Snag in Truworths succession plan
David Pfaff was among potential candidates to replace long-serving CEO Michael Mark
Another senior executive has left clothing retailer Truworths, raising questions about plans to replace long-serving CEO Michael Mark when he steps down. Mark has been at the helm for almost 30 years but one of the potential candidates to replace him, COO David Pfaff, will depart in February.
Another senior executive has left clothing retailer Truworths, raising questions about plans to replace long-serving CEO Michael Mark when he steps down.
Truworths owns the Truworths Man brand and bought UK footwear chain Office in 2015.
Mark has been at the helm of the company for almost 30 years and is widely respected, but there has been pressure for him to be replaced. Having first announced his retirement in 2014, he said this year he would resign at the end of 2022.
Since 2018, the company has repeatedly told shareholders it is committed to finding his replacement.
However, last week it announced COO David Pfaff’s departure, with effect from February. Pfaff, who was also CFO, had been one of the potential candidates to replace the CEO, the company confirmed.
Pfaff ’ s resignation raises questions about whether yet another candidate to fill Mark’s shoes has been chased out. Previous plans to fill Mark’s shoes have not always gone well. In 2015, CEO-elect and retailer Jean Christophe-Garbino came from France to take over from Mark and left nine months later.
Mark grew Truworths into one of SA’s largest fashion retailers, with a R16.67bn market capitalisation. A disastrous foray into the UK resulted in the company writing down almost R5bn of its investment in Office.
The five-person Truworths executive team consists of Mark, Pfaff, Doug Dare and Sean Furlong, who are both 57, and Sarah Proudfoot. The group confirmed Proudfoot is a candidate for future CEO.
Stefan Engelbrecht of Anchor Capital said the group was “surprised” about Pfaff’s resignation.
“He was viewed as a steady pair of hands at Truworths and, given the phased succession plan of the company, where Mr Mark and two other senior executives, Dare and Furlong, are going to be retiring in the next couple of years, we believe that the market would have felt comfortable to know that Mr Pfaff was there to lend support.”
Mark is considered a “doyen of the fashion industry”, having built up Truworths into a phenomenal business, said Brian Thomas, investor at Laurium Capital. But some shareholders feel it is time for fresh blood.
Mike Martin from Active Shareholder, a not-for-profit company that helps shareholders exercise their company rights, says the succession plan has been taking far too long.
“There does not appear to be a great sense of urgency in replacing the CEO despite the statements that this was being addressed as a top priority.”
In 2018, Truworths said: “Shareholders should be assured that succession planning for key executive roles, in particular the position of CEO, is a high priority.”
Martin said: “We believed that the board was on top of the succession plan. The resignation of Pfaff will certainly be a blow to the company’s succession plan if indeed such a plan exists.”
All Weather Capital CEO Shane Watkins said Pfaff was not the right man for the CEO position and believes a woman needs to be in charge.
“He is already in his mid-50s so would not have had longevity in the role. Mark was appointed CEO of Truworths when he was 38, so that’s why he’s been able to be in the role so long. And David was obviously a white male in a business catering largely to black females,” he said.
“While Pfaff was a capable CFO, he’s not a retailer, which in running a youthful fashion business, I feel, is essential. Our hope is that the next CEO is a youthful female with some knowledge of retail.”
THERE DOES NOT APPEAR TO BE A GREAT SENSE OF URGENCY IN REPLACING THE CEO
Company secretary Chris Durham said Mark had been at the helm for so long “at the request of the board and enthusiastically fulfils his role and will continue to do so as long as the board wishes him to do so”. But he added Mark had announced several times this year he would retire at the annual general meeting of 2022.
Truworths insists it has a succession plan, saying claims it did not have one were misleading. Durham said there were many young people in senior positions that could be promoted. The succession plan would be updated after Pfaff’s resignation.
“The nomination committee is determined to fulfil its fiduciary role by appointing the best available candidate for the CEO position as and when it feels it is appropriate to do so.”
Mike Martin Active Shareholder