Datatec directors bow to negative publicity

By Iain Scott, ITWeb group consulting editor

Johannesburg, 11 Oct 2001

Negative publicity has led to Datatec CEO Jens Montanana and financial director Robin Rindel paying their R1 million insider trading settlement themselves. Datatec is also examining the matter of bonuses, which also drew criticism recently.

Datatec caused an outcry and drew sharp criticism from the Financial Services Board this week when it emerged in the group`s annual report that it was paying the fine on behalf of the two directors.

Datatec says its board, excluding Montanana and Rindel, authorised the company to make the payment after considering various facts.

It says the original incident that sparked the insider trading probe, an alleged disclosure of a specific item of inside information to an analyst, took place in the course of the exercise of Montanana and Rindel`s duties.

Other considerations were that the two did not benefit from the disclosure, nor did they have any incentive or improper motive to release the information; they did not trade in any Datatec shares during the period in question; and they suffered significant loss as a result of the share price`s decline.

"The individuals had senior counsel advice that they had a very reasonable prospect of defending the claim, but the board wished the matter to be brought to finality," the group adds.

In addition to the negative publicity, the group says it also noted that the original decision to pay the settlement on behalf of the two directors might undermine the intent and objectives of the Insider Trading Act.

"This is totally contrary to the board`s attitude to the Insider Trading Act and was not anticipated at the time of the decision," it says.

Datatec has also come under fire from major shareholders and the public for awarding its directors R21 million relating to the sale of the 76% stake in UUNet as well as other payments to head office directors relating to subsidiaries` performances.

"The board has accordingly resolved to restructure existing share and incentive schemes for head office executives to ensure that they are incentivised at the Datatec level only and that their interests are totally aligned with Datatec shareholders," the group says.

However, it adds that with regard to the UUNet-related bonus payments to Montanana and Rindel, it is in discussions with major shareholders and the two directors "with a view to achieving an acceptable balanced outcome".

The Datatec share was trading at R10.40 in early trade on the JSE this morning. This is 55c or 5.58% up on yesterday`s close.