Peter Moyo’s reinstatement as Old Mutual CEO and his legal challenge to have the insurer’s board of directors — including chair Trevor Manuel — declared delinquent could wreak havoc on its share price, analysts say.
Soon after the news on Tuesday, Old Mutual’s share price fell 5.45% to R19.26, its biggest one-day drop in more than four months, to the lowest level seen since its split into four separate businesses in June 2018.
Analysts say this volatility could continue as Moyo returns to what is expected to be an increasingly hostile work environment.
Johannesburg high court judge Brian Mashile ordered the insurer to temporarily reinstate Moyo as his axing was unlawful. Old Mutual fired Moyo in June‚ citing a breakdown in trust between him and the board due to a conflict of interest linked to NMT‚ co-founded by Moyo and in which Old Mutual has shares.
Old Mutual fired Moyo on June 18 after a short suspension‚ citing a breakdown in trust between him and the board‚ as a result of a conflict of interest linked to NMT‚ a company co-founded by Moyo and in which Old Mutual has shares.
Tense atmosphere
He approached the court on June 28 for an urgent application to be temporarily reinstated and to interdict Old Mutual from filling his former position.
Karl Gevers, head of research at Benguela Global Fund Managers, said it would make the atmosphere tense, which might divert everybody’s attention from daily operations. The insurer can ill afford that, given how competitive the sector is, Gevers said.
“It will make the environment quite tense at management level and I think that’s why the share price has also reacted the way it has,” he said.
Warwick Bam, head of research at Avior Capital Markets, said that a protracted legal battle lies ahead but it is unlikely to affect operational performance in the short term.
The application to have the board declared delinquent would be disruptive should the court rule in Moyo’s favour and will be negative for the share price.
“Old Mutual needs to move swiftly on communicating the implications to shareholders and mediate the matter” with Moyo.
Moyo is returning to the company, which has made it clear in court that it does not want him, even if he won the case. Old Mutual’s lawyer Ngwako Maenetje told the court earlier in July that reinstatement was not an option because there was “no mutual respect left” between the two parties.
Moyo said he is not fazed by the animosity between him and the board.
“I’m back as the CEO of Old Mutual and the most important thing is that I’m going to go back and rebuild Old Mutual,” Moyo said after the ruling.
He said if anyone has to be concerned about how his return will affect the company, it is the board that fired him unlawfully in the first place.
“I fought to go back to work and that’s what I’m actually going to do tomorrow morning,” Moyo said.
In a written judgment, Mashile said Old Mutual incorrectly applied a clause of Moyo’s employment contact that the insurer said allowed it to fire him without a disciplinary hearing.
Mashile said Old Mutual had accused Moyo of gross misconduct but did not follow instructions in a second clause that reads the matter should be referred to arbitration.
Moyo was not afforded a disciplinary hearing because Old Mutual argued that the first-mentioned clause allowed it to dismiss him on notice without going through that process.
“It is nonsensical and of course disingenuous to condemn a person of having a conflict of interest or committing misconduct only to turn around and state as [Old Mutual’s] chairperson did in one of his letters, that the same person has done nothing wrong,” Mashile’s judgment reads.
Moyo’s lawyer Eric Mabuza described his victory as a David versus Goliath case.
“This case was all about accountability, transparency and the protection of corporate governance. It’s a typical story of Goliath and David. In the end justice prevails,” Mabuza said.
Gevers said the judgment shows that the Old Mutual board did not do itself and the company any favours by choosing the process it followed to fire Moyo and taking the fight public.
“It does seem like there was a bit of a power play with personalities and maybe that was the wrong way to go about it. It’s never good for any business to have the board not seeing eye to eye with the CEO.”
Old Mutual spokesperson Tabby Tsengiwe said the insurer would study the judgment before deciding on the next step.
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