Tiger slaps its own wrist

What is the price of silence? In the case of three senior executives at Tiger Brands who remained silent after they knew about collusion in subsidiary Adcock Ingram since 2002, we are talking about more than R42-million in share option profits.

Late last week Tiger Brands announced that an independent investigation by law firm Edward Nathan Sonnenberg into the collusion at Adcock Ingram found that two former executive directors and the company secretary had known about the collusion since 2002 and had not taken action or raised the issue with the board.

New competition legislation that will soon be promulgated will criminalise such acts by senior executives, who will face 10-year jail terms or hefty fines for similar behaviour.

Tiger announced it had stripped former executive directors Haydn Franklin and Mike Norris of 65 000 unvested shares each and that it had given company secretary Ian Isdale a final written warning and stripped him of his bonus for 2008 and 11 500 shares that were awarded to him in April this year.

But look at the share options awarded to Isdale, Norris and Franklin between 2002, when they were first notified of the collusion in subsidiary Adcock Ingram, and 2008, when the Competition Commission referred the case to the Competition Tribunal, and it is clear that the punishment meted out is a slap on the wrist.

Norris’s and Franklin’s combined 130 000 unvested shares in Tiger are worth R18-million and their 130 000 shares in Adcock Ingram, which they would have received when Tiger unbundled Adcock Ingram, are worth R4,3-million, using Wednesday’s opening share prices.

When Tiger unbundled Adcock Ingram all Tiger Shareholders received one Adcock share for every Tiger share they owned and so all directors received an Adcock share option for every Tiger share option.

So while Norris and Franklin may be losing out on R22,3-million in share options, they did manage to cash in R57,8-million in share options together between 2002 and 2007.

These transactions netted Franklin a personal profit of R19-million and Norris a personal profit of R15,1-million—tidy sums for just keeping quiet.

Isdale seems to be getting off even lighter than Franklin and Norris, because he has had only his 2008 share options stripped from him, not all his unvested shares.

Isdale was awarded 66 200 Tiger Brands shares between February 3 2003 and January 22 2008. Of these 37 900 are currently vested, which means he can sell them, and 28 300 are unvested.

The vested shares are worth R6,5-million using Wednesday’s opening share price for Tiger Brands and Adcock Ingram, while the unvested shares are worth R4,9-million.

It is unclear if Isdale has exercised any of these shares, as Tiger does not have to declare these transactions in its annual report, because Isdale is not a director.

However, if we assume that Isdale has exercised all the 37 900 vested shares, he would have walked away with a personal profit of R3-million.

Similarly Isdale’s vested shares if sold at Wednesday’s opening share price for Adcock Ingram and Tiger Brands would net him a profit of R4,7-million.

So Isdale remains on as Tiger’s company secretary and can collect more than R7-million in personal profits for keeping the collusion to himself, and his only punishment is being stripped of less than R2-million in share options, his 2008 bonus and the final written warning he has on his record.

Tiger’s new chief executive Peter Matlare defended the level of sanction brought against Isdale in an interview with the Mail & Guardian, stating that former judge John Myburgh had been presented with all the facts and asked to make a decision about what sanction was appropriate.

“We went and got an independent individual to look at his case,” said Matlare. “It’s not the board, this is not an old boys’ club or chums on the executive.”

Matlare said that Myburgh had recommended a final written warning and the Tiger board had decided also to strip Isdale of his 2008 bonus and share options.

“They cost him a substantial amount of money,” said Matlare.

When the M&G put it to Matlare that Isdale was getting off lightly he said, “If he had said Isdale needs to be dismissed immediately, we wouldn’t have said ‘come on John, what’s wrong with you, he’s a wonderful fellow.
I think we have been correct and ethical and we have dealt with issues in a transparent way.”

However, shareholder activist Theo Botha said that Tiger is not being transparent, because it is refusing to release the Edward Nathan Sonnenberg report and is not explaining why Isdale has been punished less harshly than Norris and Franklin.

“They released the first Edward Nathan Sonnenberg report into the bread collusion case, so why not the second report?” said Botha.

“The Adcock Ingram matter is fully put to bed as far as we are concerned,” said Matlare. “We’d like to think that bad chapter in Tiger’s history is over.

“We have to gain the confidence of the public again in how we conduct ourselves as corporate citizens,” he said.

Isdale refused to comment when contacted by the M&G, stating that Matlare had said everything that needed to be said.

Lloyd Gedye

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