The smartest guys and gals in the room?
If only . . . I am afraid that the guys and gals are anything but smart. For one, they have to be in the room. But before I talk about ‘they’, let me just explain the old business adage, to ‘be in the room’. To ‘be in the room’, they needed to, at the very least, concentrate and focus on what they were doing, namely to protect shareholders’ interests – not their own interests. But then again, this is South Africa. It is not as if they were doing it for free. They were handsomely rewarded. I am afraid that, in South Africa, it is all about self-interest, the I above all else.
Returning to the smartest guys in the room . . . if it is your desire to be the smartest guy in the room, I have a word of caution: if you are the smartest guy in the room, you are in the wrong room. The smartest guy in the room is said to be incapable of learning.
Major events happened in December 2017. As you read this piece, I expect that, with more than a month having passed, very little, if anything of significance, would have happened to the smartest guys in the room. The wheels of justice in South Africa turn very slowly, if at all.
The events that took place in December resulted in South Africa becoming even weaker. This time, it was the private sector that contributed to the weakness. In one week, Steinhoff lost 90% of its value, while EOH lost 30% and Naspers was struggling to explain and justify its behaviour, resulting in South Africa featuring on the cover of The Economist under the headline ‘The corruption of South Africa’. The press was quick to pick up on the contribution of the Stellenbosch se boys, which is reminiscent of the Afrikaans song, Bobbejaan klim die berg (which crudely translates as ‘Baboons climb the mountain’): “O moenie huil nie, o moenie treur nie, die Stellenbos se boys kom weer” (Oh, do not cry, oh do not mourn, the Stellenbosch boys, come back). Oh yes.
The Steinhoff disaster is already being referred to as South Africa’s very own Enron, which, at the time, was America’s biggest corporate disaster. If you wish to read only one business book or view a single documentary, let it be Enron: The Smartest Guys in the Room. In Enron’s instance, as I recall, only one person on its board did not go to jail. It would be interesting to see the censure, if any, that would be meted out to members of the Steinhoff board.
It is mind-boggling that fraud on such a scale could be perpetrated in a company which has 13 board members, six of whom are chartered accountants (who proudly display the CA(SA) designation). Collectively, the board members have 35 university degrees. The Steinhoff board is teeming with people who once led South Africa’s best-known companies, with one member having served on the King Committee on Corporate Governance. Add to this the fact that Steinhoff’s external auditors in recent years were, and continue to be, the top two of the big four accounting firms. Seemingly, they both missed what was happening at Steinhoff. At the time of writing, Steinhoff’s CEO had resigned, but the CFO remained in his position.
But, if the smartest guys were not in the room, what about those outside – the fund managers, the supposed counterbalance? These are the people who should have done their homework before convincing unsuspecting investors to invest in Steinhoff. What does the Steinhoff disaster say about South Africa’s fund managers? How easy is it to deceive them? Were they so impressed by the stature of the Steinhoff board members that the mere sight of the board members convinced them to invest?
What will happen to the smartest guys in the room? Other than possibly having their egos bruised, I am afraid that nothing will happen to them. They have made their money, and it is well protected. It is said that, in business, you should never use your own money.
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