Former TML bosses take on Times Media Group for refusing to increase pensioners’ medical aid contributions.
Times Media Group (TMG) CEO Andrew Bonamour has taken decisive steps in his bid to turn the company around since taking the reins in 2012. And while TMG has been able to pay off a large portion of its debt, not all of these measures have won him friends. The group, which publishes the Sunday Times and Business Day, now faces legal action from a group of disgruntled, albeit wealthy, pensioners.
The pensioners – three former directors – claim TMG reneged on a 2001 agreement to keep increasing their medical aid subsidy.
The company’s unaudited financial reports for the six months ending 31 December 2013 said the medical aid contributions cost TMG R273 million as at 30 June 2013. By ceasing to increase the subsidy and, additionally, offering pensioners a buyout of their medical aid contribution, the liability was reduced to
R87 million by December.
But the group of three pensioners – former Sunday Times MD Jimmy Mould, former Times Media Limited (TML) CEO Stephen Mulholland and former TML MD Roy Paulson – says the company is obliged to keep up its contribution. The pensioners say they are not the only people affected as there are many former employees in the same situation. The group instructed law firm Bowman Gilfillan to send TMG a letter threatening the group with legal action if the group kept refusing to increase the subsidy.
“In 2001, we negotiated an agreement with Connie Molusi, who was then managing director of Times Media Limited, that they would provide a subsidy to the pensioners’ medical aid,” Paulson told The Media. “This subsidy would increase each subsequent year by the same percentage as that paid to the staff salaries. This agreement was honoured by successive administrations until November, when [Bonamour] informed all pensioners that he intended to freeze the subsidy forever.”
The lawyers’ letter claims that TMG told the pensioners in December that it was unable to increase staff salaries and therefore would not be increasing the subsidy. However, “TMG indeed failed to increase the PRMA [post retirement medical aid] subsidy of the pensioners from 1 January 2014, this notwithstanding the fact that staff members have indeed been awarded increases.”
For this reason, says the letter, TMG’s failure to increase the pensioners’ subsidy is unlawful.
TMG’s buyout offer is a “one-off cash payment that would effectively mean that after about three years pensioners would have no medical aid cover at all”, says Paulson.
TMG would not say how many pensioners are affected, but the trio estimates the number to be about 700 individuals. The group says it has tried to contact the pensioners, but TMG has not responded to requests for their contact details.
TMG issued an official statement after receiving the letter dated 10 April. “Times Media Group has taken note of reports about alleged unhappiness on the part of pensioners as a result of a decision not to adjust the post-retirement medical aid paid to them.
“The decision to not increase the subsidy was taken in the best interests of the business and was done so in strict accordance with TMG’s healthcare policy and on the advice of our legal advisors,” according to the statement.
Bonamour gave further comment to The Media, saying, “All I can say is that the 2001 agreement was amended lawfully and approved by pensioners’ representatives and we will defend the case.”
Bonamour says it was Paulson and Mulholland themselves who constructed the 2001 agreement. The PRMA subsidy has been de-linked from salaries since 2005, he adds.
“In fact, the 2001 agreement which Paulson, Mould and Mulholland refer to was lawfully amended several times in consultation with them… Mr Paulson was present at the meeting in 2005 when this change was affected, and the minutes of the company meeting reflect this clearly,” says Bonamour.
Since his private equity firm Blackstar bought into TMG in 2012, Bonamour got rid of extraneous assets, as well as axing staff from what he has called “top heavy” management. This allowed for more staff training and hiring. TMG’s financial statement reported profit of R221 million, from a loss of R8 million in the same period the year before.
Bonamour told The Media that the medical aid subsidy was very generous by normal standards and was more typical of a larger company. “Essentially, we’re a small company trying to turn [ourselves] around and we just can’t afford the sort of benefits that were typical of a much larger company. Why should we have to retrench journalists and staff to fund the very generous medical packages for people who left decades ago?”
For purposes of comparison, Naspers, a
R450 billion giant, had a liability of R173 million to PRMA in the six months to September 2013. TMG is a much smaller company and its liability was R287 million. It is not unusual to cap PRMA subsidies, said Bonamour, adding that Telkom and Tiger Brands have implemented similar caps.
Bonamour added that it was “interesting that it’s all the ex-CEOs [sic] who are bringing the case”. Paulson maintained, however, that it’s not just top-level former directors who will be affected, but previously disadvantaged pensioners. Says Paulson, “As you can imagine, [not increasing the subsidy] would cause great hardship to all pensioners, but particularly to black pensioners who depend heavily on the subsidy.”
This story was first published in the May 2014 issue of The Media magazine.
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