Santam announces a surprise change at the top

In a surprise announcement, the Board of Directors of Santam Limited announced that Steffen Gilbert had stepped down as Chief Executive of the group. The Board said that Ian Kirk would replace Gilbert as Chief Executive with effect from 14 June 2007, a day before the announcement was made public.

The group's SENS statement, released to the JSE, included the following by way of explanation: "Mr Gilbert was appointed as Santam's Chief Executive in July 2003 to add momentum to the group's strategic repositioning, specifically in the areas of setting strategic focus, reinsurance and client service. After successfully meeting these deliverables, as well as driving Santam's capital reduction and share buyback programmes and initiating the group's Black Economic Empowerment transaction, it was agreed that a fresh approach is required to drive Santam's business strategy forward."

Reward for a job well done?

Despite receiving plenty of praise for a job well done Gilbert will work his six month notice period in a capacity other than that which he has filled over the past four years. And Gilbert looks destined to be shopping for a new outlet for his skills in the near future.

The insurance industry received little warning of this chance. In fact, a look at the group's operational update presented to shareholders on 29 May 2007 (less than a month ago) suggests business as usual at the short-term giant. There was certainly no indication of a looming management change at the group. The report seemed to indicate that Santam was progressing nicely and dealing with the various challenges in the short-term insurance industry with aplomb.

The unexpectedness of the announcement was confirmed by stock market investors, who dumped Santam shares when the news was first made public. Shares in Santam tumbled 3.5% on Friday in the immediate wake of the announcement. Fortunately investors seem to forgive and forget quickly, and Santam shares had retraced their early losses by the end of trade on Monday.

Reading between the lines

FAnews Online scoured various news sources and corporate communications for any signs of problems leading up to Friday's announcement. We did not find anything to suggest there were any disputes among senior managers at the group. While there appears nothing sinister at first glance, there are a couple of questions which could be asked.

Firstly, why was the change made so hastily? The board wasted absolutely no time in filling the top position in the company. They effectively finalised the new appointment a day before the information of the outgoing CE's departure was made public.

The second question relates to the language used in the announcement. Flowery phrases like "a decision made by mutual agreement" and "a fresh approach is required" are usually the result of internal strife. We are left with the feeling that a more powerful party's opinion held sway during discussions. Perhaps these terms of endearment and appreciation were, in reality, a great deal harsher In other words, 'you can go without a fight (jump) or we will push you!'

Towing the official line

The board was quick to point out that they had full confidence in the management team at the helm of Santam. This team will, it appears, include Gilbert for the next six months.

Chairman of the board, Desmond Smith, was full of praise for Gilbert's performance during his tenure at the helm of Santam. "Steffen has been instrumental in improving Santam's operational performance and reinsurance synergies and the board would like to thank him for his dedication and commitment. The group, under Ian Kirk, will continue along the path Steffen has helped us define."

His words sound like a final goodbye rather premature considering Gilbert will still be with the group for the coming six months. Or will his role at Santam be reduced to a largely cosmetic one during his notice period?

Editor's thoughts:
Large corporations have to change with the times or go bust. The Santam board is full of praise for Gilbert's accomplishments but claim now is time for a fresh approach. We would love to hear your opinions about the change at the head of Santam. Was Gilbert pushed, or did he jump? Send your comments to [email protected]