Bad calls cost CEOs big bucks
Some battled to salvage a mess, others made it
IN the past five months, former MTN CEO Sifiso Dabengwa saw the value of his investments in the telecoms group tumble 30%, to R232-million.
This was before he stepped down to give former CEO Phuthuma Nhleko a chance to rescue MTN from a huge fine and a tricky business situation in Nigeria.
However, Dabengwa was not alone in ending the year with a smaller fortune.
Glencore CEO Ivan Glasenberg’s worth from his stake in the mining company dropped 58% from R59.5-billion in June, which economist and Pan African CEO Iraj Abedian said was the result of “bad strategic moves and bad timing” for Glencore.
Abedian said MTN’s problems were caused by internal management failures, rather than external pressures.
He ascribed MTN’s woes to classic failures of management and corporate governance.
MTN is expected to keep negotiating with Nigerian authorities to further reduce the fine — which was cut to $3.9-billion from $5.2-billion this week.
MTN’s share price has fallen by 24% since the announcement of the fine in late October.
Sasha Naryshkine, MD and analyst at Vestact, said that in Glencore’s case, Glasenberg was trying to do whatever it took to stabilise the company.
Glencore’s board tried to recover from a 68% share price slide during the year by placing its Optimum coal mine in business rescue in August and reducing the group’s debt load by cutting costs, halting dividends and selling some of its shares and assets.
Abedian said: “Glasenberg is a major shareholder; he is playing with his own money. So in that sense he has an incentive to correct the mistakes and revive the company.”
With mining companies being the worst hit this year, it was no surprise that Lonmin CEO Ben Magara’s stake in his company was valued at R29 000 in October, from R1-million in June.
The company’s market cap declined by more than 80% this year — Abedian and Naryshkine said it was the worst performer of all the platinum mines.
Abedian said that Lonmin was a victim of the weak demand globally for platinum, but, on top of everything else, “there is the history of Marikana and the poor reputation that the company has at board level”.
“You lose money then you depend on a team and they let you down. You are not going to trust them again.”
Trust issues were also partly to blame for Lewis CEO Johan Enslin’s predicament.
His shares in the business are now worth R9-million — down 52% since June, after the company’s unethical business practices in charging exorbitant prices for goods and services were discovered by the National Credit Regulator.
Said Naryshkine: “They knew about it, but they chose to stay quiet. I don’t think there’s much sympathy from the market for their actions, especially seeing which segment of society was being charged.”
The executives could have controlled the situation, but did nothing, choosing to gain from it instead, Naryshkine said.
The fall began when the regulator announced its findings and referred the company to the National Consumer Tribunal.
According to Enslin, the company is refunding premiums of about R44.1-million, and interest of R23-million.