EOH sued its former co-founder and chief executive Asher Bohbot for R1.7 billion over material and reputational damages the company said it suffered from allegedly corrupt contracts he oversaw. Photo: Simphiwe Mbokazi
CORPORATE wars among JSE-listed companies once again came under the spotlight early this week when EOH Holdings laid claims against its former executive directors who were allegedly fingered in corrupt activities during their tenure at the company.
EOH sued its former co-founder and chief executive Asher Bohbot for R1.7 billion over material and reputational damages the company said it suffered from allegedly corrupt contracts he oversaw.
The group is also filing for damages against former chief financial officer John King, former head of public sector Jehan Mackay, and the former head of EOH International, Ebrahim Laher, for a total of R6.4bn.
Mackay was also in the spotlight early this week in the Zondo Commission when former ANC spokesperson Zizi Kodwa admitted that he was loaned R1 million by the former executive and businessman in what could be potentially linked to a conflict of interest between the two parties.
The revelations have raised the issue of corporate governance and how the directors conduct themselves which could potentially be to the detriment of the shareholders.
King committee chair and institute of directors in South Africa (IoDSA) governance specialist Ansie Ramalho said corporate governance was clearly under threat in SA.
Ramalho said the Companies Act, the PFMA, the King IV Code and criminal law cover need to be reinforced to arrest the scourge.
"The steps that EOH are now taking and which the board of Tongaat had taken against former executives are in the right direction towards accountability. However, the aspiration should be prevention of these failures. This can only happen if oversight by those who govern improves and for that we need competent and ethical leaders,” Ramlho said.
Tongaat Hulett and Steinhoff International were also cited in the past for a lack of corporate governance when their former executives were fingered for wrongdoing which has caused share prices in both companies to plummet.
Zoë Wort, a junior director at Barnard Incorporated Attorneys, said the repercussions of non-compliance were so few and far between.
Wort said people involved had to be held accountable.
Wort said the majority of entities practice good corporate governance as good corporate governance keeps one out of the news and prevents reputational damage.
“However, there will always be instances of impropriety, such as what was alleged to have occurred at EOH and Steinhoff, where one could conclude that there was bad corporate governance and/or a lack thereof entirely at some or other level,” she said.
Peter Takaendesa, the head of equities at Mergence Investment Managers, said investors and other innocent stakeholders suffered huge losses over the past few years due to these EOH governance failings.
“The new EOH management are therefore on the right path in their attempts to recover some of the losses and repair the company’s reputation. Let the law take its course where there is evidence of wrongdoing. We believe the market is correctly not expecting any loss recovery near the magnitude of the stated over R6bn in claims, if anything at all, given cases of this nature are complicated and could take a very long time to conclude,” Takaendesa said.
Andrew Bahlmann, chief executive: corporate advisory at Deal Leaders International (DLI), said in the mergers and acquisitions (M&A) market, poor governance was one of the main reasons the group backed away from deals.
Bahlmann said conservatism in valuations lied at the heart of a successful deal, hence the importance of due diligence.
“The issue of corporate governance is really a question relating to the audit. Many people holding strategic positions in a listed company see the primary purpose of an external audit as being to detect fraud and corruption in their (the client’s) business. This may lead them to let their guard down because this is in fact not the case,” Bahlmann said.
sandile.mchunu@inl.co.za
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