Companies listed on the Nairobi Securities Exchange (NSE) will now be required to disclose how much they will pay their CEOs and top executives should they get sacked before the end of their terms.
The demand is contained in new rules dubbed the Companies (General Amendment) Regulations 2017, which are meant for investors to know the liability of terminating executives’ contracts in quoted companies.
The rules come as at least four NSE-listed companies battle compensation lawsuits filed by former CEOs.
“A director’s remuneration report shall contain, in relation to a director’s contract of service… provision for compensation payable upon early termination of the contract,” amendments to the companies law say.
In an economy where many executives have been forced to exit early with little or no pension because of their firms’ misfortunes, the issue of exit pay or “golden parachute” is becoming prominent and contestable.
In court, the former chief executives are claiming compensation running into hundreds of millions of shillings. They include former CEOs of TransCentury, Olympia Capital, Home Afrika and KenolKobil #ticker:KENO.
Analysts say the rising disputes offer a rare peek into the unrealistic severance packages promised to CEOs at the time of hiring. This is what the new company law wants disclosed in annual reports.
“Full disclosure of executive pay is positive for investors and allows them to question whether the remuneration is tied to performance,” said Benard Kiragu, managing partner at Scribes Registrars, a consultancy firm offering company secretary services.
Gachao Kiuna, former CEO of investment company TransCentury #ticker:TCL, is demanding terminal benefits amounting to over Sh21 million. Former Home Afrika #ticker:HAFR CEO Njoroge Ng’ang’a has sued for wrongful dismissal and is claiming Sh36.3 million from the troubled real estate firm.
Kenneth Kareithi, former CEO of investment firm Olympia Capital #ticker:OCH, is seeking the equivalent of his annual salary after his ouster in February 2014.
Former Kenya Airways #ticker:KQ Finance Director Alex Mbugua last year sued the national carrier for wrongful termination. The court this month ordered his reinstatement or Sh144 million payout.