CSA and Graeme Smith: A contentious contractual clause and power dynamics in the employment relationship

On 2 August 2020, Khanyiso Tshwaku reported for the Sunday Times on a contentious clause which was contained in a draft version of Cricket South Africa (CSA) director of cricket Graeme Smith’s employment contract during contract negotiations between CSA and Smith. This was based on information leaked from within CSA. The wording of the draft clause and its inclusion during these negotiations are fascinating in terms of employment law and employment relations, primarily due to the unusual nature of the draft clause and the insight it provides into the relationship between the employee and his employer. Accordingly, these matters fall to be discussed here, with them having entered the public domain and evidently being of public interest. The content of negotiations is normally protected by rules agreed between parties, which maintain its confidentiality and prevent the parties from disclosing, outside of the negotiations, any information forming part of the negotiations.

The version of the contract which contained the clause in question was in draft format and the clause does not appear in Smith’s current contract, meaning it is not part of his binding terms of employment. However, the wording of this clause and the events surrounding its inclusion in the draft contract have wider relevance than merely the provisions of Smith’s employment contract. Considering these matters provides for an interesting analysis of the power dynamics and current affairs within CSA, which intersect with the aforementioned legal aspects of interest.

The report on this draft clause appears against the background of a tumultuous recent period for CSA, particularly since late 2019, and with the organisation in a difficult financial position. In December 2019, CSA CEO Thabang Moroe was suspended pending a forensic investigation into board decisions and the conduct of management, including Moroe. Furthermore, Dr Jacques Faul’s term as acting CEO is currently approaching its end in the absence of clarity on Moroe’s position and the validity of a number of appointments made by CSA are being questioned, including that of Smith. In addition, the need to eradicate racism from the game and the failures of transformation have been brought into sharp focus in recent weeks and questions have been asked on the process followed in the 2015 investigation into match fixing and the outcomes of the investigation. Matters concerning this contractual clause provide us with important insight into the multi-faceted and ever-shifting power dynamics at play within CSA. The direction which the precariously perched national game takes in the foreseeable future will surely depend to a large degree on how the power dynamics ultimately play out at the primary senior positions at CSA.

The controversial draft clause

Tshwaku reported that the Sunday Times has seen a copy of Smith’s draft employment contract and that the draft contains the following clause:

“Notwithstanding clause 9.1, it is specifically recorded that the contractor shall be entitled to summarily terminate this agreement on written notice to CSA if Jacques Faul is no longer the acting chief executive officer or chief executive officer during the term, for whatever reason.”

The newspaper led with an opening paragraph stating that Faul – who has been seconded to the acting chief executive role from the Titans, initially for a period of six months and subsequently extended until mid-September 2020 – was aware of this clause, but failed to act on it. According to the report, Faul had continued to negotiate the contract on CSA’s behalf despite having knowledge of the clause. It is clear, however, that the clause does not form part of Smith’s current terms of employment.

Smith was initially appointed on an interim basis in December 2019 from a pool of four candidates, on a three-month fixed-term contract, which was then extended for a period of two years in April 2020 with an option to extend it for an additional year. The two-year term will conclude at the end of March 2022.

The Sunday Times reported that CSA’s company secretary, Welsh Gwaza, raised concerns about this clause in an internal memo, calling it unusual and saying that it created the perception of a conflict of interest concerning Faul. The memo, further, stated that Faul had recused himself as the point person in the contract negotiations after the matter was raised.

Tshwaku's report states that on 6 April, Smith’s lawyer informed Faul that Smith agreed to the clause being removed. With the two-year extension of Smith’s contract having seemingly commenced at the beginning of April, it is not apparent whether the clause was removed before agreement was reached on the extension of the contract or whether it formed part of the binding terms of the employment relationship at any stage, either in the initial fixed-term contract or the agreement governing the extension thereof. It is, perhaps, instructive that reference is made by the Sunday Times to the clause being contained in a draft contract, as opposed to a final or signed version of the document. Faul’s statement to the newspaper, that the clause was not contained in the agreement which he signed, accords with this.

