The South Gauteng High Court has ordered Old Mutual and respondents to temporarily reinstate Peter Moyo as CEO, who was fired in June and to put a halt on any decision to replace him. It also ordered the insurer and respondents to pay costs.
Judge Adams ruled that his suspension and dismissal were unlawful.
Moyo, long standing and respected executive, took the 174 year Old Mutual and its current Chairperson Trevor Manuel, to court, for unfair dismissal. It is a legal battle that could have far reaching implications for corporate South Africa.
Moyo was suspended as CEO in May after the insurance group said there had been a material breakdown of trust and confidence. This related to a company Moyo co-founded, in 2002, NMT Capital, in which Old Mutual was a significant investor. The company asserts that Moyo put the interests of NMT before those of Old Mutual, something he was contractually not allowed to do.
“For Corporate South Africa it could mean that even the slightest conflict of interest is taken a lot more seriously than it currently is,” says Morris Mthombeni, a corporate governance expert and lecturer at GIBS. Mthombeni says it appears Moyo has taken quite a drastic measure in filing such serious charges against Old Mutual and its board. Moyo claims the board of Old Mutual did not follow due process in releasing him and has asked the courts to reinstate him as CEO. He is also requesting that the chairman and directors be declared “delinquent directors.”
“Unfortunately the board and Mr Moyo have disagreed materially on how the conflict of interest has been managed,” counters Old Mutual.
Old Mutual bought 20 percent of NMT Capital for R200 million, in 2002, as part of its transformation agenda. This initial investment was split between ordinary shares, preference shares and private equity.
As a preference shareholder, Old Mutual is entitled to be paid dividends first, but Moyo insists this is a right they often waived.
“In practice and since 2010, the redemption of Old Mutual preference dividends has been deferred or “rolled over” by agreement for a continuous period of almost a decade to date,” said Moyo in his application to the South Gauteng High Court.
Instead, Moyo believes his alleged victimisation is a result of him raising concerns about what he says is a conflict of interest for Old Mutual chairman and former minister of finance Trevor Manuel. This, he claims, relates to the split of Old Mutual UK from the South African business, where Rothschild, another company Manuel is chairman of, were the lead advisers for a small fortune in advisory fees.
This, as well as an undisclosed payment of Manuel’s legal fees, amount to what Moyo terms a “triple conflict.”
Old Mutual rejects Moyo’s claims without reservation and intends to rebut them in court.
The escalation of this high profile disagreement to the courts raises an interesting set of questions around corporate governance and practitioners are sure to watch this closely.
Mthombeni says although this is not a watershed moment in corporate governance in South Africa, “it will show if we give lip service to conflicts of interest.”