Kudos for concrete steps to repair PPC

IN the sorry mess that is the PPC boardroom brouhaha, only two players emerge with their reputations enhanced — Foord Asset Management and Visio. There are also, of course, the thousands of workers in the group who are getting on with their jobs and trying not to be too distracted by the battle between the grown-ups in the boardroom.

On that point, it would be interesting to see for how long PPC could continue to operate without a properly functioning board.

If Ketso Gordhan is right, it’s been some time since the cement manufacturer had an effective board.

Until recently it enjoyed the tremendous comfort of operating in a cartel in which everyone knew his place and into which few imports were allowed.

So big decisions about multibillion-rand plant expansions would have been rare; aggressive plans about growing into new markets would not even have been considered.

But things have changed. The cosy cartel has been broken up, cheap imports are leaking into the market and PPC has undertaken an ambitious international expansion programme. The company now needs an engaged board.

No doubt this is precisely why Foord has taken the unprecedented step of garnering 10% of the group’s shares and requesting a shareholders’ meeting. Thanks to Foord’s action, which amazingly has not been greeted with universal enthusiasm, all PPC shareholders will have a chance to rectify the situation by voting for a new board.

Foord has made it clear that it is not taking sides; the fact that Gordhan’s name is on the list of nominees suggested by Foord is not an endorsement of the former CEO resuming his position. Only a newly constituted board can make that decision. Gordhan is far from being a shoo-in.

The really disturbing aspect of the PPC battle is the fact that only Foord, Visio and the Public Investment Corporation have expressed any opinion on the conflict and seem prepared to do anything to resolve it. All of the other institutional share- holders have shuffled around and looked the other way, seemingly petrified they might be caught up in something as ungainly as a boardroom battle in a public arena.

It appears the majority of institutional fund managers, who are remarkably sophisticated and well resourced, are not equipped to deal with the situation.

Their strategic choices are entirely passive. If they have not yet sold their PPC shares, they might piggyback Foord’s active engagement and vote at the shareholders’ meeting.

This highlights one of the huge flaws in 21st-century shareholder capitalism. Real shareholders aren’t actually in control of the capital. The millions of employees and investors whose retirement money is being managed by herds of fund managers are the real shareholders in PPC.

But between them and their investment are a legion of rentseeking middlemen who have little incentive to ensure that PPC flourishes rather than flounders. PPC is just another one of their holdings; if trouble is brewing, it can be dumped in favour of something less troublesome.

Why incur the costs and potential backlash, as Foord has, of behaving as a committed owner? These middlemen have the effect of wiping out any notion of accountability. If nobody but Foord is holding them to account, then to whom should the PPC board be accountable?

The board members must have worked out by now that the bulk of the fund managers who hold the company’s shares are effectively “missing in action”. They barely attend AGMs, tending to give their votes to the chairman to do with them as he will.

No wonder the feral PPC board smacked Foord when it initially attempted to exercise its accountability obligations.