Leaked memo shows fatter pay cheque for KCB directors
KCB chief executive officer Joshua Oigara (left) and group chairman Ngeny Biwott during the bank’s half-year results briefing in Nairobi in August last year. FILE
What you need to know:
Board chairman to earn a monthly fee of Sh500,000, up from Sh300,000, besides a chairing allowance of Sh80,000, a telephone allowance of Sh30,000 and a lunch allowance of Sh3,500.
The chairman will also claim entertainment expenses incurred in the course of KCB-related business.
KCB chief executive officer Joshua Oigara said the review was the first since 2010 and was guided by a market survey done by an independent consultant.
“Revised rates would be effective 28th August, 2013,” read minutes of a meeting held on October 31 last year that approved the increased rates.
KCB Bank has increased the pay for board members in changes that will see the chairman earn at least Sh6 million per year, renewing the debate over what compensation non-executive directors of listed companies should draw.
The review will see the chairman, presently Ngeny Biwott, earn a monthly fee of Sh500,000, up from Sh300,000, besides a chairing allowance of Sh80,000, a telephone allowance of Sh30,000 and a lunch allowance of Sh3,500.
The chairman will also claim entertainment expenses incurred in the course of KCB-related business.
“Revised rates would be effective 28th August, 2013,” read minutes of a meeting held on October 31 last year that approved the increased rates.
Non-executive directors of the group will receive a monthly fee of Sh130,000, chairing allowance of Sh70,000 and sitting allowance of Sh65,000. The bank has nine non-executive directors.
KCB chief executive officer Joshua Oigara said the review was the first since 2010 and was guided by a market survey done by an independent consultant.
“The bank’s approach is to attract the best talent and we are not shy to set the benchmark because of the unique position we are in,” said Mr Oigara.
The KCB board members include the Treasury principal secretary, former military chief Joseph Kibwana, Musa Ndeto, Adil Khwaja and Charity Muya-Ngaruiya. Members of the executive who sit on the board are Mr Oigara, the CEO, and chief finance officer Collins Otiwu.
Other perks that the KCB directors will be entitled to are membership in top golf clubs such as Nyali and Great Rift Valley and a medical policy which the bank’s management is finalising.
KCB is Kenya’s largest bank with assets of Sh385 billion. It runs operations in Uganda, Rwanda, Tanzania, South Sudan and Burundi where chairpersons of the subsidiaries will get a monthly fee of Sh200,000.
Mr Oigara said the compensation was necessary because its directors have to navigate different regulatory regimes in the countries of operation which increased the risk exposure. The bank plans to set up a non-operating holding company to own the subsidiaries.
Companies do not usually disclose the breakdown of allowances paid to directors, preferring to carry it as a line item in annual reports. Shareholders usually delegate to the board the setting of directors’ pay during annual general meetings. The broken down fees do not require their approval.
Although there are no regulations on fees and allowances to be paid out to non-executive directors, the fact that they do not take part in the day-to-day running of institutions has evolved a practice where they are usually compensated for appearance at corporate functions and sittings during meetings.
Bank directors sit on different committees, including audit, remuneration, credit, information technology and risk management. Committees sit five times in a year on average.
Of KCB’s seven committees, the credit team has the most sittings as it approves big ticket transactions. The bank has scheduled seven board meetings this year.
In addition to the scheduled bi-monthly board meetings, the directors sit to monitor policy implementation, review performance or approve strategic moves.
In 2012 the board had 17 meetings which Mr Oigara attributed to the restructuring the bank was going through since 2010 following recommendations by international consultants Mckinsey.
The restructuring saw KCB cut the executive team from 19 to eight and rationalisation of the rank and file. This helped the bank cut the cost to income ratio from to 56.4 per cent in 2012 to 52.1 per cent in September last year.
In 2012 KCB paid Sh41 million to its non-executive directors in Kenya and Sh84.8 million as a group.
Equity Bank which has an asset base of Sh267 billion paid its nine non-executive directors for the Kenyan unit Sh20 million. Equity Bank also has nine non-executive directors at group level.
Barclays Bank paid its directors Sh16 million in 2012 and was set to revise their fees last year. Barclays had six non-executive directors.
“The basic rates of fees paid to non-executive directors have remained unchanged since 2010 and the board will soon commence a review of the remuneration of its non-executive directors to ensure that the bank continues to recognise their value on the board,” said Barclays in its annual report.
In a note to shareholders last year the chairman of Barclays Bank said on average his time commitment was at least 45 days a year to the bank while that of non-executive directors was set at a minimum of 25 days per year.
Co-operative Bank disclosed in its report that it pays a monthly fee to its 11 non-executive directors which is reviewed regularly. The bank paid Sh65.5 million in 2012 as directors’ fees.
The details show the price banks are paying to retain competent boards that command clout in the marketplace and offer strategic direction.
Directors’ pay has been on the rise in the banking industry as lenders moved to attract professionals in their boards in the hope of being ahead of the competition in market responsiveness and innovation.
Last year the directors’ pay of the five large banks grew by 2.01 per cent compared to 18 per cent in 2011 and 12.3 per cent in 2010.
Kenya’s retiring and serving C-level executives — CEOs, chief financial officers and chief marketing officers — are increasingly taking up new boardroom roles in banking.
Barclays Bank has three executives — including Mr Ashok Shah, the chief executive of APA Insurance and Mr Brown Ondego, the CEO of Rift Valley Railways.
CBA Bank has Nicholas Nesbitt, CEO of Kencall, and Agriculture secretary Sicily Kariuki (former managing director of Tea Board of Kenya) while Guaranty Bank sought the experience of Mary M’Mukindia, the former CEO of National Oil, and John Mark Wandolo, former KCB corporate director.
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