Should Rupert be CEO and chair?

Cape Town - Richemont chairperson Johann Rupert's decision to assume the role of CEO at the Swiss-based luxury brands group as well has elicited contrasting responses from a shareholder activist and local asset managers.

Richemont announced on Friday that Rupert - who is also chairperson of investment companies Reinet and Remgro - would assume the role of CEO from April 1 2010.

While Rupert retains his chair of Richemont, the group did nominate Lord Renwick of Clifton (who sits on the SABMiller board) as lead independent director.

The appointment of Rupert follows the resignation of Norbert Platt as CEO for health reasons at the end of 2009. The development suggests Richemont could not find a suitable replacement for the well-regarded Platt, who was appointed in 2004.

Shareholder activist Theo Botha said Rupert's dual executive role flew in the face of the guidelines presented in the King 3 code on corporate governance.

"Looking at the date of the appointment, I wonder whether this could be an April Fool's joke. King 3 clearly states that an executive cannot hold the position of CEO and chairman."

Botha said it would be interesting to see if King 3 guidelines were applicable to a company that has a primary listing outside SA.

Richemont holds a primary listing in Zurich and a secondary listing on the JSE.

Asset manangers unperturbed

He also raised the issue of the concentration of executive power in Rupert's hands, pointing out that Rupert was chairperson, investment manager, investment adviser and controlling shareholder at recently formed investment company Reinet.

Asset managers canvassed by Fin24 were not too perturbed by developments.

One noted that while Botha was technically correct in terms of the King code on corporate governance, there was much reassurance to be taken from Rupert's appointment as CEO.

"Rupert's knowledge of the Richemont business is extensive, and he has always been a hands-on chairman. If Richemont could not find a suitable candidate for the CEO position, I would rather have Rupert at the helm than someone lacking in experience at this very tough time for the luxury goods sector."

Richemont is one of the world's biggest luxury brand holders, owning iconic tags like Dunhill, Cartier, Montblanc, Van Cleef & Arpels, Panerai, Piaget, Vacheron Constantin and Jaeger-LeCoultre.

Another analyst argued that with trading conditions continuing to prove tricky, it was important for Richemont not to compound external problems with a risk of internal problems that could arise with appointing a new CEO.

Most analysts believed Rupert's appointment as CEO was only an interim measure, and that a few years down the line a new CEO would probably be appointed.

Officially, Rupert said on Friday that Richemont's philosophy was that its maisons should operate largely autonomously while benefiting from the group's central and regional support services.

"In these challenging times, we want to ensure consistency in our management approach."

He stressed Richemont had strong management in the maisons, in the regions and in its central functions. "I look forward to working more closely with my colleagues."

Fin24.com