Peter Moyo’s legal team looks set to create even more corporate history. The former Old Mutual CEO’s lawyers might very well pull off the first-ever "claw-forward" remuneration strategy. And it could happen before any JSE remuneration committee succeeds in implementing the more familiar clawback strategy.
Clawbacks have become a fashionable addition to the bag of tricks that enables overpaid remuneration committee members to devise even more reasons for heaping huge awards on their executives.
It’s an attempt to deal with the criticism that executives have received huge incentive payments while the actual performance turned out to be value destroying. By promising to claw back some of the pay package in the event of exceptionally weak results, the tough-sounding committee is able to justify even higher levels of remuneration. Of course, if you look at the small print in the clawback provision you will see it requires that the offending executive acted almost fraudulently rather than just ineptly.
Steinhoff’s attempt to get money from former CEO Markus Jooste will demonstrate the near impossibility of getting money back from executives.
But back to Moyo and his claw-forward. The R250m damages claim against Old Mutual is apparently based on what he believes he would be paid if he served the remaining 4½ years of his employment contract with the insurance giant.
It is an outrageous amount even assuming he worked for Old Mutual every single hour of those 4½ years.
It is difficult to think of someone as a victim when he is demanding R250m for 54 months of work
A public battle over the right to be paid that sum would provide useful insight into our executive pay crisis, not just at Old Mutual, but by implication — given all the benchmarking that goes into justifying executive pay levels — all large listed firms. Relax, corporate SA, it’s unlikely to happen.
The introduction of a financial sum that would make Moyo’s suffering more bearable has tainted his legal team’s so far brilliant gamesmanship. For a few months it was difficult not to think of Moyo in terms of a committed executive who wanted nothing more than to get back to work and do his best for his company but who was prevented by evil people on the board. It was easy to forget how conflicted Moyo was and how he used his position at Old Mutual to enrich himself.
It introduces a rather tawdry element to Moyo’s victimhood and is remarkably flat-footed. It really is difficult to think of someone as a victim when he is demanding R250m for 54 months of work — and in light of all we now know about NMT Capital, the investment firm co-founded by Moyo, not even full-time work.
Calls for Old Mutual to settle this dispute quickly are understandable given the short-term share price pressure, but inappropriate. How could an institution committed to long-term investment justify coming to a convenient "arrangement" with somebody it believes has transgressed the most basic of corporate governance standards? And there should be no move to ditch other directors. That would couple them on the tote with Moyo and would be totally inappropriate.
Old Mutual’s primary concern right now should be its clients, not its shareholders. For every R1 spent on legal fees it should spend at least R2 on service and administrative staff to ensure its clients are not spooked by media headlines. Shareholders will benefit in the longer term.
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