Broad Strokes by Michael Coulson – coulsonmh@gmail.com
Clogs to clogs in three generations is an old North Country saying.
The saying’s not always true – the Rothschilds and Rockefellers, to name just two, have lasted rather more than that – but does epitomise the difficulty of ensuring continuing competent management in a family-controlled business.
The Oppenheimers produced three generations but not four. Others have been less fortunate. In any such dynasty, there is a real problem when the fortunes of not just the founding family but outside investors and other stakeholders are put at risk.
This is certainly the case at two of our prominent family-controlled public companies, the Ackermans’ Pick n Pay and the Venters’ Altron/Altech. In both, the problem starts with structures designed to serve family interests: pyramidal at Pick n Pay , and a second listing for the Venters that, if one wanted to be unkind, one could suggest has little function except to give both the founder’s sons CEO status.
At Pick n Pay , it’s ironic that Gareth Ackerman, who decided not to go into top management when times were good, is now executive chairman pro tem, pending the arrival of the latest outsider to take up the CEO challenge: Richard Brasher. One can only wish him luck, though I note wryly that Tesco, his former employer, has underperformed in the UK market in recent years.
When clashes with Craig Venter led to [Hedberg] quitting only months later, many felt the wrong person left
At least the Ackermans have shown they can work with outsiders. Analysts and investors had great hopes when the highly regarded Jeffrey Hedberg joined Altech as COO. When clashes with Craig Venter led to him quitting only months later, many felt the wrong person left.
Fact is, family influence has led to major strategic errors at both companies in recent years. At Pick n Pay, failure to keep pace with industry trends. At Altech, I can vividly remember Craig evangelically promising us that east Africa would be half the business within three years, in the face of widespread scepticism. Well, hundreds of millions of rands later the sceptics have been proved right, and it’s hard to believe that some of the reasons the company now adduces for failure couldn’t have been identified as risks, had a more critical approach been taken at the outset.
Now Altech has appointed another COO whose past experience has been in civil engineering, risk management and the motor trade. Is this what the group needs, and will he have more success than Hedberg in fighting his corner? Investors will certainly hope so.
No, of course there’s no crisis
The chairperson, CEO, other top execs and most of the board quit; there’s an annual loss of more than R1bn; and despite having been around for almost 80 years, the company is chronically undercapitalised and needs a R5bn capital injection – which is unlikely to be the last. But crisis? No, SAA is not in crisis, avows Public Enterprises Minister Malusi Gigaba.
One wonders just what more has to happen before the word crisis would be appropriate. A Boeing running into Table Mountain in the fog, perhaps? No, that would only be a minor operational issue. Mind you, Gigaba apparently has some strange ideas. He’s been reported in the press (I hope correctly) as saying that SAA “contributes R1,3bn to the economy”; and that it can’t be privatised because when Swissair was privatised it went bust. I can’t imagine what that R1,3bn means. In any event, it’s so close to the annual loss – which is a cost to the economy and paid directly by you and me, as taxpayers – that if we attach some meaning to it and factor it against the loss, that “contribution” is virtually wiped out.
And as far as Swissair (for years my favourite airline) is concerned, privatisation was not the primary cause of its bankruptcy, whose burden in any event fell mainly on the providers of capital rather than the taxpayer. And even though its reborn form of Swiss International is little more than brand engineering by Lufthansa, it remains an above-average carrier. broad StrokES Michael Coulson coulsonmh@gmail.com
IM | October 31 – November 20 2012
Investor’s Monthly is a Free Insert in Business Day. It is published on the last Wednesday of every month.
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