Telkom CFO defends loan procedure, says superiors signed off
The granting of a R6-million loan to the now suspended Telkom executive was supported by both the chairperson and head of its remuneration committee.
Telkom’s chief financial officer, Jacques Schindehutte, said he received the appropriate signoff from his superiors when procuring an interest-free loan, rejecting the company's assertion that he authorised it himself.
Telkom chief executive Sipho Maseko and human resources officials approved the R6-million loan, which was used to buy company stock, Schindehutte said in an interview last week.
The executive has been told by Telkom, Africa's biggest fixed-line phone company, to repay it. Schindehutte has been suspended from his position because of an unrelated matter, according to Telkom.
Telkom on January 14 said the loan breached corporate governance regulations and that Schindehutte oversaw the provision of the loan to himself. Email correspondence among directors, obtained by Bloomberg News and confirmed by Schindehutte, show that both the company's chairman and head of its remuneration committee supported the granting of the loan.
Chief executive Maseko sought to take a similar loan himself, though ultimately didn't, the emails show. Telkom officials declined to comment on the content of the correspondence.
The spat over the loan is a distraction for a company trying to stem a four-year streak of sliding revenue.
Maseko, a former Vodacom SA executive who joined Telkom last April, is cutting costs at the carrier's struggling mobile unit and trying to boost revenue from data. Telkom is 40% held by the South African government and employs about 21 000 people, according to data compiled by Bloomberg.
"It would be unheard of to suggest that I had any influence in granting my loan because the decision was there for HR and the group chief executive to make," Schindehutte said. "I've acted totally appropriately with regard to this loan and I followed the normal process, which includes seeking the authority of my superior manager."
Schindehutte emailed Maseko, Chairman Jabu Mabuza and Santie Botha, the head of the remuneration committee, on September 27 asking to take out a loan from the Pretoria-based company, according to the email exchanges.
Using the loan to buy company shares would deliver a "huge show of confidence" to the market, he said in an email. Mabuza and Botha both replied the same day saying they supported the transaction, the correspondence shows.
"I also want to follow up on this and follow Jacques," Maseko said in a reply to Mabuza and Botha after receiving Schindehutte’s proposal. "Want to be able to consummate the transaction on Monday," Maseko said.
Maseko was unable to buy the stock, the chief executive said in a separate email on October 1. "My broker did not execute on the transaction—I would not want to push it now given the rules," Maseko said in the email addressed to Schindehutte and other company officials. "I’m miffed but rather safe than sorry."
Telkom on Monday declined to comment on the communication, citing confidentiality related to a hearing into the CFO’s conduct. Botha and Mabuza didn't return calls to their offices.
Schindehutte personally oversaw the advancement of the payment of the loan amount to himself, Telkom said in its January 14 statement. He had "oversight responsibility" for corporate governance, including regulatory and administrative processes relating to loans to Telkom directors, it said.
The CFO was suspended in October following the outcome of an investigation into unspecified allegations of misconduct. He remains a Telkom employee. A disciplinary hearing into the matter started January 16, according to the company.
"Telkom will not be responding to media queries involving Mr Schindehutte for the duration of the hearing to ensure that such comments do not have an impact on the process," the company said in an emailed response to questions. Telkom "is committed to uphold all requirements of corporate governance to allow the hearing to be conducted in a fair manner."
Schindehutte bought 243 700 Telkom shares for R5.96-million, or R24.45 each, on September 30, the company said in an October 2 statement. The stock was little changed at R31.50, or 29% higher than what Schindehutte paid, as of 9.07am in Johannesburg, amounting to a potential profit for the director of about R1.73-million. – Bloomberg