When you employ top executives, such as Hedberg and Peter Nelson (ex-CFO), you have to allow them free reign to implement their strategies.
Remember that these guys are normally employed for a contracted period and their remuneration depends largely on results. Hence they will want to have the final say on all strategies and the implementation thereof.
All Telkom's strategies have to be approved by their Board of Directors (BoD), which includes the CEO and the CFO. *_BUT_* the chairman of the BoD is appointed by the government as they are the majority shareholder and, via their Class A shareholding, the chairman has a golden vote. This effectively allows the chairman to veto any decision.
Jeffrey Hedberg is the right person for the CEO job, but he refuses to be a puppet with the chairman pulling the strings.
For Telkom to remain profitable they need to increase productivity to generate revenue and increase efficiency to cut costs.
To achieve either of these objectives some tough decisions need to be made. Obviously Hedberg has sounded out the BoD and they have must have rejected his proposals, one of which is to reduce personnel.
From a political perspective retrenchments in an Election year is a huge no-no! Staff costs make up a substantial portion of Telkom's total operational cost. So how else can he cut costs without impacting on productivity and efficiency??? To complicate it even more, the unions are demanding double digit salary increases.
Another thorny issue is Hedberg's vision to first sort out the South African based operations before heading into Africa. This is in direct contrast to the government's wishes.
Recently there has been noises emanating from the Minister of Communications office that they want to revise the Class A shareholding and extend the effective period of the "golden vote". This is a threat to Telkom's ability to operate independently.
So the question Hedberg must have asked himself was "As a person of integrity, can I apply for the CEO position knowing that it is doomed to fail and just turn a blind eye and milk it for as much as I can?".
We now all know the answer to that.
