New Absa skipper knows the ropes
But his board needs to up its game
It’s difficult not to feel some sympathy for Arrie Rautenbach, who, through little fault of his own, is the subject of considerable controversy after being appointed CEO of one of the largest banks in the country. Of course, the prospect of raking in the tens of millions of rands in remuneration every year that automatically come with that appointment will help to compensate for some of the anxiety he may be feeling, so we needn’t overdo the sympathy.
Presumably, Rautenbach can take comfort from knowing he must be an outstanding banker. If he weren’t, or if Absa’s directors’ affairs committee (DAC) didn’t think he was, they would not have risked the inevitable backlash. They could have opted to quietly continue with Jason Quinn’s temporary appointment and hope nobody noticed, until they found a suitable black candidate.
Rautenbach must also be an exceptionally brave individual, or at least extremely confident. Because, while the job may be high-paying, given Absa’s history it’s a bit of a poisoned chalice. It is far from inevitable that he’ll be a successful CEO, again through little fault of his own. Mind you, at this stage success could probably be defined in rather pedestrian terms, such as keeping Absa on a steady keel for a few years.
To this end, it will surely help that Rautenbach has been with Absa for 25 of the 31 years since the Amalgamated Banks of SA was formed through the cobbling together of United Building Society Holdings, the Allied and Volkskas Groups and some Sage Group operations.
The Reserve Bank will have given the nod to Rautenbach’s appointment but the Public Investment Corp, Absa’s fourthlargest shareholder, expressed its disappointment. Both these institutions must realise Absa needs to urgently address its turbulent leadership situation. Evidently only the Reserve Bank is able to acknowledge the advantages of having an old Absa hand at this stage.
Absa’s turbulent situation is not new. It predates Daniel Mminele’s sudden departure in April 2021 as well as Maria Ramos’s unexpected departure in 2019. Indeed, it probably goes all the way back to 2005 when a gung-ho Barclays, high on globalisation fumes, acquired a controlling stake in one of the few SA banks without a controlling shareholder.
Recently retired Absa chair Wendy Lucas-Bull made much of the R14.6bn the bank bagged in its divorce settlement with Barclays. This pay-off can hardly have come close to compensating for what must have been an utterly disruptive relationship with the UK banking group. First of all, there were the years spent trying to merge two entirely different cultures, followed promptly by years spent undoing whatever merging had been achieved.
The R14.6bn looks like petty cash in the context of the institutional damage wreaked during all of that. That damage might help to explain why the Absa board, and in particular the DAC, failed to do the continuity planning required by the group’s nomination policy. But it does not excuse it.
The policy could hardly be more straightforward. It states: “The DAC will from time to time review, consider and make recommendations to the board on director nominations, appointments, elections and re-elections, board continuity [succession planning], performance evaluations, and terminations of appointments, both in respect of executive and nonexecutive directors.”
There was little evidence of succession planning when Ramos announced her departure in 2019. Given the response at the time, it seems to have been as much of a surprise to the DAC as it was to the market. Former Reserve Bank executive René van Wyk had to step in to fill the gap until a permanent appointment was made. In January 2020, former deputy governor of the Reserve Bank Mminele took over the top slot. However, a seemingly fundamental disagreement on the group’s strategy and cultural transformation resulted in Mminele quitting after just 16 months.
How was that potential danger not picked up by the DAC during the year-long recruitment process? And again, the board was blindsided without any candidate on the horizon to replace Mminele.
Quinn was slotted in as another gap-filler while a permanent candidate was sought. So Rautenbach is Absa’s fifth CEO since 2019. He also happens to be the first internal candidate since Steve Booysen was appointed in 2004.
No doubt the board, and in particular the DAC members, will be tempted to fall back on the tired old skills shortage argument to explain their failure to do what is required by their nominations policy. But how is it possible, with almost 40,000 employees, that they have been unable to identify and cultivate the necessary executive talent in-house?