The events at Eskom since November 11 2016, when then-Eskom CEO Brian Molefe’s departure was announced, including the purported R30 million early retirement and subsequent reinstatement, constitute “a breathtaking level of unsound governance both in a corporate and a personal sense,” says Ratings Afrika corporate governance expert Charl Kocks.
Kocks has evaluated the conduct of Eskom’s leadership as described in the affidavits by public enterprises minister Lynne Brown, Eskom chair Ben Ngubane and Molefe in response to the application by the Democratic Alliance to have Molefe’s reinstatement reviewed and set aside. He says Ratings Afrika does not comment on the merits of the matter, but on the extent to which actions or inactions constitute sound governance.
He says governance is sound if it takes into account all stakeholder interests and then results in actions or inactions that are fair.
For this purpose, he assumes the versions are correct and the documentation submitted true and complete.
Kocks says it is clear from the affidavits that the Eskom board of directors were under the wrong impression that they could amend the rules of the Eskom Pension and Provident Fund (EPPF) without involvement of the EPPF board of trustees. They did this to benefit individuals who are appointed on five-year contracts and thus would not otherwise gain from a clause that allows for early retirement from the age of 50 because they would not meet the ten-year rule of tenure.
He questions the fact that the Eskom board seemingly did not find the basic concept of ‘early retirement’ within a fixed-term contract of five years “to be illogical or even worse”.
The board and Eskom’s People and Governance committee further found it acceptable to amend pension fund rules to benefit persons such as Molefe financially “in a manner unrelated to reasonable compensation for services rendered,” he points out.
“In addition, the manner wherein they proposed to do so would provide income tax benefits to the recipient that are arguably inappropriate.”
Kocks says that when a pension fund is used in this manner and the trustees of that fund are effectively ignored in the process of favouring a specific employee or class of employees in an unbalanced way, the function and independence of the pension fund is being corrupted. “We use the word ‘corrupted’ in the sense of abusing the intended purpose and due process,” he explains.
Molefe did not act in the interest of Eskom, but very much in his own interest when he announced on November 11, 2016 that “I go now, because it is in the interests of Eskom and of the public it serves, that I do so,” but delayed his actual departure to January 1, 2017.
Molefe in his affidavit states that he turned 50 on December 28, 2016. Kocks says Molefe mistakenly believed at the time that “very substantial financial benefits” would accrue to him if he were to take “early retirement” at that age, rather than to resign in November.
“This decision alone was most certainly not in the interests of Eskom, but very much in his own interest,” Kocks says.
All in all, he says the events from November 11, 2016 until May 22, 2017 “ in our view constitute a breathtaking level of unsound governance both in a corporate and a personal sense.
“We cannot commend such actions under any circumstances.”
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