EOH CEO under fire for spending millions on lawyers while firing staff and cutting salaries

EOH CEO Stephen van Coller is under fire for spending millions on lawyers and consultants when employees were hit with salary cuts and retrenchments.

This criticism followed news that EOH sued four of its former executives, including founder Asher Bohbot, for R6.4 billion.

EOH said this action “closes off its inherited legacy issues and holds accountable those responsible for the governance failings”.

The company said it ensured transparent cooperation with the relevant authorities, including the SIU, Hawks, and the Enquiry into State Capture.

“It has been no easy feat getting to this point. The new EOH leadership team is immensely proud of everyone who has been involved in this process,” EOH CEO Stephen van Coller said.

However, not everyone thinks Van Coller’s continued focus on corruption years after it happened is the right thing to do.

An EOH manager, who spoke to MyBroadband on condition of anonymity, said the CEO’s actions entrench the perception that EOH is corrupt.

“Instead of ridding the company of its corrupt image, it continually reminds the market that EOH is a corrupt company with serious challenges,” he said.

Another problem is that EOH staff were hit by salary cuts, forfeit increases and bonuses, and faced retrenchments while the company blew millions on lawyers and consultants.

EOH’s latest annual report showed that it spent over R260 million in two years on advisory and other services. A large part went to the investigation into corruption by ENSafrica.

The R260 million is, however, only part of the money spent on the issue, an EOH insider told MyBroadband. He said apart from the ENSafrica contract, EOH spent millions on consultants from PWC, Delta, and other companies.

EOH employees who contacted MyBroadband said they feel the money could have been better spent growing the company and protecting employees.

One manager said EOH employees made tremendous sacrifices since Van Coller took the reins to turn the company around, only to face salary cuts and retrenchments afterwards.

He finds it particularly unpalatable that Van Coller received a salary package of R17.6 million when low-level employees did not receive salary increases and bonuses.

Instead of seeing the latest legal action as a positive development, it is perceived as a personal crusade by Van Coller to lift his image at the company’s expense.

One executive told MyBroadband there is little chance of recovering a large amount of money from the former executives.

In fact, he said, it is doubtful that EOH will even cover the legal costs associated with suing the former executives.

“Suing executives for over R1.5 billion each is a vanity project which hurts EOH’s image without a significant chance of benefitting the company or its shareholders,” he said.

Steven Nathan

Steven Nathan, the founder of 10X Investments, credited Van Coller for uncovering corruption and holding the perpetrators accountable.

Van Coller’s actions, however, come at a high cost to EOH and its employees. Nathan highlighted three adverse effects on the company.

1. It costs a lot of money, with EOH paying expensive legal and consulting fees to investigate corruption and going after former executives.
2. EOH’s management team is spending time investigating corruption from years ago instead of focusing on growing the business.
3. The investigations and legal action remind employees, clients, and the market of corruption at EOH.

Nathan said EOH’s management team has limited time, energy, and resources. Spending it investigating previous corrupt activities rather than running the business may not be the best strategy.

He added that while it is good to go after former executives implicated in wrongdoing, it sticks to EOH.

“It keeps reminding people about the challenges EOH has as a company. This is a challenge for clients and staff,” he said.

“It is not an easy path to follow. There are definitely consequences and some downside.”

Nathan said it is sad that EOH is no longer a company that creates jobs and pay taxes.

He highlighted that EOH under founder Asher Bohbot was one of the first companies to aggressively create learnerships and job opportunities.

EOH created hundreds of jobs and gave opportunities to people without previous business experience.

Nathan’s views are echoed by a senior executive close to EOH, who spoke to MyBroadband on condition of anonymity.

He said Van Coller’s focus should be on strengthening EOH and ensuring its employees and clients are protected.

“Instead of ridding EOH from its image of a corrupt company, Van Coller continues to talk about corruption at the company at every opportunity he gets,” he said.

“Van Coller seems to be on a personal crusade to be seen as a corruption buster instead of looking after the interest of EOH and its employees.”

He said EOH used to be a great company that employed thousands of South Africans and paid billions in taxes.

Although there were a few rogue employees who harmed the company, they could have been dealt with swiftly and decisively.

“EOH knew who the corrupt people were and what they did. By all means, take action against them, but don’t drag the company down with them,” he said.

He also questioned Van Coller’s strategy of selling cash generative businesses, which he described as EOH’s crown jewels.

It includes the sale of financial software specialists Sybrin for R334 million, which he described as well below market value.

“Instead of growing EOH and protecting staff, he is selling the crown jewels and firing employees,” he said.

He said the only thing which saved EOH is Covid-19, which prevented clients from changing contracts and limited the movement of employees.

The market is also not optimistic about EOH and its prospects. EOH’s share price declined from R8.63 to R7.05 year to date, indicating that investors are not encouraged with what they see at the company.

MyBroadband asked EOH how much money it has already spent pursuing legal action against former executives, but the company could not answer this question.

It could also not say whether it is confident that it will recover any funds from its former executives and whether it will cover its legal costs.

EOH would not answer whether the money could have been better spent to grow the company and save jobs.

Now read: R6.4 billion lawsuit against former EOH CEO and three execs