CEOs who take the chair don’t sit well with Khoza

REUEL Khoza, the recently retired chairman of Nedbank and one of South Africa’s most respected business leaders, says the practice of long-serving CEOs stepping down only to reemerge shortly afterwards as chairmen of the same companies is a violation of good corporate governance.

It is certainly contrary, he says, to the spirit of the King codes on corporate governance, which the same companies claim piously to take seriously and uphold.

The issue has surfaced recently with the appointment of Koos Bekker as chairman of Naspers only a year after he vacated the CEO’s office that he occupied for 18 years.

Phuthuma Nhleko, a longstanding CEO and now chairman of MTN, and Simon Sussman, a former CEO and now chairman of Woolworths, are two other prominent examples.

Former SABMiller CEO Graham Mackay also slid comfortably into the chairman’s seat at the brewer only months, as it happened, before he died of a brain tumour in 2013.

Khoza, 65, a visiting professor at Rhodes University in Grahamstown, where he has been teaching corporate governance for eight years, played a significant role in formulating the King 2 and King 3 codes on corporate governance.

The codes say the chairman should be an independent nonexecutive director, which Khoza argues is hardly likely to be the case if he has just been running the company as the CEO.

The codes state that the chairman must allow management to run the company without interfering. To reduce the likelihood of interference, they say a CEO “should not become chair- man until three full years have elapsed”.

In South Africa, corporate governance is voluntary, unlike in the US, where it is legislated “and people have to comply almost mechanically”, he says.

Companies in South Africa comply “because they believe it is the right thing to do”.

The notable examples in South Africa of what he calls “conflation”, whereby the CEOs of Naspers, MTN and Woolworths became chairmen, “are painful exceptions”, he says.

“The tendency, almost irresistible, is to wish to rule from the grave.”

Both Bekker and Nhleko have given assurances that they will not interfere with their CEOs, but Khoza is not convinced.

“On the surface you say, ‘I am now chairman, I am not going to interfere’. But at almost every opportunity the former CEO in you surfaces.”

But doesn’t their experience enrich the company?

“From where we sit the risks outweigh the possible benefits.”

The tendency is to wish to rule from the grave