Of all the reasons for Pick n Pay’s existential challenges, few analysts would have tagged lack of involvement by the Ackerman family as one.
Most would reckon there’d been far too much family interference and not enough independence from that grip. And yet, according to a recent News24 report, Gareth Ackerman believes part of the reason the once-dominant grocery retailer lost its way was because the family did not play a more active role in questioning the direction and operational performance of the group. And, horror of horrors, he says in future the family is set to play a far more active role in questioning the direction of the group.
That news probably won’t go down too well with shareholders who’ve stuck with the group through thick and thin; the shareholders who were hoping the reappointment of Sean Summers marked a new management era and the possibility of the group reclaiming some of its former glory. The carefully selected investors invited to participate in the Boxer listing might also have concerns.
By and large Pick n Pay’s shareholders have been a fairly tolerant bunch. For more than two decades they’ve put up with disappointing results followed by promises of improvement followed by disappointing results. In 2016, rumblings of anger finally percolated into the public arena with activist shareholders demanding that the Ackerman family release its rigid hold on control. They claimed the family was stifling management, who seemed increasingly incapable of fighting off competitors. The noisy activists demanded, at the very least, the unwinding of the pyramid through which the family had exerted control. They won, sort of. Pickwick was removed but, in compensation, the family was issued Pick n Pay Stores B shares, which ensured they retained a controlling 52.8% vote.
That was 2016. The same year that Gareth Ackerman received an unprecedented R3.9m for his supposedly non-executive role as chair. In anticipation of shareholder criticism, the board explained that the remuneration committee had considered the active role he played in the group’s corporate governance “and in formulating overarching strategies for individual companies within the group”.
It wasn’t just Gareth Ackerman. In addition to Raymond and Wendy Ackerman’s positions as honorary life presidents, three other family members were on the board. Far from too little involvement, the problem was surely too much.
No doubt, Pick n Pay would not exist without the Ackermans. Raymond and Wendy Ackerman were retail geniuses and were the driving force behind the hugely successful group, until they weren’t, and it wasn’t. A more independent board might have been able to ensure a smooth transition back in 1999 when Summers was first appointed CEO, replacing Raymond Ackerman. Much as Shoprite’s board enabled Pieter Engelbrecht to thrive after Whitey Basson’s departure.
The board’s lack of independence was arguably the single greatest factor behind the group’s demise. It’s not that the board wasn’t populated with skilled and experienced individuals, but too many of them had long-standing ties with the company and the Ackerman family, the sort of ties that encourage deference and discourage the robust engagement needed to correct poor decisions.
Consider that as recently as 2022 Hugh Herman was still being described as an independent non-executive director. Not only was he classified independent, he was the board’s lead independent director, a designation deemed necessary because the chair was Gareth Ackerman. This, despite the fact Herman had been on the Pick n Pay board since 1976 and was MD of the group from 1986 to 1993.
Another “independent” non-executive director was Bakar Jakoet who had been with the group for 36 years. Jeff van Rooyen was a comparative newbie with just 15 years of service.
There’s no doubt these are highly skilled individuals but it’s a bit of a stretch to believe they were vigorously independent. Recall, it was only after intense pressure from shareholder activists that the board agreed to unwind the outdated pyramid structure.
Nampak is another good example of why independence is the crucial director attribute. Only since A2 Investment Partners injected a hefty dollop of independence into that board have things started to look up. Decades of skilled and experienced directors were unable to right this listing ship.
Robust independence
Earlier this year Coronation Fund Managers’ Neville Chester and Karl Leinberger wrote a compelling article about the importance of having commercially experienced and skilled directors on boards and warned about reducing the “crucial role of corporate governance to a by-rote box-ticking exercise”. They also cautioned against an “obsessive pursuit of independence” believing it came at the expense of skills and deep knowledge.
Of course, an obsessive pursuit of anything is to be avoided. Except perhaps when it comes to the independence of board directors. Indeed, it’s rather strange that Coronation is not hypersensitive to director independence. After all, the lack of an independent board was probably the key factor in most of the smash-ups that have roiled the JSE in the past 20 years, and Coronation was a significant shareholder in some of the biggest of those disasters.
Robustly independent directors might have saved African Bank from Leon Kirkinis’s gargantuan self-belief. His unrestrained certainty was the primary reason behind the bank’s implosion in 2014 and the destruction of billions of rands of shareholder value.
And few people would argue that Steinhoff’s board was not stuffed to the gills with skilled and experienced directors. Christo Wiese, Len Konar, Johan van Zyl, Steve Booysen, Theunie Lategan and, until May 2016, Jannie Mouton. The list is a veritable who’s who of South African corporate life. It’s possible too much socialising blunted their willingness to rein in the errant Steinhoff CEO.
Similarly, the skilled Tongaat Hulett directors seemed unable or unwilling to exercise the sort of robust independence that would have saved the sugar group from its plunge into the abyss.
Strangely, in support of their argument for skilled and experienced directors, Chester and Leinberger’s report makes much of the troubled situation at Spar and recounts their role in getting the very skilled and experienced Mike Bosman to take over as chair in early 2023. However, they make no reference to the lack of director independence that had created the problems Bosman had been brought in to deal with.
Of course, being independent doesn’t mean you don’t need to have skills and experience – these are generously paying gigs, so skills and experience should be assumed. The real challenge is assuring the independence is robust, but not so robust it fatally threatens the collegiality needed for a functioning board.
