payout and did not, as Moyo argued, require a disciplinary process before the termination took effect.
Old Mutual welcomed the judgment, saying that it “confirmed it [had] acted properly in terminating Moyo’s employment the first time”.
Spokesperson Tabby Tsengiwe said Old Mutual’s board would now begin the search for a new CEO.
Old Mutual has been involved in a bitter feud with its former CEO since May, when it suspended and later fired Moyo over alleged conflicts of interest related to NMT Capital. Moyo is one of the founders and Old Mutual was a 20% shareholder.
The saga has sparked debate whether companies should pay “golden handshakes” to leaders with which they have had a fallout in order to end the conflict, or instead engage, as the insurer has done, in costly, protracted legal disputes.
Sasfin Securities deputy chair David Shapiro said Old Mutual’s board and Moyo both need to
“look at themselves for allowing the situation to get as ugly as it has and for it to have lingered”.
“Where there was a disagreement with Moyo, it should have been dealt with conclusively in the early stages at an internal level before it got ugly and into the courts,” Shapiro said.
Warwick Bam, head of research at Avior Capital Markets, said the saga with Moyo has been a “distraction at all levels” for Old Mutual and that the victory is “very important to clear the slate and create space at a board level to make business decisions”.
“This victory gives credibility to the Old Mutual board.
“On the face of it, it appeared [Old Mutual] had a very strong case, which was why surprising it took so Bam said.
Shareholders do not like uncertainty and operationally they felt “business decisions were impaired by the lack of certainty around a permanent CEO appointment”.
INSURER GETS COSTS
it was long,”
Moyo appeared to be shocked as the brief summary of the judgment was read. Costs were awarded to Old Mutual, which means that he has to pay the legal fees of two of the insurer’s and chair Trevor Manuel’s senior counsel.
Moyo said he was “disappointed” and that he would appeal against the judgment. Speaking outside court, he said that having skimmed through the 46-page judgment with his lawyer “there are some things that are of concern to us”.
“There are a lot of serious allegations [by Old Mutual], which we dispute.”
He also denied that his behaviour had “prejudiced” Old Mutual and accused the insurer of “lying” about the facts of the matter. He said he was willing to continue his two other legal battles with Old Mutual.
He was fighting for his reputation, Moyo said.
While Tuesday’s court case related to an urgent application filed by Moyo for a temporary reinstatement, he has brought a second, non-urgent case in which he is arguing that his employment was unlawfully terminated and that he should be compensated. This case will also be heard in the high court in Johannesburg.
Furthermore, he has filed papers accusing Old Mutual of contempt of court for preventing him from entering its premises and resuming work, even when he was given a temporary reinstatement by the high court.
His lawyer, Eric Mabuza, said that he was expecting to be given a date for the contempt of court case soon. Mabuza dismissed concerns about Moyo’s mounting legal fees. “It’s not about costs. It’s about justice and vindication of [Moyo’s] rights”.
Since the saga started on May 24 2019, Old Mutual shares have fallen 9.26%, while the JSE’s life insurers’ index rose 1.29%.
Setback: Former Old Mutual CEO Peter Moyo and his spouse Sibongile sit inside the high court in Johannesburg on Tuesday. The court upheld Old Mutual’s appeal, finding that the insurer had lawfully dismissed Moyo.