It is self-evident from the wording of the draft clause that its inclusion in a contract, or draft contract, would be a contentious matter within CSA. A clause of this nature is uncustomary and uncommon in employment contracts. It is not uncommon in the case of senior position appointments for candidates for employment to take precautions to ensure that their performance will not be adversely affected by poor relationships. It might be a material sticking point in negotiations, for example, that a prospective financial director refuses to accept an appointment where they would have to report to a particular managing director. This does not necessarily attribute fault to any person but does necessarily speak to certain human beings being unable to get along and work well together. However, it is rare for terms such as those contained in the draft clause to actually be contractually stipulated. A primary concern for CSA would have been the effective limitations which such a clause could place on the organisation’s capacity for self-determination and the inordinate power which it could effectively give to Smith in respect of Faul’s future in the organisation, as his superior in the hierarchy.

An example of such a clause being included in an employment contract in the world of high-level sport is the contract between renowned German football club Hamburger SV and its former manager, Frank Pagelsdorf. As recounted by journalist Eberhard Spohd, when Pagelsdorf was appointed at the turn of the century, his contract included a clause which provided that he could leave the club with immediate effect if the person to whom he reported, the club president Uwe Seeler – an all-time great player for Hamburg and West Germany – was no longer president of the club. Incidentally, Seeler left the club soon after Pagelsdorf joined, but the manager stayed on nonetheless.

Gwaza’s memo stated that the clause was not accepted on the grounds that it would have delegated CSA’s appointing authority to Smith, who would then have to report to Faul, and due to the clause being “unconscionable and made in bad faith” and creating a benefit for the acting CEO. If the clause had been included in the contract, Smith would have been able, for argument’s sake, to hold CSA’s feet to the fire by threatening to resign, with immediate effect, if CSA intended to continue with Moroe, or anyone else, as CEO instead of Faul. Aside from the legal ramifications of its inclusion in Smith’s contract, his desire to have the clause included in itself would have been worrying for CSA. Considered together with occurrences discussed below, the mere inclusion of such a clause in negotiations strongly suggests that Smith did not want to work with the incumbent CEO, Moroe, and indicates that he sought contractual protections to ensure that he would not need to.

According to Tshwaku, before the clause was removed from the document, Faul responded to Gwaza by saying that he could not see negotiations with Smith reopening, as Gwaza had suggested. Faul said that the suggestion to remove Smith’s right to terminate – impliedly in terms of the wording of the draft clause, as above – would not be accepted by Smith’s lawyer. Faul said, further: “I’m not aware if you know that he refused to report to the suspended CEO”. He made reference to Smith generating income via his international profile and to Smith’s fear of being tainted by association with people not viewed “in a positive light by the public”.

Faul’s expectation that Smith and his legal representative would not be open to the removal of the clause was, of course, ultimately contradicted by their agreement on its removal. According to the Sunday Times’ report, Smith’s lawyer had communicated that if things went badly downhill or in the case of a scandal, Smith would simply have to rely on his contractual three-month notice period. The reference in the draft clause to the enablement of summary termination is a reference to termination with immediate effect, i.e. without Smith having to serve his contractual notice period. It is clear just how cautious Smith was in entering into a relationship with CSA.

When contacted by the Sunday Times for comment, Faul said that he had had the clause removed from the contract and that it was the CSA board that contracted Smith, not himself as the interim CEO.

In the absence of the clause from the contract, if Smith were to seek to resign with immediate effect in contravention of his contractual obligation to serve a three month notice period, CSA would be entitled to approach the courts to seek “specific performance” of his obligations, i.e. that he be ordered to see out his notice period, and, in the alternative, that Smith be required to compensate CSA for any damages suffered as a result of his contractual breach. In the event of a scandal arising, as referred to by Smith’s lawyer, which, for example, were to have an impact on Smith’s reputation and his ability to earn personal commercial revenue, depending on the facts, there could conceivably be an argument that CSA was guilty of a material breach of the employment contract and that Smith was accordingly entitled to cancel the contract immediately, or seek damages. A breach by CSA of one of its common law obligations towards its employee could see such circumstances arising. By way of an example, this could involve a representative of the organisation being dishonest towards Smith, which could amount to a material failure to act in good faith towards him.

