NSSF prepares to loosen grip on National Bank board

The NSSF will not influence the appointment of directors at National Bank of Kenya as the lender races to comply with new regulations that require half of non-executive board seats be held by independent directors.
The National Bank of Kenya (NBK) does not have an independent director since its board members are representatives of major shareholders, the NSSF and the Treasury who own 48.05 per cent and 22.5 per cent respectively.

The Central Bank of Kenya (CBK) has issued fresh guidelines on board composition in an effort to reduce the influence of principal shareholders in the boardrooms.

The CBK defines an independent director as one who is not a direct or indirect representative of the principal shareholders, has not worked in the bank as an executive for the past five years and has not had any business relationships with the institution in the same period.

Significant suppliers of the lenders or relatives of senior managers and those with a direct or indirect shareholding of more than five per cent in the appointing banks are also not considered independent. “We have not yet decided how to go about the process but what we are clear about is that we don’t want bloated boards,” said Tom Odongo, the managing trustee of NSSF in an interview on Friday.

New rules

He said that the fund will comply with the rules while appointing new directors at the coming AGMs — a pointer that it will not influence the hiring of the new board members.

The fund has in the past year tightened its grip on NBK’s board, which has seen it replace four directors with its representatives.

The bank has a 10-member board made up of three executive directors including managing director Reuben Marambii, and his two deputies Isaiah Mworia and Ali Noor. Of the seven non-executive directors, two (Tom Odongo and the head of financial services at the Ministry of Finance, George Omino) — directly represent the NSSF and the Treasury respectively.

The fund also replaced Jennifer Riria, Paul Ngumi and Alfred Juma — all government appointees — with investment banker Mohamed Hassan (now board chair), Sylvia Kitonga and Erastus Mwongera in June last year.

The new rules, which come into force from August 2, affect more than half of Kenya’s 44 banks, including some that are listed. Majority of directors in Kenyan banks have secured board seats with the assistance of business associates, personal contacts or friends. Corporate governance experts say this is denying companies boardroom diversity that is critical for fresh ideas.