Opinionista Johann Redelinghuys 23 February 2014

Hands off? Brian Joffe is faking it

Joffe pretends that he will be hands-off and non-executive, having grabbed the chair of Adcock Ingram, but this is not how he is known to operate. In a bruising boardroom battle, Bidvest - leveraging its newly acquired 34.5% shareholding in Adcock Ingram, and having pulled the PIC with its 21% into the deal - kicked the incumbent chairman off the board and installed its CEO, Joffe, as the new chairman. Mr Joffe will obviously not be an independent chairman and has, based on published accounts, left a trail of acrimonious conflicts in the wake of this hijacking.

Amidst protestations that he will not be managing the business and that a potential turnaround will be “up to the executive”, it is clear that non-executive chairman or not, Joffe is in the driving seat. The market thinks so too, and reflected its sentiment in a substantial 5% rise in the share price. It is unlikely that the share price would have reacted so enthusiastically if Mr Joffe were seen merely as the non-executive chairman he claims to be.

By all accounts he is a hands-on CEO at Bidvest, and it is not in his nature to try to influence matters from the sidelines in the more subtle role of a non-executive director. The die is cast. He will inevitably be an executive chairman.

Forget for a moment how happy the shareholders seem to be and reflect on the elements of a sound King III-type leadership model for a listed South African company; and then ask if Adcock Ingram is heading in that direction. In the model structure the executive team led by the CEO would normally be required to run the business. Its members would develop the strategy and have it interrogated and finally signed off by the board. The board, with a strong mandate for independence, would provide wise governance and hands-off leadership. The chairman must preferably be independent, and if not, should appoint a strong and well-regarded non-executive lead director.

Street-fighter that he is, Mr Joffe clearly was miffed at having his offer to purchase 60% of the equity rejected by the Adcock Ingram board and he decided to fight the battle in a different way. In the unseemly process that has followed, independent governance has been sacrificed. No one argues that it is within a substantial shareholder’s preserve to appoint members to a board, but for a whole posse to be riding into town after the shoot-out does not bode well for the even-handed leadership and governance the company needs to settle things down.

Bidvest has insisted that in addition to Mr Joffe, Lindsay Ralphs, Roshan Morar and Dr Anna Mokgokong also be appointed. Not much independence there either.

If the way Dr Khotso Mokhele, the axed chairman, was treated is any indication of what lies ahead for Dr Jonathan Louw, the CEO, and the rest of the Adcock board members, there can only be a lot of disagreeable turmoil ahead.

To add some relish to the undoubted pleasure Mr Joffe must be experiencing after his boardroom victory, he has been named “dealmaker of the year”. The confidence, and one might say bravado of Bidvest in its criticism of Adcock’s performance and comparing it scathingly to that of Aspen, operating in the same sector but a very different company with a substantially different leadership, is interesting. Bidvest has no experience of the pharmaceutical industry.

When Mr Joffe was asked what plans he has for the turnaround of Adcock Ingram, his comment was, “We don’t have management control. The executive team will do that. Ours will be to contribute to the strategy as part of the board.” He clearly intends with this statement to confirm that there will be no interference in the management and that his mission is no more than that of a non-executive.

But then Financial Mail reported in its 19 December 2013 edition comments made by Mr Joffe in an interview. Anticipating his deal with Adcock, he said, “The first interventions at Adcock Ingram will be the things they are currently involved in, where we can get immediate benefits. These will be management issues like fixing technology and ensuring distribution networks function as they should.”

Adcock’s distribution capabilities have come up for criticism regularly and Bidvest prides itself on its competence in logistics. It looks like a good fit, and Mr Joffe has built his reputation and that of Bidvest in precisely this way. He does it by buying up under-performing companies and turning them around. There can be no question that a turnaround needs active management involvement and strong executive capability.

But if all they intend to do is, as he says, to “contribute to the strategy”, the current executive team should have no fear of being ejected. The truth, however, is that Mr Joffe is known to be successful precisely because he is strong on control and likes to keep his hand on the levers. Then why the pretence of “we don’t have management control?” DM



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"Joyfully to the breeze royal Odysseus spread his sail and with his rudder skillfully he steered." ~ Homer