Issue: September/November 09
Forget Anglo. Think Old Mutual.
By appointing Sir John Parker rather than a black South African to the chairmanship, Anglo American has shown the SA government the finger. It’s done so because it can. With its primary stock-exchange listing in London, Anglo is a multinational resources conglomerate that has outgrown its origins on the Witwatersrand goldfields as much as it has outmanoeuvred the pressures from Pretoria.
When mines minister Susan Shabangu says government regrets having allowed Anglo to list in London, she’s crying too late. Anglo’s corporate behaviour is outside her jurisdiction and there’s nothing she can do about it. For practical purposes, her lament – that Anglo had said it was listing in London to take advantage of world markets, not to disinvest from SA – is spilled milk.
It takes no genius to read between the lines that government is mightily peeved. It feels it had been misled. Even so, it would be untenable for government to coerce board appointments in companies where it has no shareholder status.
From a policy perspective, nevertheless, the flareup that’s happened over Anglo is a flare-up waiting to happen over London-listed Old Mutual.
Like Anglo, the board of Old Mutual (chaired by Christopher Collins, an Englishman, and to be chaired by Patrick O’Sullivan, an Irishman) is dominated by non-South Africans. Like Anglo, Old Mutual is weighted amongst the top 40 shares on the JSE which demands its inclusion in serious South African investment portfolios. Like Anglo, Old Mutual shocked the investment community by the passing of its dividend.
Unlike Anglo, however:
The frustration that government has shown with Anglo might be mild when its attention turns to Old Mutual, as it should. But how?
The proper route is surely through the Government Employees Pension Fund (GEPF). Now in the process of registering into its own name the shares held on its behalf by the Public Investment Corporation, the GEPF is one of the largest single shareholders in Old Mutual.
Obviously, the GEPF is entitled to exercise its rights not only to vote at shareholder meetings of Old Mutual but also to engage with it on the appointment of directors. Arguably, in the Old Mutual circumstances, it has the responsibility too: firstly, in the interests of the fund itself; secondly, in the interests of government and consequently the taxpayer.
This is because the GEPF is a defined-benefit fund. Shortfalls in its pensions promise, due to inadequate investment performance, must be made up by government as the employer of the fund’s members. And because it is the employer, half of the GEPF board members are government nominees.
More than this, the GEPF is a founding signatory of the United Nations Principles for Responsible Investment. The principles oblige institutional signatories to be “active owners” of companies in which they invest.
So how it engages with Old Mutual might prove an early test for the commitment that the GEPF it has taken upon itself. To the extent that the GEPF’s lead is followed by other South African asset managers, also signatories to the UN principles, the stronger the case.
This is not a matter of political intervention, which government dare not be seen to entertain. It’s a matter of shareholder involvement, quite rightly.
This article, by TT editorial director Allan Greenblo,
originally appeared in Business Report on July 16 2009.