Blame black board for the white guy

26 June 2016 - 02:00 By Andile Khumalo
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When Phuthuma Nhleko kicked off his second coming at MTN in November last year, he was clear about what he hoped to achieve as executive chairman.

"I will assume responsibility as executive chairman for the next six months as I proactively deal with the Nigerian regulator and will continue to work with them in addressing the issues around unregistered subscribers as a matter of urgency.

Together with the MTN board, my second priority will be to find an appropriate chief executive officer to take MTN forward. I will then revert to my nonexecutive chairman role," said Nhleko.

It's been slightly over six months, but the man has done what he said he would do.

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On June 10, the company announced a final settlement of a cash amount of $1.67-billion (about R25.5-billion) for the Nigerian fine from an initial fine of $5.2-billion.

Ten days later, the company announced it had found a CEO.

He is a former banker with Standard Bank and Nedbank and a former chief financial officer of Vodacom, so he is well versed in the South African and parts of the African market. His previous job was CEO of the European cluster at Vodafone, so he understands the global play. Add to that he is South African.

Sounds good, right? Not really. At least not according to the Black Management Forum (BMF) and the Public Investment Corporation (PIC).

The BMF says the decision by MTN to appoint Rob Shuter as CEO is a blow to transformation, calling it a contribution to "the steady decline in the number of black South Africans at the leadership helm in companies".

BMF president Mncane Mthunzi notes there is "clear reversal of black representation" in top JSE-listed companies and an unwillingness for transformation at top management level, resulting in a decline in the number of black CEOs.

PIC CEO Daniel Matjila, who agrees with the BMF, said he would have preferred a black CEO. Of course he would. We all would. So why didn't we get one?

Who is accountable for this decision and what leeway did they have in making it? Where on the priority list does transformation rank in deciding who gets the top job?

Governance regulations are clear: the board is responsible for the appointment of a CEO.

block_quotes_start I am certain the directors are very aware of their own record as a company and would probably have also preferred a black CEO block_quotes_end

Some boards consult with shareholders, especially where they are wholly owned by a single shareholder or there is a clear majority shareholder.

In the context of South Africa, there are only a handful of asset managers that own the lion's share of top JSE companies, so consulting them would not be cumbersome.

I would not be surprised if Nhleko made a few calls before the announcement, especially given the ICU operation he had been called in to conduct over the past few months.

However, whether the board consults or not, it is accountable and responsible for the decision. So let's have a look at the board.

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The BMF says "it is disheartening to note that these decisions are made by the board of directors with the majority of black people and under black chairmanship".

By my count, the 13-member MTN board has only five white directors, if you include Azmi Mikati, the Lebanese CEO of M1.

In our obsession with race, you would think South Africans know who is black and who is white, but I've never known how to categorise the Lebanese. Anyway, I digress.

The PIC does concede that the appointment of senior management of companies is "the prerogative of the board of directors who are expected to act in the best interests of the company and shareholders".

Clearly, the majority black board of MTN, having completed an extensive search and having applied its mind, decided that Shuter was the best man for the job.

Given MTN's history of having had only black CEOs, you can understand the BMF's disappointment.

This also brings to the fore, perhaps for the first time in a long while , a stand-off between a seasoned black professional body and a black-run listed company led by seasoned black professionals, some of whom are also leaders in black professional bodies.

When one serves as a director, they do so in the sole best interest of the company, not themselves.

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Often the decisions taken by board members are complex and involve a balance of conflicting factors.

The board of MTN had to find a CEO who it believed would serve the company well in these turbulent times. I am certain the directors are very aware of their own record as a company and would probably have also preferred a black CEO.

The question is why they did not appoint one.

Given the complexity of the decision that was made, the debate would then have centred on priority. In other words, what, at this time, was more important and in the best interests of the company than other competing factors.

Perhaps the BMF is not far off, with its view that failure to appoint a black CEO signals that transformation is not a business imperative.

Perhaps in a sea of conflicting priorities, transformation fell off the list this time around, which is ironic.

Khumalo is chief investment officer of MSG Afrika Group and presents "Power Business" on Power98.7 at 5pm, Mondays to Thursdays

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