The chairman of listed telecoms firm Huge Group should step down after putting the company's reputation at risk, says a shareholder activist.
Yesterday, the JSE took an unprecedented step and fined chairman Anton Potgieter and CEO James Herbst R5 million each.
The directors were censured for not following the bourse's rules after buying future shares in Huge worth R8 million, which were then sold back to the company. However, minority shareholders were not informed of the deal, and had no say in the matter.
As a result, the Johannesburg-based bourse found that the directors had contravened its rules around related-party transactions, and fined the two men in their personal capacity.
A damaged name
Shareholder activist Theo Botha says the company's reputation has been damaged. He doubts whether it can get back on track if it keeps the same people at board level.
Botha says Potgieter should be replaced by an independent chairman, who should conduct a full investigation into the company, including a forensic audit.
However, Huge has come out in support of its directors. In a statement released after the bourse announced the fines, it said: “The Huge Group board of directors has stated that Potgieter and Herbst will have the full support of the board should they decide to appeal against the penalties.”
Huge bought the 12.3 million shares between July and October last year, at an average price of 360c each. Since then, the company's shares have slid dramatically, and were unchanged at 33c in mid-morning trade, close to the company's 52-week low on Wednesday of 30c.
To protect and serve
Botha adds that the directors have a duty to protect shareholders, especially when the directors hold a substantial portion of the company's shares.
Potgieter has a 6.41% stake of Huge through an entity called Luigi's Trust, according to the company's latest annual report. Botha says this goes against good governance practices, as chairmen cannot have the company's other shareholders' interests at heart if they also hold a significant stake.
According to Huge's annual report, its other major shareholders include Mojaho Trading, which has the biggest stake in the company at 11.3%. Mojaho is Huge's empowerment partner, and is made up of Huge management. It is headed by Huge director Vincent Mokholo.
The Walkie Talkie Trust owns 6.28% of Huge's shares. The company's pre-listing statement indicates the trust is held by Carol Frankel and John Hare. Hare was Huge Telecom's chairman at the time that the empowerment deal was inked.
Huge has breathed a sigh of relief that it was not fined as an entity, and that it won't face any costs if Herbst and Potgieter fight the fine.
The company now wants to put the issue behind it - and get on with business.
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