COMPANY COMMENT: Tiger Brands on the blacklist
And questions of governance raised about independence of Steinhoff’s new board
Court of public opinion is likely to be vicious
Make no mistake the backlash against Tiger Brands will be mighty – even if there is, as yet, no obvious link between the company’s products and the deaths of around 180 people from a listeriosis outbreak.
While mostly unspoken, trust is a critical element in the contract between company and customer – particularly so if the product is edible.
Take for example China’s tainted milk scandal of 2008. At least six babies died and more than 300,000 were taken ill after powdered and ordinary milk was found to have been contaminated with high levels of melamine. That scandal led to the bankruptcy of dairy suppliers in the Sanlu group, according to reports, while two executives in the milk sector were handed death sentences.Luckily the regulatory environment in South Africa is not so draconian but the court of public opinion is likely to be vicious.
Tiger’s advantage is that it has acted swiftly since first detecting low levels of listeria in certain processed meat products early last month, and it seems to have taken the lead in notifying the Department of Health. Still, CEO Lawrence MacDougall was clearly taken aback by Sunday’s offensive from Aaron Motsoaledi’s department – and the company does not yet have access to the test results being used by the department.
Tiger argues that it has been pro-active in its product recall and in-house testing, but Monday’s share price fall is an indication that there may be plenty of pain ahead.
The financial implications are as yet unknown, but the reputational damage is already being wrought.STEINHOFF
Old chums on board to unravel the accounting mess
Not everyone was thrilled with the new appointments to the Steinhoff board. One corporate governance specialist said it was worrying that two of the new directors had ties with Coronation, which is one of the group’s major shareholders. In his mind this raised the possibility that Coronation’s interests would be looked after ahead of other shareholders who only have one, such as the PIC, or have none, such as the vast majority of shareholders.
Alexandra Watson is a professor of accounting at UCT and no doubt has skills that will be extremely useful as the board tries to unravel the “Walter Mitty accounts” put in place by former CEO Markus Jooste.But without in anyway disputing her undoubted talents it is a bit of a stretch to describe Watson as independent in the current context. Watson has been on the Coronation board since May 2008. The worry is that many people might, rightly or wrongly, assume she would have Coronation’s interests in mind as she helps her colleagues on the board trawl through screeds of bizarre accounts.
Hugo Nelson is a former CEO of Coronation where he is currently described as an “independent non-executive”. Again, there may be some people who assume he would have Coronation’s interests uppermost in his mind as he takes his place on the Steinhoff board.
In terms of crisis management to date the Heather Sonn-led board has done a remarkable job. It has issued frequent updates to the market, which in the context of a legal minefield, is commendable particularly as some of the updates have actually been informative. But Coronation’s prominence on the board and describing their directors as independent is a bit discouraging.