Absa has removed Sipho Pityana from its board with immediate effect, a move indicating that a rift between him and the banking group has intensified over his extraordinary decision to sue the Reserve Bank’s Prudential Authority.
Pityana dragged the Prudential Authority, a regulator of banks in SA, to the high court in Pretoria in late October for “unfairly” blocking his candidacy as Absa’s board chair.
On Wednesday 24 November, Absa announced that Pityana will no longer serve as a board member, saying his decision to sue the Prudential Authority amounts to dereliction of duty.
Pityana wants the court to declare that the Prudential Authority “unlawfully” conducted an “informal process” with the board of Absa Bank to sink his nomination as the bank’s chair. Pityana didn’t seek any relief against Absa but cites the bank in his court proceedings.
But Absa might find itself at the centre of Pityana’s lawsuit and face a claim for damages after firing him. Pityana has instructed his legal team to challenge and review Absa’s decision to kick him off the board.
Absa and the Prudential Authority have denied allegations they acted unfairly, adding that Pityana was never formally nominated for the board chair role.
Pityana’s role on the Absa board was recently downgraded as he was fired by the bank from his positions as a lead independent director and chair of the remuneration committee. But he remained an ordinary board member.
Market watchers questioned why Absa didn’t completely remove Pityana from the board pending the conclusion of his lawsuit against the Prudential Authority. After all, Pityana’s lawsuit could affect the Absa board’s functions or his relationship with colleagues.
Absa said the decision to completely fire Pityana follows a meeting on Tuesday 23 November during which he was allowed to respond to the board’s allegations that “he had neglected or had been derelict in the performance of his functions as a director of the boards”. Pityana also faced an allegation that he “had failed to conduct himself in the interests of Absa”.
Adverse findings were made against Pityana, paving the way for his removal from the board in terms of section 71(3)(b) of the Companies Act.
“…the boards arrived at the view that, amongst others, Mr Pityana pursued his own personal interests to the detriment of Absa and thereby created a material and sustained conflict between his interests and those of Absa.
“While the boards respect Mr Pityana’s individual right to administrative fairness, unfortunately in this matter, the boards concluded that the pursuit of his personal interest at the cost of the Group’s interest created a sustained and irresoluble conflict. Absa has a duty to its stakeholders to put the Group’s interest before individual interests,” the bank said in a statement.
Put differently, Absa believes that Pityana’s lawsuit has caused negative publicity and reputational harm for the bank.
Sipho Pityana responds
Pityana has responded to the Absa board decision, describing it as “disappointing and unlawful”.
In a statement, Pityana revealed that his relationship with the board deteriorated after he dragged the Prudential Authority to court. According to Pityana, on 2 November, the Absa board asked him to resign from the board within 48-hours. Pityana refused to step down.
“I refused to resign because to have done so would have meant succumbing to corporate bullying and intimidation tactics that should have no place in our society.
“I was elected by shareholders who showed continued confidence in me when they re-elected me at our AGM [annual general meeting] in June 2021. Only in exceptional circumstances may the board remove one of its members, exactly in order to prevent such abuse. If I believed that such circumstances prevailed, I would have resigned without ever having been asked to do so.” DM/BM