Separation of board and CEO: look before you take legal action


Ideas & Debate

Separation of board and CEO: look before you take legal action

The word “tenacity” is defined by the dictionary as meaning one of three things: the quality or being able to grasp something firmly, or the quality or being very determined; the determination or, finally, the quality or the fact of continuing to exist; persistence.

Chief Grip, Infatigably Persistent, Royal King of Determination Peter Moyo has lived the good life of litigation and been left empty. Still. Let me remind you who this tenacious gentleman is as I wrote about it in 2019.

On May 24, 2019, the board of Old Mutual Limited issued a statement to the Johannesburg Stock Exchange that it was suspending CEO Peter Moyo. A few weeks later, another statement was released stating that Moyo’s employment was terminated.

The reason given was concerns that had emerged about a conflict of interest in a company of which Moyo was chairman and Old Mutual was a shareholder. Moyo sued the company, filing a lawsuit alleging wrongful termination, seeking reinstatement, damage to his reputation, and asking the court to find Old Mutual’s board delinquent.

In July 2019, Judge Brian Mashile ordered his temporary reinstatement as CEO, but the company refused to let him into its former Old Mutual offices, leading Moyo to be sued for contempt of court.

I have written five articles on this divorce case between the board and its CEO in 2019 and 2020. In my last article in June 2020, I wrote “On January 14, 2020, the South African High Court has upheld an appeal by Old Mutual against reinstating Peter Moyo as CEO, then two months later, on March 17, 2020, the court dismissed Moyo’s request to bar the company from hiring a permanent CEO .

“However, Moyo’s streak of bad luck did not end there. A short week later, the Supreme Court of Appeals dismissed, with costs, his application for leave to appeal the January judgment which quashed temporary reinstatement.

“The judges concluded that there was no constitutional interference with Moyo’s right to work, dignity or self-esteem and that he was not entitled under constitutional law to to employment with a particular employer.”

But Moyo was determined to extract his pound of flesh from Old Mutual in court. To date, Moyo’s lawyers alone have extorted thousands of pounds in legal fees from their client on top of Old Mutual’s legal fees.

He continued his claim for damages amounting to 250 million rand (1.9 billion shillings), the amount he would have earned until the end of his contract, and also sued counsel for administration of 13 members for delinquency.

It is important to note that the reason he was asked to leave was a very messy conflict of interest issue. A company Moyo co-founded before joining as CEO of Old Mutual, NMT Capital, also had Old Mutual as a preferred shareholder.

At a board meeting chaired by Moyo, a dividend was announced which paid the common stockholders at the expense of the preferred stockholder, who was in breach of the preferred stock ownership agreement. Moyo received 30 million rand (226 million shillings) from this dividend while Old Mutual received nothing.

There were strong protestations of innocence from Moyo, claiming that Old Mutual had its own director on the board of NMT Capital when this decision was made, so “shauri yenu” (it’s from your fault) and that he should not be blamed for any conflict.

The board, in a statement after Moyo’s departure, said: “The board has not received an acceptable explanation why, in flagrant violation of the relevant preferred share agreement with Old Mutual as well as Mr. Moyo’s employment bonds, ordinary dividends were declared while the debt to Old Mutual was exceptional.

So what’s the latest? In January 2022, the High Court in Johannesburg dismissed Moyo’s claim for damages of R250 million. The court found that Moyo had produced no evidence that Old Mutual had wrongfully terminated its contract.

The rain continued to batter Moyo when last month, on May 16, a three-judge bench of the High Court dismissed Moyo’s demands that the board of Old Mutual be found delinquent and in contempt of court. court. The icing on the icing on this contentious cake: the motions were dismissed with costs to be borne by Moyo.

“Old Mutual is pleased to put this matter behind us after three years of contentious litigation and to focus on growing the business going forward, with good governance at all times,” the company said in a statement.

In summary: corporate governance 1 – sassy tenacity 0. More importantly, a key lesson here is that if you’re going to sue a big company for wrongful dismissal, make sure you’re standing at the highest rung of the corporate ladder. the moral.

[email protected] Twitter: @carolmusyoka

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