Companies

What Kenya’s top firms pay their chief executives

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It is a nerve-racking race as some corporations increase executive pay by up to 83pc a year. PHOTOS | FILE

Kenya’s corporate executives used relative stability of their companies’ performance to significantly grow their pay in the past financial year, the latest round of reporting by public-listed firms show.

Executive compensation rose by margins of up to 38 per cent in a single year, mostly reflecting growth in profitability - save for a few cases where the company bosses went against the grain, adding millions to their compensation even as the businesses they lead became less profitable or sank into loss-making altogether.

The Business Daily’s analysis of executive compensation in the past financial year found that the financial services and telecommunication sectors remain Kenya’s most lucrative.

The list of top earning executives whose pay the Business Daily was able to compute from the annual reports includes Housing Finance (HF) managing director Frank Ireri, Pan Africa Holdings’s Tom Gitogo and retail chain Uchumi’s Jonathan Ciano.

The trio has now joined the league of big earners who are running blue chip companies such as Safaricom, KCB, East African Breweries (EABL), Co-operative Bank, Kenya Airways and Britam where total executive pay rose by up to 83 per cent, lifting by large margins the pay of CEOs that are lumped with those of senior managers.

The steep rise in executive compensation in Kenya is seen as partly driven by the scramble for scarce corporate leadership talent in a market where employers continue to decry a dire shortage of skills needed to craft and execute growth strategies.

Companies are also rewarding top executives for profitability growth that benefits shareholders in terms of dividend earnings and capital gains for stocks traded on the Nairobi Securities Exchange (NSE).

Financial reports show that Mr Gitogo’s monthly pay rose nine per cent to Sh2.5 million in the year ended December 2013 from the Sh2.3 million he earned the year before.

The pay review came as the financial services firm more than doubled its net earnings to Sh1.2 billion, helped by higher investment income and appreciation of its equity portfolio.

Pan Africa’s share price has more than doubled in the past 12 months to trade at Sh120.

At Housing Finance, the monthly remuneration of Mr Ireri leaped 14.5 per cent to Sh4.9 million in the year ended December, up from Sh4.2 million a year earlier.

The mortgage financier reported a 34 per cent increase in net earnings to Sh995.1 million in the same period, driven by higher interest income and sale of properties.

HF’s share price has appreciated 76 per cent in the past year to trade at Sh44.5.

Mr Ireri has recently joined the club of CEOs with substantial ownership in the firms they lead after he bought 225,000 shares in HF currently worth Sh10 million.

READ: Ireri on HF’s top shareholders roll after stock buy

The shares were bought under the company’s employee share ownership plan (ESOP) at Sh10 a piece, indicating that he has booked a capital gain of more than 300 per cent on his 0.01 per cent stake.

NSE’s Peter Mwangi, who Thursday announced he would step down on November 23 after serving the maximum two terms covering five years, saw his monthly compensation rise 1.7 per cent to Sh1.12 million in the year ended December.

The bourse’s net profit more than tripled to Sh262.2 million last year, helped by the sale of trading seats to institutions such as Equity Bank and Commercial Bank of Africa.

The NSE has priced itself for the initial public offering (IPO) at Sh9.5 a share and is seeking to raise up to Sh627 million ahead of self-listing on September 9.
The bourse’s demutualisation and the IPO is one of Mr Mwangi’s recent achievements at the helm of the company.

Mr Ciano of Uchumi Supermarkets was rewarded with a 38.75 per cent pay increment in the year ended June 2013 that saw the retail chain end its 10-year dividend drought.

His monthly pay rose to Sh2.22 million, up from Sh1.6 million a year earlier.

Mr Ciano has been the face of Uchumi’s turnaround, helping to pull the retailer from bankruptcy in 2006 and put it on a profitable growth path.

In the half year ended December, the retailer’s net profit declined 19 per cent to Sh106.9 million on lower sales and higher finance costs.

Uchumi is set to raise an estimated Sh1.5 billion through a rights issue to fund its growth plan after getting the backing of the government that has the largest single stake of 13.4 per cent.

Uchumi’s share price has declined 35 per cent in the past 12 months to trade at Sh12.8, an outcome that has been linked to weaker half-year results.

The pay increments awarded to individual CEOs was also replicated at other publicly traded firms but whose details the Business Daily was not able to determine because the chief executive’s pay is lumped together with that of other executives and senior managers in the financial reports.

National carrier Kenya Airways, for instance, rewarded its two top executives Titus Naikuni (CEO) and Alex Mbugua (finance director) with a 33.7 per cent combined pay rise to Sh8.5 million per month in the year ended March.

READ: Kenya Airways’ executive pay rises 33pc in year of Sh3b loss

This was despite the airline posting a second consecutive loss of Sh3.3 billion in the period, leaving shareholders in a two-year dividend drought.

Financial services firm Britam — headed by billionaire Benson Wairegi — increased executive pay by the widest margin of 82.4 per cent to Sh78.6 million in the year ended December.

In absolute terms, EABL led with a 13.9 per cent jump in annual executive directors’ pay to Sh214.8 million in the year ended June 2013. The brewer’s executives include Charles Ireland (CEO) and Tracey Barnes (finance director).

Safaricom, the telecoms giant that is Kenya’s most profitable company, was second with a 37.4 per cent rise in executive compensation to Sh211.7 million in the year ended March.

The company’s executives who share the amount are Bob Collymore (CEO) and John Tombleson (chief financial officer).

The pay rise seen across the board is in line with the long-term trend in corporate Kenya where compensation schemes including salaries, stock options, and allowances have continued to grow to attract and retain top talent in a competitive and dynamic business landscape.

Talent surveys done by advisory firm PricewaterhouseCoopers (PwC) have consistently pointed to scarcity of top talent in the local and regional markets that has been linked with the bigger pay cheques awarded to experienced executives.