Subscribe

PIC has mixed feelings on new MTN CEO

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 24 Jun 2016
Following the appointment of Rob Shuter, the PIC says it "would have preferred a black CEO" for MTN.
Following the appointment of Rob Shuter, the PIC says it "would have preferred a black CEO" for MTN.

The Public Investment Corporation (PIC) has mixed feelings about MTN's appointment of Rob Shuter as group CEO and president.

The major MTN shareholder told ITWeb it "would have preferred a black CEO" but also expects Shuter's appointment to "strengthen risk management and governance at MTN".

The Black Management Forum (BMF) this week came out strongly against Shuter's appointment, calling it "a serious blow to transformation".

BMF president Mncane Mthunzi said MTN had squandered a good opportunity to reaffirm its commitment to transformation because it had previously "demonstrated exemplary leadership by successively having black CEOs".

The BMF said the MTN decision shows transformation is not a business imperative, "which is disappointing", and that MTN's choice is contributing to the steady decline in the number of black South Africans at the leadership helm in companies.

The BMF statement was followed by conflicting media reports, with some saying the PIC was unhappy with Shuter's appointment and others claiming the shareholder had given him the nod.

The PIC told ITWeb it has noted the BMF's statement on the matter and "shares the sentiment expressed".

This after the forum said it planned to engage with the PIC and other shareholders "on their expected role and moral obligation for the appointment of black CEOs and executives in general".

The PIC declined to comment on whether it had been consulted on Shuter's appointment before it was made. The group is MTN's biggest shareholder, owning a 16.57% stake in the business through an investment for the Government Employees Pension Fund.

Despite the PIC preferring a black CEO for MTN, it says it is important to emphasise the appointment of senior management of companies is the prerogative of the board of directors "who are expected to act in the best interests of the company and shareholders".

"Whilst the PIC remains the biggest shareholder in MTN, it equally respects the authority of the board where it concerns senior appointments."

The PIC also seems to have no problems with Shuter's leadership experience.

"Having noted the appointment of Mr Shuter as well as other appointments, the PIC expects these to strengthen risk management and governance at MTN and to assist the organisation in achieving its strategic objectives and increasing shareholder value," it told ITWeb in a statement.

Executive disruption

Shuter is filling the vacuum left when previous CEO Sifiso Dabengwa resigned as CEO in early November 2015. Shuter, however, still has contractual obligations at Vodafone, where he is CEO of the telco's European cluster, and will only take up his role as MTN CEO sometime next year.

Dabengwa resigned two weeks after the company announced it faced a $5.2 billion (R78 billion) fine from the Nigerian Communication Commission for failing to disconnect 5.1 million unregistered SIM cards in the country. The penalty was later reduced to $3.9 billion (R59 billion), and on 10 June, after months of negotiations, MTN agreed to pay $1.671 billion (R25 billion) to the federal government of Nigeria over three years to settle the fine.

After Dabengwa's resignation, the PIC also came out with a strong statement saying his exit was "the noble thing to do in the current circumstances" but it believed "a lot more people need to take collective responsibility for the fine".

"There still remain questions as to the role of the board of directors, which is charged with exercising fiduciary responsibilities for the benefit of shareholders. In particular, we question the role of the risk and compliance function within MTN," the PIC said at the time.

In Dabengwa's absence, former CEO and non-executive chairman Phuthuma Nhleko took over as executive chairman to lead the company until it found a successor. He led the negotiations on the MTN fine and also played a major role in choosing the next CEO.

The BMF said it is "disheartening" the decision to not appoint a black leader was made by a board of directors "with the majority of black people and under black chairmanship".

When MTN announced Shuter's appointment, it said he would bring experience and new insights to the CEO role, having had many years in the telecoms sector both in Africa and Europe "as well as in banking, where his expertise will help as MTN continues to develop its new business strategy".

Shuter has been CEO of Vodafone Netherlands since April 2012, and in October 2015, his role was expanded to include the other European countries, excluding the four large European markets: UK, Italy, Spain and Germany. The South African started his career as an accountant with Deloitte in Johannesburg before working in key roles at both Standard Bank and Nedbank. He later joined Vodacom as financial director.

Share