Issue: September/October 2007


Tribulations of training

It’s my pleasure to participate, from time to time, in training workshops of union trustees from some larger industrial funds. My role is a trainer of sorts, but inevitably I learn a lot more from them than they from me. It offers a coalface experience of theory against practice.

One of these important “learnings” is their enthusiasm to acquire the necessary trusteeship skills. While those who write the theories spend Sunday mornings in the sunshine of golf courses, these guys (often wearing red Cosatu jackets, sponsored by Old Mutual) sit in a darkened conference room at an unfashionable airport hotel to hear speakers (some boring, so let’s be modest) work through retirement-fund matters of the day.

Such commitment, merely to attend month after month, is itself impressive. At the most recent workshop, a question was put by a grizzled shop steward during discussion about “fiduciary”, “onerous”, “liability” and other biblical stuff in the Financial Services Board’s good-governance circular PF130. “Once we’ve had all this training,” he asked in quiet desperation, “what are we supposed to do with it?” Initially, the question seemed almost embarrassingly simple and the answer should have been as simple. But it wasn’t, and it’s since been a cause for considerable bother. One could easily have responded with platitudes, about better service to fund members and not being sued and the like. But this seemed strangely inadequate. Why indeed should they spend their leisure time in this way, unless there were significant and identifiable personal advantages? Why indeed should they want to be trustees at all?

It could have been possible to respond cynically, bearing in mind they don’t get special remuneration, with reference to tickets for jazz concerts and soccer matches (and more, such as school fees for their children) sometimes prised from not unwilling service providers. Clearly, though, this would have been an inappropriate and demeaning reply. These are people with their hearts on their sleeves, eager to acquire knowledge for their own upliftment and for the economic empowerment of those they represent.

That’s somehow where the answer seems to lie. It’s in the ability to look after other people’s money as their own, which it partly is. Few could have a stronger or more direct vested interest in protecting their savings and enhancing their benefits than the trustees whose personal capital and futures are tied into the decisions they make. From this premise, the rest is commentary.

Clearly, adequate training is fundamental to these objectives. Without it, they’d be incapable of mandating and monitoring their service providers. More than this, they’d have little capacity to identify and initiate shareholder activism (which the King code and Financial Sector Charter encourage) particularly in circumstances that can directly affect fund members’ benefits.

For instance, since its logo was so much in evidence, take Old Mutual. It’s not often that directors and former directors are at loggerheads with respective versions of the truth. The circumstances that gave rise three years ago to the R5,2 billion rights issue in subsidiary Nedcor are contentious.

It would appear that former Nedcor chief executive (and Mutual director) Richard Laubscher is itching to go on affidavit with his version: that the Nedcor board, including him, had collective responsibility for the bank’s problems; that the Mutual-appointed directors of Nedcor acted in the interests of Mutual before Nedcor when they insisted Nedcor pay for its acquisition of BoE with borrowings; that Nedcor paid more for BoE than it needed to and still more to take out minorities in Nedcor Investment Bank than it should have.

Obviously, these allegations are serious – R5,2 billion is serious money – and they are seriously disputed. Taken from whence they come, they have about them the ring of an after-the-event whistleblower. But they should nevertheless be taken seriously, not least by retirement funds that were invested in Nedcor and were prejudiced by not having followed their rights at R45 a share. Mutual underwrote the rights offer. Two years later, with a share buyback at R140, its shareholders (not policyholders) benefit handsomely.

Mutual and Nedcor, with directors of the highest repute, pride themselves on compliance with the King governance code. Yet, on the basis of Laubscher’s allegations, nobody’s challenged them. No investors have squeaked. There’ve been no rumblings of class action, either because nobody believes Laubscher, or because nobody cares, or because some companies are too powerful to tangle with. In the traditional South African way, losses to investors are taken on the chin.

King is about much more than separating the roles of chairmen and chief executives. It’s also about ways directors are held to account. Now we prepare for introduction of King 3, without a litmus test for implementation of King 2.

Trustees’ lives could be exciting, were they to make it so. They could confront the big boys, as others are loath to do, were they alive to the possibility. That could be a worthwhile motivation for them to undergo training, were they to realise the full extent of the value they could add.

Allan Greenblo
Editorial Director