NEWSMAKER: Roy McAlpine: A legend is getting off the bus

29 May 2011 - 05:08 By Chris Barron
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The Scottish chartered accountant who helped Donald Gordon build Liberty Life into one of South Africa's greatest companies, and gave its new owner Standard Bank hell on a regular basis thereafter, has decided to bring the curtain down on what has been a remarkable career.

Roy McAlpine, who was head of Liberty Asset Management until 1998, turned 70 in January and will resign from the last of his directorships - African Rainbow Minerals, Hyprop Investments and Imperial - in June.

"There's a time to get off the bus," he says. "People may debate when that time is but I think 70 is about right."

After Standard Bank bought Liberty Life in 1999 McAlpine became its sharpest and most persistent critic. He exposed its use of a pyramid structure to exercise control over Liberty with an economic interest in the company of approximately 35%.

To the bank's intense irritation he, himself a former director of Standard Bank, used every opportunity to publicise the absurdity of its claim that the directors of Liberty Holdings - closely aligned as they were with the interests of Standard Bank - were independent.

The whole thing was an unacceptable farce, he insisted, and the interests of minority shareholders, such as himself, were being shamefully prejudiced.

When Standard Bank eventually dismantled the pyramid structure and de-listed Liberty Holdings, there is no doubt that McAlpine was a large part of the reason.

He and fellow shareholder activist Theo Botha were lone voices, though.

"Shareholder apathy in SA is endemic," he says. "Maybe it goes back to the bad old days when there was an old boys' network. You had the mining houses and the banks and everybody owned shares in each other and they all met at the Rand Club, and nobody rocked the boat."

He scored another victory when Old Mutual tried to steamroll the minority shareholders of short-term insurer Mutual & Federal into accepting a derisively low offer for their shares.

"The worst case of corporate raiding" in SA's history, he called it. Largely because of his well-publicised objections, the offer was rejected.

There's a bit of ambivalence in McAlpine's insistence on good corporate governance because in the days when he was a top executive there was no such thing.

If there had been, he says, some of SA's biggest corporate success stories would not have been possible.

Stricter standards of corporate governance were inevitable, he says, "but if our great entrepreneurs of the past had been held to them there would have been no Liberty Life, no Pick n Pay, no Altech.

"The entrepreneurs who started these would never have been permitted the freedom of choice and decision-making they needed to build up these companies."

Today, he says, a CEO has to call a board meeting before he does just about anything, and this "smothers initiative and quick decisions".

At board meetings "far too much time is spent on corporate governance issues.

"These are not the wealth-producing aspects of a company and a lot of it is unnecessary."

Compliance has become "hugely expensive for shareholders and the country as a whole".

He thinks a large part of the problem is that corporate governance has become an industry in itself. Too many people now have a vested interest in keeping that particular pot boiling.

Mervyn King's latest code of corporate governance has taken it to "ridiculous" levels, he snorts. "Lots of the requirements are unrealistic."

And he feels they impose an impossible burden on non-executive directors.

"Any successful businessman or woman who, in the last five years of his working life, decides to accept a non-executive directorship, relative to the remuneration paid and given, needs to have his head read.

"Given what he's expected to know, he's putting his entire personal wealth at risk under certain circumstances."

Had I seen the size of the new Companies Act, he asked incredulously.

"All those requirements. And the non-executive director is supposed to know them all. He carries responsibility for all these requirements that no normal human being could be expected to know."

So why do people like him serve on boards?

"Because suddenly Mr ex-CEO finds himself waking up on a Monday morning with nothing to do.

"He's only 60, he's still young and fit and feels he can't sit on his bum all day, he's got to do something."

Of course, as McAlpine points out, a company can tick all the right corporate governance boxes in the world and still end up making the most terrible wrong-headed and damaging decisions.

Standard Bank's decision to award its non-executive chairman Derek Cooper a R7.5-million bonus is a case in point.

"An inexplicable blunder made more inexplicable by the fact that a few months later they retrenched 20% of their staff," comments McAlpine.

"That was a terrible blunder; a PR blunder par excellence.

"If I'd been sitting in the remuneration committee of Standard Bank and a R7.5-million bonus for the returning chairman was proposed, I would have said, 'No chance, we're going to have the mother of all rows when this is disclosed'.

"And yet no one seemed to bother.

"But was it bad corporate governance? Probably not, because if you were to look at the minutes of the remuneration committee meeting you'll probably find that it was agreed to by the remuneration committee and the board."

McAlpine was criticised for being an overly conservative investment manager, but it's a criticism he's happy to live with, he says.

"I'd rather be conservative than reckless. Liberty marketed itself as being a conservative investor."

He used to tell clients: "If you want higher returns go somewhere else. But remember there's no such thing as a free lunch."

In other words, higher rewards equal more risk.

Nevertheless, Libam was at the top of the retail and institutional investment tables in the '80s and early '90s.

So why did the likes of Allan Gray overtake them and leave them standing?

"In my era at Liberty we competed and more than held our own with Allan Gray," he says.

It was only when Standard Bank took over that Liberty started "under performing".

"That's when the deterioration of the overall company began."

The key factor, he believes, was its transformation from being an entrepreneurially run company "where Donald called the shots" into, effectively, the subsidiary of a major financial institution.

McAlpine grew up in Glasgow in the post-WWII years when life was "very tough" and dominated by shortages and severe food rationing.

He obtained a BSc in maths and physics from the University of Glasgow, and became a chartered accountant.

Chartered accountants were thin on the ground in SA and, drawn by the opportunities and big salaries, he moved here in 1965 and joined Liberty in 1969.

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