4 June 2020 by Dispute Resolution Alert

Crash landing: The rise and fall of Dudu Myeni

In a judgment delivered by the North Gauteng High Court last week, former non-executive chairperson of SAA, Dudu Myeni, was declared to be a delinquent director.

Myeni, and certain board members who supported her decisions, frustrated and sabotaged a number of important well motivated transactional initiatives developed by the executives of SAA to try to turn its fortunes around. What remains unexplained is why Myeni and her fellow board members behaved in this way with disastrous consequences for the airline. Myeni either refused to give explanations or gave evidence which the court found to be evasive, contradictory, unreliable and dishonest. She alleged - in the case of an abortive transaction with Emirates - that she was following instructions by former President Jacob Zuma. But the court found that even if this was true, it did not excuse her own conduct. The citizens of South Africa, who have paid the price of her failures, remain none the wiser as to her motivations. Criminal investigation has been recommended. It remains to be seen if this will provide the explanation as to whether she was simply enormously and arrogantly incompetent, or whether there were more sinister reasons behind her behavior.

From a legal technical point of view, Myeni’s conduct ticked all the boxes for a finding of delinquency.

In terms of section 162 of the Companies Act, Directors will be found delinquent if they “acted in a manner that amounted to gross negligence, willful misconduct or breach of trust in relation to the performance of the directors functions within, and duties to, the company” as contemplated in sections of the dealing with directors’ fiduciary duties. Such duties were, in the case of SAA, enhanced by the requirements of section 50 of the Public Finance Management Act (PFMA) which requires directors of public entities to “act with fidelity, honesty, integrity and in the best interests of the public entity”.

The scope of this alert is too short to permit a detailed description of the facts. Certain remarks made by the court speak for themselves. Ms Myeni’s “belated attempts to justify her misconduct show that she acted dishonestly, in bad faith and not in the best interests of SAA or the country”. She was warned by then Minister of Finance, Nhlanhla Nene, that she and the Board were failing in their fiduciary duties but simply paid no heed to this advice. She interfered with executive decision-making or went behind the back of executives in dealing with third parties. She acted without Board authority. She acted with “deliberate dishonesty and a gross abuse of power” as contemplated by section 162. She was “reckless” in ignoring advice and recommendations.

As the court pointed out, a Minister can only “exercise effective oversight over major transactions” for SOE’s “if information is presented honestly, fully and accurately”, whereas the information presented by Myeni was replete with ”falsehoods, misrepresentations and omissions”. Myeni furthermore “displayed complete disregard for public funds”.

The court ultimately concluded that, “She was a director gone rogue, she did not have the slightest consideration for her fiduciary duty to SAA” and that “her actions did not constitute mere negligence but were reckless and willful”. As it is entitled to do under law, the court in measuring the culpability of her conduct, took into account both objective standards and Myeni’s apparent extensive personal experience as a director: she professed herself to be an expert on corporate governance. Myeni was found to have completely betrayed the trust placed in her as a director of a public company – and it is this betrayal of the standards of proper corporate conduct and trust which underpins findings of delinquency in terms of the Companies Act.

Of course, declarations of delinquency do not undo the damage that the underlying misconduct may have caused. By the time such findings are made it is usually too late.

The court went on to make the following remarks which many South Africans would endorse: “To serve on the Board of an SOE should not be the privilege of the politically connected. Government has, as custodian of the common good, an obligation to ensure that suitably qualified people, with integrity are appointed in these positions…. to ensure that state resources are not squandered, or the economy placed at risk”.

Amen to that.

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