Every time a new CEO walks into his office, there’s one thing all the smartest ones at least do; get all the predecessor’s dirty laundry out of him, unless, of course, the predecessor is now in the president’s office or lurking somewhere in a powerful position of a corporation. But if it’s a clean break, and not like Disney moving its superstar savior CEO (Bob Iger) into the president’s office instead of getting him out of the building, the smart thing to do is expose as many dead bodies as possible.
What it does is buy the CEO some time to clean house, restructure, and then get the organization moving toward the new strategy, which the board of directors you’d imagine has fully endorsed. This is a tried and tested strategy, read the early earnings releases of any new leadership group – it’s all about cleaning up past failures, bad investment calls and buys.
As such, judgment on a CEO’s performance, whether using stock price in the case of a publicly traded company, typically becomes granular after a three-year period. Perhaps in the 18 month period there will be much more detailed scrutiny of whether the ship has at least stopped sinking.
Andre De Ruyter, the man called in to save Eskom and favored by former finance minister Tito Mboweni, will begin his third year as chief executive in January next year. He is one of his longest-serving CEOs in a ruinous decade: a feather in his cap. Every South African had a snapshot of the scale of the problems De Ruyter and his team were experiencing on their first day at the Megawatt Park venue, so there was no need for further details. Years of mismanagement, aging power plants, and corruption by opportunists both inside and outside the corporation gave us all an idea of how difficult their job would be. All this against the fact that Eskom simply cannot meet SA’s demand for power.
Having said all that; have you done a good job?
It is a fair question now that we have come out of a year in which we have had the longest periods of load shedding and are now facing a diesel shortage that is keeping us in dire straits as we approach our holiday period, where the whole industry is slow. True, some of the reasons for our current state are none of your concern and we can get into a long history of the government’s failure to implement its own structural reforms that would have helped our electricity situation.
There is still an organization that in recent years has needed to be addressed, I think we can now begin to wonder if De Ruyter is succeeding in turning the ship around or at least slowing its slippage. It’s a tough answer, and to be honest, it doesn’t deserve a good grade at this point. Where is the restructuring of the corporation, the separation into its three separate units? We can blame politicians for a lot, but where does responsibility begin?
The third year is the year that we will judge much more critically: as a man of a publicly traded entity, he will know that too. Eskom still looks like an organization adrift towards its inevitable collapse: in a developing economy that needs a strong industrial base to absorb employment, it’s quite an uncomfortable place for all of us. Privately funded windmills alone will not be our salvation.