It is hard to know why Sipho Pityana so desperately wanted to be chair of Absa, or what he aims to achieve by taking the banking regulator, and the bank itself, to court because someone else got the job. But when the lead independent director of SA’s third-largest bank takes the banking regulator to court, it can’t be good for the bank, or the sector, or indeed for SA.
Banks are different. That is why the process by which their directors and key executives are appointed is different from that of most companies, requiring the approval of the banking regulator. They are the custodians of other people’s money — our money. And the regulator is the custodian of the banking system itself, whose stability and soundness is crucial to the economy’s ability to function.
“Banks are at the centre of the economy, and their actions have economywide consequences so large that society has a right, if not a duty, to regulate them very closely,” as one banker succinctly puts it.
Banking regulation is now housed in the Prudential Authority at the Reserve Bank, headed by deputy governor Kuben Naidoo. Anyone a bank wants to put forward as a member of its board, or a “prescribed officer” such as a CEO or finance director, or a “material risk-taker” such as the head of internal audit or compliance or risk, must first be approved by the banking regulator.
The regulator scrutinises the person to determine whether she or he is “fit and proper”. That would include objective criteria as well as more subjective ones. All new directors would have to complete a statutory form under the Banks Act, disclosing anything that might disqualify them. In the most senior leadership appointments the regulator would typically also want to interview the candidate before giving the nod.
But the regulator would generally be careful about interfering in banks’ operational decisions. And in SA, the relationship between the regulators and the banks has generally been a collaborative one that relies on informal interactions and advice rather than instructions from the regulator. Traditionally, banks’ leaders discuss any big plans or appointments with the regulator and his team — and if they get raised eyebrows in response, they don’t ignore them.
One has to wonder about the culture of a bank that generates so much leadership drama
That informality would particularly be the case with the appointment of a chair, which is the responsibility of the bank’s board and ultimately of its shareholders, not of the regulator. An external candidate for chair would in any event have to go through the rigorous “fit and proper” scrutiny. It is more when an existing board member, who would already have passed the “fit and proper” test, is a candidate for chair — as Pityana claims he was at Absa until AngloGold Ashanti chair Maria Ramos allegedly went to the regulator with new information concerning sexual harassment charges against him.
In a letter attached to Pityana’s affidavit, Absa chair Wendy Lucas-Bull made it clear that “the board did not at any stage pass a resolution to nominate you as chairman”. Pityana’s argument, however, is essentially that it was in that informal process, before any formal nomination, that the regulator blackballed him — improperly.
The impeccable regulation of SA’s banks over many decades is one of the economy’s success stories, ensuring the soundness and stability of the system despite various crises. The Reserve Bank has faced a variety of politically motivated attacks in recent years, and Pityana’s attack feels like another that will take time and effort to counter, while the banking sector and the economy are still recovering from Covid-19’s toll.
More bureaucratic
Any regulator or board anywhere might have wanted to cast a careful eye over Pityana’s history as a leader. He has an unfortunate track record of losing CEOs prematurely — at AngloGold Ashanti, where Kelvin Dushnisky left after just two years and Pityana himself then upped and left without any explanation; at Business Unity SA, where the competent and highly regarded Tanya Cohen suddenly departed; and most recently at Absa, where Daniel Mminele lasted just 15 months before parting ways with the board.
Whatever the merits or otherwise of each case, it is the chair and deputy chair who are responsible for choosing the right executives and ensuring they succeed, and they need to be held accountable if they fail to do that.
If Pityana were to win his case it could have far-reaching ramifications for banking regulation, forcing it to be much more formal and bureaucratic. That could be good, replacing the raised eyebrow with something more transparent. But it risks damaging the constructive and flexible relationship between the banks and their regulator that has thus far helped sustain a healthy banking system.
Even worse is the damage to Absa itself. There has almost never been a time, since the banking group was born in the 1990s, when it was not at the centre of some or other drama. This one comes after a long stretch of instability, with former CEO Ramos departing in early 2019, to be replaced by interim CEO Rene van Wyk, and then in early 2020 by Mminele, a former deputy governor of the Reserve Bank whom Absa’s board had been courting for years before his appointment.
One has to wonder about the culture of a bank that generates so much leadership drama. It still has an interim CEO in Jason Quinn. The well-regarded new chair designate, Sello Moloto, whose appointment was announced on Tuesday, will not have an easy job. And it surely will not get easier as long as Pityana remains on the Absa board as lead independent director, something that has prompted a fair bit of outrage in the market.
Ultimately, though, the biggest damage could be to SA itself. Investors are starting to wonder why SA seems to be becoming an ever more litigious society in which people launch court challenges against any decision they dislike.
This particular challenge puts question marks over the credibility of the governance processes and leadership culture at one of our largest and most systemically important banks, as well as of the regulator. That it is launched by Pityana, who did important work as leader of the “Save SA” anticorruption movement in the bleakest of the Zuma years, is sadly ironic.
• Joffe is editor at large.
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