Old Mutual has hit back at ousted CEO Peter Moyo, saying his “sustained and hostile” campaign against board members is proof that there has been a “destruction” of the relationship between both parties.
And because of this, he cannot return to work and serve the four years remaining in his employment contract with the insurance group.
Arguably, this is no secret considering that the dispute between Moyo and Old Mutual has degenerated into a tit-for-tat spat since he was fired on 18 June 2019 as both parties have hung out dirty laundry.
The insurance group said Moyo has “actively sought to undermine” the ability of Old Mutual’s 13 non-executive directors (or board members) to “carry out their corporate governance functions”.
Old Mutual was responding to Moyo’s application in August at the High Court in Johannesburg to have the company’s directors declared in contempt of court, for “failing” to comply with a 30 July court order that temporarily reinstated him as CEO.
To recap: Judge Brian Mashile ordered that Moyo should be temporarily reinstated because he was not offered a disciplinary process before he was fired on 18 June, following a “material breakdown in the relationship of trust and confidence” between him and the board, chaired by Trevor Manuel.
Since this order, Moyo has been prevented three times from accessing his office at Old Mutual’s headquarters in Sandton because the insurance group believes it doesn’t have to comply with the order because it is appealing against it.
But Moyo argued that Old Mutual should be found guilty of contempt of court, which relates to being disrespectful towards a court of law regarding its orders and comes with serious sanctions including a monetary fine or imprisonment. Moyo is pushing for the directors to be imprisoned for six months or a period determined by the court.
He also wants the individual directors to be declared delinquent under the Companies Act, which would bar them from being on any company board for up to seven years.
If successful, all current directors including Manuel, Paul Baloyi, Steward van Graan, Peter de Beyer, Thys du Toit, Sizeka Magwentshu-Rensburg, Nosipho Molope and others, would have to resign from the Old Mutual board.
Old Mutual responds
Representing Old Mutual directors in Moyo’s contempt of court application, the insurance group’s head of legal Craig McLeod said the axed CEO cannot be reinstated for two main reasons.
Moyo, according to McLeod, recognised that there “remained no scope for co-operation” between both parties and he would still want to remove the directors from office through court action — even if he was to be reinstated.
“Directors are materially hampered in the proper and efficient discharge of their duties to the company in circumstances such as these, and the executive management of the companies may be rendered dysfunctional. This makes the situation untenable from the perspective of governance and leadership of the companies,” McLeod said in court papers dated 8 October.
However, Moyo has repeatedly said his first prize would be to get his job back. The 58-year-old believes he can work with the current directors as they would be required to “put their differences aside”.
“I’m old enough. We will all continue to work for one purpose at Old Mutual. We are not there to love each other.”
But he is forging ahead with his contempt of court application because the board is “not permitted to ignore a court order simply because it does not agree” with it.
Old Mutual said the directors, who relied on the strength of legal advice they received, were not acting irresponsibly, but “in good faith” when they decided to terminate Moyo’s employment contract — first on 17 June and for the second time on 21 August.
McLeod said the directors had a contractual right to issue Moyo with letters terminating his employment contract because the relationship between both parties had “become wholly untenable” after an “extremely challenging situation” that breached corporate governance standards.
The “situation” refers to Old Mutual accusing Moyo of declaring ordinary share dividends — linked to NMT Capital — worth R105-million at the firm’s board meeting on 4 July 2018, which he chaired. NMT Capital is Moyo’s private company in which Old Mutual owns a 20% stake. Of the total dividends declared (R105 million), Old Mutual said Moyo wrongfully pocketed dividends worth R30-million, while it wasn’t paid preference share dividends, breaching its rights as a shareholder.
Under the Companies Act, preference shares have the first claim to dividends before ordinary dividends.
To see Old Mutual directors imprisoned, a Johannesburg-based lawyer said the onus is on Moyo to prove — during the contempt of court hearings that are expected to begin in November — that Old Mutual directors deliberately wanted to disobey the court.
“Moyo would have to prove that the board acted in bad faith. Imprisonment is a serious punishment and the court wouldn’t willy-nilly revert to this remedy. Alternatively, the court might impose on the directors a warning, a monetary fine or say something scathing about their conduct.”
In the case of a fine, Old Mutual will likely pick up the tab. BM