Smith’s bargaining power and the background to his appointment

The picture formed from the sequence of events at the time of Smith’s appointment is one of CSA being in desperate need of his expertise and assistance and needing to appoint him to repair the serious damage which had been done to its image and appease a sceptical and concerned South African public.

With the impending series against England and Australia, CSA were firmly pinned onto the proverbial back foot when negotiating with Smith. Adding to the disorder in the lead-up to agreement finally being reached between CSA and Smith, in addition to the cloud which hung over Moroe, the first of three independent CSA board members had resigned, there was no convenor of selectors in place and CSA had just lost its R80-million-a-year sponsor Standard Bank. There had also been substantial controversy, which played out in the public, resulting from the withdrawal of accreditation by CSA for a number of journalists, followed by Moroe issuing a public apology on behalf of CSA.

In light of these occurrences, it becomes clear just how much bargaining power Smith had at the time, perhaps providing insight into why he and his legal representatives may have considered it feasible to attempt, and appropriate to seek, to include the contentious clause in his contract and also indicating why they may have deemed its inclusion necessary as a protection measure.

After confirmation was published that Smith had interviewed for the director of cricket role, in November 2019, he released a statement withdrawing his interest in the role. He cited concerns relating to not being provided the necessary freedom and support to implement the change he envisaged. We know that, as was reported by the Daily Maverick, Smith took up the role on an interim basis shortly after Moroe’s suspension and the subsequent appointment of Faul. It is notable in this regard, from a Daily Maverick report, that Smith had engaged with Moroe for the better part of fifteen weeks without agreement being reached on his appointment, but that this was concluded within a matter of days of Faul’s appointment.

Questions have been asked about whether the required recruitment and selection processes and corporate governance guidelines were followed in the appointment of Smith as director of cricket and in the appointments which Smith himself made, including Mark Boucher as the head coach of the Protea’s men’s team, Enoch Nkwe as Boucher’s assistant and others within the Proteas coaching setup. This formed part of the grievances raised by forty black former cricketers and coaches in July, in support of Lungi Ngidi and the Black Lives Matter movement, which ultimately led to the group meeting with CSA and the Cricket for Social Justice and Nation Building initiative being announced.

Speaking to News24, CSA president Chris Nenzani defended both Smith’s appointment, which he said followed an extensive interview process and received the required ratifications, and the appointments which Smith made, saying they were endorsed at board level. Nenzani referred to the prevailing urgency in filling positions and to the authority which CSA sought to give Smith to select the head coach, saying that they wanted to give the director of cricket “a handle on that appointment”.

Smith described the criticism on his appointment as “extremely unfair”, saying that a “really vigorous process” had been followed. On the talk that he has been responsible for arranging “jobs for pals”, so to speak, Smith defended the appointments he has made. He spoke of there being agendas within the CSA structures that have resulted in leaked documents and stories in the media. Nenzani came out in defence of Smith, bemoaning to News24 that these issues have been prevalent at CSA for some time and Faul, speaking on behalf of CSA, condemned the leaks and warned of the confidentiality of certain information which has entered the public domain.

The tide has turned since late 2019. Faul has confirmed to CSA that he will be stepping down at the end of his contract, on 15 September, to return to the Titans and Smith has said that he would be happy to work under any CEO. Any hopes Smith may have had of working with Faul on an indefinite basis have thus potentially been dashed. There is speculation that Gwaza is a candidate to take over from Faul as acting chief executive.

Faul, in his second spell as acting CEO, has led efforts to stabilise CSA in extremely trying times, considering the global pandemic and the numerous issues facing CSA. Under his leadership, CSA negotiated an important new three-year sponsorship with Betway as “headline event partner” and official sponsor of the Proteas men’s and women’s teams.

The question of whether Moroe will return to fulfil the role of CEO again remains unanswered at this point in time. CSA has now received the first forensic report, or the first part of the report, and Moroe has since been presented with the allegations against him, as he confirmed to TimesLIVE. A disciplinary hearing will follow. CSA will hold its annual general meeting on 5 September, where, according to the Daily Maverick, it will elect a new president and possibly restructure its board, meaning significant change may be afoot across the senior ranks of the organisation.

