Investors remain on edge over the mystery suspension of Nombasa Tsengwa, the first Black woman CEO of coal miner Exxaro, over unspecified “conduct issues”.
Tsengwa was placed on “precautionary suspension” last week, while law firm ENS conducts an investigation into an anonymous whistleblower complaint. Geoffrey Qhena, chair of the company, says only that this related to “workplace conduct and governance practice”.
Those close to the investigation tell Currency that these “conduct issues” largely stem from Tsengwa’s abrasive management style, which had led nine executives to resign in recent months.
But what raises eyebrows is that Exxaro’s board had in June received a similar whistleblower complaint around Tsengwa’s conduct. In that case, however, the board investigated it and concluded there was not enough evidence to take it any further.
At the time, Qhena defended Tsengwa to Business Times – which first reported on the disquiet about her “horrifying” management style – saying that “no executive has come to me at least, or the board, to say there is a culture of fear”.
But a few weeks later, she had been suspended. So what changed?
“There was an investigation in mid-year, which came to a conclusion. But what happened is, new information came to light where other issues were raised, and this was coupled with a whistleblowing complaint,” Qhena tells Currency. “What we’re dealing with now is a new and different investigation.”
While there has been no timeline given for when ENS expects to have completed this investigation, Qhena says neither the board, nor Exxaro, can afford for this to be dragged out indefinitely.
“This is a listed company, and shareholders are equally anxious that this be resolved. We don’t want it to take months; we hope to get to the bottom of it as quickly as possible.”
Tsengwa seems to be of the same view. Those close to her tell Currency that she “expects to be back at work soon”.
The problem with assessing the case is that none of the investors or public knows what this “new information” actually is. As with the complaint in June, this was anonymous, and it hinges on the same unspecified “conduct” issues.
Qhena describes it as “serious”, even though Exxaro has been clear to say this does not involve any fraud or unethical behaviour.
“It is very unusual to suspend a CEO,” one insider tells Currency. “Normally, they’re given the option to resign, but my understanding is Nombasa is standing her ground.”
One person sympathetic to Tsengwa tells Currency that her suspension related only to her taking a hard line against executives, leading to the wave of resignations.
“It doesn’t seem to be that much more than accusations that she is a bully. And if that’s all it is, it’s strange, since surely all CEOs can be bullies from time to time,” he says.
Root canal
Investors are rattled by the black hole of information about the CEO’s suspension, not least because this comes as the company is finalising its year-end results.
In a research note from SBG Securities last week, analysts described Tsengwa’s suspension as “the elephant in the room” during Exxaro’s recent discussion with investors. “Little insight into this concerning situation was offered to investors,” the report said.
Remarkably, Exxaro’s shares did not dive as you’d normally expect of a company after its CEO is suspended: its share price is now R171.64, marginally above the R171.40 on the day before Tsengwa was suspended.
Peter Major, a veteran analyst and director of mining at Modern Corporate Solutions, says there’s so much wrong with Exxaro, of which the standoff with the CEO is just one part.
“I haven’t seen anything big being stuck on her. Sure, many people have resigned from the company, but you know, people resigned from Apple and Microsoft due to Steve Jobs and Bill Gates, so it’s hard to say exactly what the wrongdoing was here,” he says.
Major says the deeper problem is that the company has gone nowhere since it was formed in 2007, which is why its shares have traded at a discount of more than 50% to its peers over the past five years. (Exxaro’s price-earnings ratio is 4.6, far below the likes of Anglo American’s 21.4, for instance).
He says the wider market senses that Exxaro’s senior management and board are way out of their depth, having destroyed value over the past 17 years.
“Exxaro has no vision, and the people who work there know it. Critics and ex-employees have said that being there is like having root canal without the anaesthetic – good pay and work not bad, but a depressing, dysfunctional environment [lacking] enthusiasm or creativity.”
What this boardroom debacle has shown is that it’s certainly deeply factionalised.
One employee, who spoke to Currency on condition of anonymity, says Tsengwa took over at a time when the company needed to reprioritise growth – and made enemies of various people who had become too comfortable.
“If your focus is on driving implementation and achieving results aggressively, not everyone will align with that. Exxaro has been in a growth drought for years despite lots of talk and plans. A change in pace was needed,” he says.
What lit the fuse, it seems, was Tsengwa’s suspension of Kgabi Masia, Exxaro’s head of coal, while he was on a work trip in Switzerland. This now means Qhena’s board has two headaches: an investigation into Tsengwa to resolve, and one into Masia.
The stakes are high, though, not least because Tsengwa also happens to be the president of the Minerals Council South Africa, the association that represents the large mining houses. She has stepped back from her duties at the council, however, until the probe is finished.
Paul Dunne, the CEO of Northam, tells Currency that he will be the “caretaker president of the Minerals Council in the interim”. But, he adds: “My hope is that this doesn’t take too long to resolve.”
The reality, however, is that few CEOs who are suspended by the board make it back into the corner suite. The most recent high-profile example was Old Mutual’s suspension of Peter Moyo, which led to a bitter and expensive legal battle, which Moyo ultimately lost.
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