Why we stand by our story on Centum CEO pay
The Centum Investment CEO James Mworia, in several tweets Wednesday, challenged the accuracy of this story headlined: “Centum CEO sets new record with Sh375.6m CEO pay.”
We indicated, in our response to the tweets, that we stand by our story which is based on the company’s disclosures in its latest annual report.
Here are the reasons why we stand by the story:
- There annual report tabulates key management compensation, which includes pay for executive directors and senior management. This was given as Sh614.9 million and Sh711.5 million for the years 2017 and 2016 respectively, at the group level.
- There is additional disclosure of the management team remuneration, now narrowed down to those who are executive directors. This is given as Sh375.6 million and Sh201.1 million for the years 2017 and 2016 respectively, again, at the group level.
- Mr Mworia is the only executive director at the group level at Centum, and the amounts above are attributable to him alone going by the presentation in the annual report.
“The board has only one executive director to prevent conflicting roles between the Management and the Board of Directors,” Centum says in its 2017 annual report.
Centum Investment’s #ticker:ICDC chief executive James Mworia’s total pay rose 87 per cent to a record Sh375.6 million in the year ended March compared with Sh201.1 million the year before, taking his cumulative eight-year pay to nearly Sh1 billion.
The compensation, which extended Mr Mworia’s record as corporate Kenya’s highest-paid CEO, was equivalent to Sh31.3 million per month, according to disclosures in the company’s latest annual report.
The bulk of Mr Mworia’s remuneration is made of a performance bonus scheme, whose targets the Centum chief executive and his management team have consistently met over the years, drawing hundreds of millions of shillings in return.
Mr Mworia’s take-home is particularly unique in the fact that his monthly salary is a more modest Sh2 million or about Sh24 million a year – translating to a small fraction of the annual total remuneration for the 40-year-old executive.
At Sh375.6 million, Mr Mworia’s total remuneration places him ahead of the pay of the chief executives of the five largest firms by market capitalisation at the Nairobi Securities Exchange, #ticker:NSE including Safaricom, #ticker:SCOM East African Breweries Limited #ticker:EABL and KCB Group.#ticker:KCB
Safaricom’s Bob Collymore and KCB’s Joshua Oigara in December 2015, announced they were on a monthly pay of Sh9 million and Sh4.9 million, adding up to Sh108 million and Sh58.8 million respectively.
Mr Mworia was already making multiples of the two CEO’s pay by 2012, his compensation having risen sharply when Centum started reaping the benefits of its big shift from passive equities investments to large-scale projects in different sectors of the economy.
The Centum chief executive’s remuneration has grown at an annual compounded rate of 64.6 per cent in the past eight years when the company has also grown its market capitalisation and total assets to stand at Sh28 billion and Sh88.3 billion respectively.
Mr Mworia has excelled at implementing Centum’s earlier decision to invest big in areas such as real estate and fast moving consumer goods, raising debt, selling some assets and structuring joint ventures to fund the capital-intensive projects.
The ventures have grown in value, allowing the company to book multi-billion-shilling gains and ultimately satisfying the bonus payment criteria of clocking a minimum return of 15 per cent on net assets each year.
Centum previously said employees were entitled to 20 per cent of any return above the set benchmark, with the absolute payout also based on individual performance.
The new annual report is silent on what portion of the excess return accrues to employees, indicating that the level could have changed.
The investment firm beat the hurdle rate by a whisker, allowing the senior management team to book new bonuses whose payments is spread over several years to encourage them to stick around.
Centum reported a net return of Sh6.3 billion in the year ended March when the opening shareholder funds stood at Sh39.3 billion, representing a return rate of 16 per cent.
This created an excess of some Sh390 million in absolute terms, part or all of which was available for distribution to eligible staff.
Employees of the company had accrued bonuses of Sh716.2 million in the review period compared to Sh987.4 million the year before, making the workforce of less than 200 one of the highest-paid in the country.
“The group has in place a performance bonus scheme. The scheme rewards employees of the group based on achievement of certain set benchmarks of business success,” Centum said in the report.
“The group’s performance bonus scheme is designed to enable achievement of consistent business growth that is tied to the increase in shareholder wealth, which is the primary business objective. A hurdle rate of 15 per cent annual increase in return based on the opening shareholder funds has been set.”
The bonus is payable in three equal installments over three years, with accrued payouts continuing only if the net asset value is maintained or increased from the prior year.
The acquisitive company has racked up major fair value gains during Mworia’s tenure, with these standing at a cumulative Sh24.1 billion in the year ended March across subsidiaries including Two Rivers Development (which partly owns the Two Rivers Mall) and Coca-Cola bottler Almasi Beverages.