Blue Label tale: lapses and lessons
Actually, as I write these words the directors of Blue Label and its subsidiaries are attending a workshop at the JSE on what it is to hold fiduciary responsibilities.
For those who haven’t been keeping up with the story, Blue Label Telecoms listed in November last year and within three short months two directors and the wives of two directors transgressed the JSE’s listings requirements by trading in shares, at times without clearance from Blue Label, and without reporting the trades to the JSE.
One director, Selwyn Diamond, was fined a maximum of R100000 for his and his wife’s transgressions, while Graham Prosser and Sean Kaplan (whose wife also traded) got off with being privately censured by the JSE. All of these men were directors of a subsidiary known as The Prepaid Company.
As the news of each transgression came to light, the share price took a knock and the joint CEs of Blue Label stopped talking to the press directly and rather appointed a spokesperson. I think that was a good strategy. To have someone less emotional about the issue answering calls meant that the company kept communication open and didn’t say anything it didn’t mean to say.
But one statement from Blue Label suggested that the JSE should have training courses for all directors of newly listed companies, not just those on the AltX board.
While all directors should certainly understand their fiduciary responsibilities and the JSE could help to facilitate this, let’s not shift the blame here.
Since the JSE revamped its listings requirements in 2001 there has been no other known instance of directors and their spouses not reporting their share dealings. And Blue Label maintained from the very beginning that all directors had been given instruction ahead of the listing as to how to deal with their shares. None of these guys were new to business. It is hard to believe that they didn’t know what to do.
Further, the company had a sponsor for its listing — Investec. While the JSE made it clear the responsibility to report the trades did not lie with the broker, you’d have thought Investec, if it was the broker, would have advised the directors about each step of those share trades. The directors and their spouses maybe traded online. Maybe no one knew. But I find it hard to accept that the share sales and purchases that occurred were done in a vacuum of ignorance.
I’ve asked around and people who know the joint CEs of Blue Label, Mark and Brett Levy, say they’re good guys who have no doubt been shaken by the knock their successful company has taken (its revenues are in the billions and it is already one of the 80 largest listed stocks in SA). But when it comes to leading a large business and managing staff, they must have made a mistake.
Not knowing what your fellow directors are up to suggests a lapse in management.
The company says it now has all manner of compliance systems in place, but those should have been designed before taking a listing.
I also think having directors such as Neil Lazarus, who was implicated in the Corpcap saga, is playing with fire. In an age when good corporate governance is all important, investors care about the cash but they also care about a company’s image and reputation. Sure, Lazarus should be allowed to put that bit of corporate history behind him, but realistically people are going to remember it.
Blue Label has also been dismayed about the press attention it has received. Maybe that's another thing the directors didn't contemplate ahead of a listing. But it's simple – when a public company messes up it is not only news for the press, but the press has a duty to report it. In terms of our company law, the financial press is one of the pillars helping to keep investors informed about events so that they can make up their own minds, with as much information as possible, about whether or not they want to buy or sell stock.
The launch of Blue Label’s listing has got off to an inauspicious start. But the share is not below its issue price and the local and global markets have been riddled with turmoil anyway. The share is now cheaper than it was and may be a good buy. If there are no more nasty surprises, Blue Label should do just fine. If this company truly is in it for the long term, as they all claim when they leap on to the boards, then this unfortunate series of events should fade into the background.
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