Old Mutual Ltd will appeal a court ruling that the South African insurer reinstate its fired chief executive officer, preventing Peter Moyo from reporting for duty as he had planned on Wednesday.
The company will argue in a higher court that it followed sound governance principles and gave Moyo enough notice of his termination, Old Mutual said in an emailed statement. The Johannesburg High Court had ruled that Old Mutual acted unlawfully when terminating Moyo, while also blocking the business from continuing a process of finding a replacement.
“Old Mutual is clear that there has been a complete and irreparable breakdown in trust and confidence in Mr Moyo,” the company said. “The filing of the appeal will suspend the operation of the court order. Mr Moyo has been informed that he is not required or permitted to resume his duties, pending the outcome of the appeal proceedings.”
The appeal is poised to fuel a bitter feud between the 56-year-old and the board led by chairman Trevor Manuel amid allegations and counter-accusations of conflicts of interest. Moyo, who pumped his fists after the ruling, has brought a separate application to have the board declared delinquent directors.
That may take another 60 days. He told reporters afterward that he plans to report for duty at 8 a.m. on Wednesday.
Shares in the 174-year-old insurer tumbled to their lowest since the company moved its main listing back to Johannesburg from London in June last year as the ruling deepened uncertainty over the top management of the company. In firing Moyo, Old Mutual denied him of procedures laid down in his employment contract, the court found.
The company’s board argued that it was entitled under certain provisions in the contract to suspend and dismiss Moyo without a hearing.
“It casts a very bad light on Old Mutual,” said Wayne McCurrie, a portfolio manager at FirstRand Ltd’s FNB Wealth and Investments unit, which doesn’t own the insurer’s stock. “It goes beyond Moyo and cuts to the credibility of Old Mutual as a company.”
‘Hard to Repair’
Old Mutual announced Moyo’s suspension in May after a “breakdown in trust” because of his involvement in investment firm NMT Capital. Just over three weeks later, the company terminated his employment because NMT had declared dividends even though Old Mutual was owed preference-share payments.
The insurer had bought 20% of NMT, which was founded by Moyo and two others, as part of its efforts to redress racial inequality during apartheid. Moyo argued that Old Mutual had a director on NMT’s board, who raised no objections to the declaration of the dividends.
“From the outside, the relationship looks hard to repair,” said Bradley Preston, the head of listed investments at Mergence Investment Managers in Cape Town, which owns Old Mutual stock. “There needs to be certainty that there’s a good working relationship between the board and the CEO.”
The axed CEO also accused Manuel – who helped oversee South Africa’s longest period of economic growth as finance minister until 2009 – of spearheading the campaign against him because questioned the chairman’s independence. Old Mutual said Moyo’s claims are “simply quite ludicrous” and that Manuel had recused himself from discussions related to his role at Rothschild & Co’s South African unit, an adviser to the insurer.
“It’s a lot of ‘he said, she-said’” until there’s been an independent ruling on the merits of accusations lobbied from both sides, said FNB’s McCurrie. “They can’t just kiss and makeup. They’ll have to see it out in court.”
The stock is down 14% this year after Tuesday’s record 5.6% slide. The one-day decline outpaced its peers on the five-member FTSE/JSE Africa Life Assurance Index.
“My main concern for Old Mutual is increased reputational damage” if Moyo’s second application is successful, said Warwick Bam, head of research at Avior Capital Markets, which has an outperform rating on the stock. “While Old Mutual’s day-to-day operations are unaffected by a change in CEO or board, clients’ perception of the firm may change based on these events.”