ONE billion dollars might sound like a ridiculous figure for an exit package, but that is what Douglas Hoto, the outgoing First Mutual boss, will pocket
for reluctantly stepping aside for one shareholder to pursue its takeover of the insurance firm unfettered.
Hoto will leave FML, his employer of eight years, at the end of this year after he was pushed out by Renaissance for frustrating its takeover bid.
Ironically, it’s not Renaissance alone who will foot the bill but thousands of other innocent shareholders and policy holders who were not part to the power struggles at the company.
The shareholders who will pay through the nose include the pensioners whose schemes made them shareholders in the FML after its demutualisation from a society into a listed company in 2003. It includes the thousands of civil servants and low-income earners who became shareholders by virtue of being holders of policies at demutualisation.
Hoto becomes the second FML chief executive in three years to be pushed out for matters related to the shareholding structure of the company. Hoto’s predecessor, Norman Sachikonye, was pushed out over the controversial deal involving Capital Alliance, an investment company formed by the management to take 20% in FML at demutualisation. The Capital Alliance deal, which was controversial from the start, later turned nasty leading to the suspension of FML from the Zimbabwe Stock Exchange for more than a year, hurting small investors. There were also threats from the Commissioner of Insurance to cancel FML’s operating licence over the issue. The matter was resolved after FML agreed to fire Sachikonye as part of the condition to retain its licence and resume trading on the stock market.
Sachikonye left FML in June 2004 with a $2,588 724 375 cheque for his 16 years at the company. He paid $80 000 for the 1999 model car which at that time cost $4, 4 million. At that time houses in Borrowdale were going for around $400 million.
businessdigest is yet to get the breakdown of Hoto’s package but it is understood that the company will use the same method they used to calculate Sachikonye’s package two years ago. If they use the same method, then Hoto will get a hefty pay-out in what the company calls “service recognition”.
About three quarters of Sachikonye’s package came from service recognition. He will get a severance gratuity of three months and a stabilisation allowance of about six months. Hoto will also get cash in lieu of leave and another cheque for notice. He is entitled to buy his current company car for at book value plus school fees for his children and six months medical aid cover.
Analysts however say $1 billion is too big a price for a shareholder to achieve his goal. Hoto’s benefits are taking 17 cents in every dollar of the shareholders’ funds as at June 30 this year. The package also translates into 28% of the profit that was attributed to shareholders in the June half-year results. FML did not declare a dividend in the June half year results.
But the loss goes beyond monetary terms. In Hoto, the company is losing a modest chief executive who contributed to the turnaround of the firm at a time when it looked like it would collapse.
It is losing eight years of human resource investment at the highest level. Hoto, a former mathematics teacher in Chiredzi, is one of the four actuaries in the country.