Hard to think of Wiese as a vic­tim

Is the sys­tem of cor­po­rate gov­er­nance point­less?

Financial Mail - - BOARDROOM TAILS - @an­ncrotty

The re­sponse to Christo Wiese’s an­nounce­ment that he has in­sti­tuted a R59bn claim against Stein­hoff seems to be as much in­flu­enced by per­sonal ex­pe­ri­ence of the as­so­ci­ated fi­nan­cial loss as any un­der­stand­ing of cor­po­rate law.

Re­mark­ably, Wiese con­tin­ues to en­joy sup­port from some in­vestors who ac­cept the line that he was duped by a canny and un­scrupu­lous op­er­a­tor. “Why would Wiese have risked ev­ery­thing he built up over 50 years if he knew what Markus Jooste was up to?” is the typ­i­cal re­sponse of his sup­port­ers.

If Wiese can per­suade the court to ac­cept that ver­sion of events he may be able to re­coup a portion of the R59bn as well as some­thing of his pre­vi­ously for­mi­da­ble rep­u­ta­tion. But it will be a long process and given all the other pos­si­ble claims against Stein­hoff — per­haps GT Fer­reira and Thys du Toit will launch their own — there may not be much to go around.

At present the more com­monly held view is that Wiese, one of SA’S shrewdest busi­ness­men, has to ac­cept some re­spon­si­bil­ity for the events that led to the De­cem­ber 2017 an­nounce­ment about ir­reg­u­lar­i­ties. For those who’ve watched his ca­reer, the con­cept of Wiese as vic­tim rather than per­pe­tra­tor is ev­i­dently hard to ac­cept.

“He may not have known the de­tails of what was go­ing on but he must have had a fairly good sense that Jooste was sail­ing very close to the wind,” is the view of crit­ics.

While things re­mained on track Wiese may have cho­sen not to look too closely. He may not have no­ticed the puz­zling changes in the fi­nan­cial ac­counts from one year to the next.

One neu­ropsy­chol­o­gist sug­gests Wiese has taken so many risks in the past, and won, that he has dif­fi­culty con­tem­plat­ing the prospect of los­ing. This means his ap­petite for risk is way beyond that of nor­mal in­vestors. He be­came rich by tak­ing risks and win­ning, so he would not have been alert to the pos­si­bil­ity of los­ing, is how the neu­ropsy­chol­o­gist de­scribes it. It is a com­mon trait among the su­per­wealthy and ac­counts for much of their hubris.

What­ever one’s view on the like­li­hood of Wiese’s claim be­ing suc­cess­ful, if pur­sued, the le­gal ac­tion will turn cor­po­rate gov­er­nance on its head. The ba­sis of Wiese’s claim is that nonex­ec­u­tive di­rec­tors can be mis­led.

There are a few prob­lems with that claim; one is that Wiese wasn’t any old di­rec­tor. He was a highly paid nonex­ec­u­tive chair­man who ap­peared to have close links with the com­pany.

And the “mis­lead­ing” was of a com­pre­hen­sive, sus­tained na­ture. He wasn’t mis­led just once or twice.

If Wiese and all of the nonex­ec­u­tive di­rec­tors are suc­cess­ful in ar­gu­ing that they could not have been ex­pected to know about the ac­count­ing ir­reg­u­lar­i­ties, then share­holder cap­i­tal­ism is un­der threat. It re­lies on di­rec­tors to pro­tect the in­ter­ests of share­hold­ers from man­age­ment who might be tempted to go rogue. If a melt­down the size of Stein­hoff has no con­se­quences for di­rec­tors then the sys­tem of cor­po­rate gov­er­nance is point­less.

Per­haps Wiese is just point­ing out the ob­vi­ous.

The more com­monly held view is that Wiese has to ac­cept some re­spon­si­bil­ity

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