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Old Mutual’s Bitter Feud With Its Fired CEO Splits Shareholders

Old Mutual Ltd. shareholders are split on whether the South African insurer should pony up and settle with Chief Executive Officer Peter Moyo (pictured) or run the risk of a 250 million rand ($16.5 million) damages claim.

All Weather Capital (Pty) Ltd. is up for a settlement if it will end the feud. Allan Gray (Pty) Ltd., Old Mutual’s second-biggest investor, is against the idea. Sanlam Investment Management wants to wait and see how the court process unfolds, while Prudential Investment Managers (Pty) Ltd. reckons a payout of that magnitude would be “egregious.”

Moyo fired the salvo when he issued Old Mutual with a summons seeking damages if he can’t get his job back. The 174-year-old firm shot back, saying it will vigorously defend any claim, and that it was correct to dismiss the CEO. The battle spilled into the open when Moyo was suspended toward the end of May and then fired three weeks later, which he successfully challenged in court as being unfair.

“We are not opposed to a 250 million rand settlement if it achieves an expedited closure to this unfortunate and costly dispute,” All Weather Capital Chief Investment Officer Shane Watkins said in response to emailed questions. The board should then independently re-evaluate whether Trevor Manuel should continue as chairman, he said.

 “The board has handled this matter appallingly and changes are necessary and desirable,” Watkins said. All Weather Capital holds about 300 million rand of shares in Old Mutual.

While Prudential Investment Managers, which owns 4% of Old Mutual, would prefer an out-of-court settlement to a long legal process with “uncertain outcomes,” the price is too high, said the Cape Town-based company’s head of equity Johny Lambridis.

‘Particularly Excessive”

“It appears particularly excessive in a society like ours that is plagued with inequality,” he said. It “unfortunately speaks to the fact that executive pay in South Africa and globally has grown to levels dangerously out of kilter with what society seems willing to tolerate and what shareholders are willing to pay.”

The amount Moyo is seeking is in addition to the 36 million rand he earned in salary and incentives in 2018, and 4 million rand for his six months notice period, the insurer said. Moyo, 56, has denied wrongdoing and said he should’ve been through a disciplinary process before being dismissed. His contract was due to expire when he turns 61. At present Moyo and Old Mutual are not negotiating a settlement or payout, the fired CEO said.

Allan Gray, which holds 10% of Old Mutual and has consulted with the company, is fully behind the board.

“We believe company boards, as shareholder representatives, should be able to dismiss executive officers and there should be no need for cash settlements,” said portfolio manager Jacques Plaut. “The board is following the correct course of action.”

Patrice Rassou, head of equities at Sanlam Investment Management, said Old Mutual’s reasons for dismissing Moyo have not yet been tested in court, making for a difficult call on whether the parties should settle.

While the matter has been handled very poorly, “I don’t think we have a full picture,” he said.

‘Massive Headache’

Old Mutual’s board fired Moyo for an alleged conflict of interest over NMT Capital, in which he and Old Mutual both own 20%. Old Mutual said it should’ve been paid preference-share dividends before NMT declared ordinary dividends to its shareholders. Those payouts also caused a fallout with the Industrial Development Corp., which wrote off a portion of a loan to a unit owned by NMT without knowing of a windfall NMT had made from another investment.

The spat — which has seen Moyo been turned away from reporting for work three times — has pitted the fired CEO against his chairman amid allegations and counter-accusations of conflicts of interests, claims they both deny.

Manuel, a former South African finance minister who oversaw the country’s longest stretch of economic growth, has said court rulings against the company has created a “massive headache for corporate governance.” Moyo, who has accused Manuel of spearheading his dismissal, wants to defend his reputation.

Public Investment Corp. continues “to engage both parties to register its concerns and urging them to find a solution to this dispute,” the insurer’s biggest investor and the continent’s largest money manager said in an email.

 “A delay in resolving this dispute will escalate the destruction of shareholder value,” PIC said. “Most importantly, the PIC urges the Old Mutual Board to act in the best interest of the company and its stakeholders; and to preserve the remaining shareholder value.”


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