Commenting on the premature stepping down of Absa CEO Arrie Rautenbach, Radebe Sipamla, senior investment analyst at Mergence Investment Managers, said it was unfortunate that Absa’s internal squabbles had played out publicly instead of being resolved internally. Questions also need to be asked of the board as to why they were slow to react on the issues that had initially been raised internally and ultimately became public. As a result, Absa’s boardroom drama have dented investor sentiment and investors have become increasingly sceptical about the bank, applying implicit and explicit valuation discounts to its stock relative to peers. This was driven by the lack of management stability and trust in the guidance management provided on the operational outlook. Radebe said: “In our view Absa’s valuation discount relative to peers may persist unless the board and management can convince investors that internal management squabbles won’t continue to be a distraction and enhanced governance oversight will be applied to prevent a repeat of the alleged governance failures that are reported to have transpired.”
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