The importance of robust employment contract negotiations

The glimpse into the contract negotiations between CSA and Smith and Smith’s current position in the leadership milieu of the organisation provide valuable learning points in employment relations. Imbalanced bargaining power in contractual negotiations can have a significant bearing on the terms that govern an employment relationship and, accordingly, on the contractual obligations of employees and employers and the respective protections which a contract affords them.

Parties tend to be willing to overlook even glaring concerns when negotiating employment contracts where they are in a weaker bargaining position. Examples come to mind of employees seeking to pursue opportunities for alternative employment and coming to realise that they had agreed to far longer notice periods than expected. Generally, the more senior an employee and the rarer and scarcer their skillset, the more bargaining power they will have in negotiating their contract. We often see this in executive contract negotiations. Smith, as a prospective employee, was in the position of having the negotiating capital to push the envelope on what he sought in his contract. One expects that Smith and his advisors would not have viewed these efforts as running the risk of damaging the relationship between him and CSA to any serious degree. Of course, the shoe is generally on the other foot, with employers holding more power.

In order to build an employment relationship grounded in trust, communicating reservations to the other party and bartering on terms before signing a contract and formally entering into the relationship is essential, and will benefit both parties, if they are intent on building a transparent and equitable working relationship. This can be more difficult for a party where they are in a weaker position. However, doing this will prevent resentment at a later stage and will minimise the possibility of a party feeling hard done by and, therefore, being susceptible to committing revanchist acts, whether overt or subtle, conscious or subconscious. In this way, a mutually open and honest approach to the negotiations can benefit both employees and employers.

Concluding thoughts

The imbalance in the relationship between CSA and Smith, which is evident from the inclusion of the above discussed contractual clause in negotiations and from surrounding events, could prove to be inconducive to a constructive and healthy employment relationship. With it being abundantly clear that Smith has, or had, serious reservations about working in the CSA structures, CSA should be making it an ongoing priority to build and maintain trust between the organisation and its employee and in doing so, to allay any concerns which he may still harbour. This will need Smith’s buy-in. Equally, Smith’s initial efforts to include the clause in his contract may have caused detriment to the relationship from the perspective of CSA. The starting point for these trust-building efforts would be establishing a meeting of the minds on the direction in which CSA is headed and on Smith’s role in the achievement of its objectives. This would place a reciprocal obligation on Smith to meaningfully engage with his employer on his role in the organisation.

Mutual trust might be developed and bolstered by, for example, deferring to Smith’s technical expertise in CSA decision-making and giving due weight to his extensive experience of the international cricket industry. This was done when Smith was tasked with making coaching appointments. Placing such responsibility on Smith should stimulate his further integration into the organisation and remove any feeling he may have of being somewhat of an outsider, as opposed to a unified component of CSA.

As Lloyd Burnard wrote for News24, Smith’s international profile and his relationships in the game have already begun to pay dividends for CSA since his appointment. According to Burnard, Smith’s international standing and his relationship with Saurav Ganguly, who is the president of the Board of Control for Cricket in India (BCCI), was “almost solely responsible” for the arrangement of a home T20 series against India which stands to benefit CSA to the tune of approximately R190 million if the series is ultimately played. On this evidence, the importance of Smith’s role in a commercial sense is manifest, in addition to the value he adds in terms of technical cricket-related matters.

CSA has much work to do in restoring the faith of its stakeholders and the public in the organisation. To this end, satisfactorily resolving the issues brought to light by the forensic report is a necessary step in restoring trust in CSA from the perspective of all primary role players. The positive result of the light which is being cast on the controversial contractual negotiations is that CSA and its representatives, as the custodians of the national game, are held to account in terms of administration and governance. The same goes for the questions being asked of appointments made and of the demands for substantive transformation on and off the field. It will be necessary for the CEO, whoever that may be, whether interim or otherwise, to support Smith in playing his role in making the necessary changes, and vice versa. If CSA values Smith’s contributions in terms of commercial and sporting matters, it will be vital that the organisation enables him to conduct his work in an optimal manner for the benefit of the national game. If Moroe is to return as the operational CEO, he and Smith will need to find a way to work together constructively. Otherwise, swift decisions will need to be made in the best interests of the sport.

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Sports and employment lawMiles ChennellsAugust 13, 2020