KenolKobil under CMA spotlight over role of chairman

Oil marketer KenolKobil has come under the spotlight of the capital markets regulator over its decision to combine the roles of chairman and CEO in breach of corporate governance guidelines.

Jacob Segman, who has been an executive at KenolKobil over the past two decades, was on April 2010 appointed chair, making him the only chief executive to double up as chair among companies listed at the Nairobi bourse.

The Capital Markets Authority (CMA) says it will be asking the oil marketer to separate the two roles as it prepares a law that will bar companies listed at the Nairobi Securities Exchange (NSE) to separate the two positions.

Presently, the corporate governance guidelines allow firms to combine the twin roles in an interim period and give reasons behind this in its annual report—a disclosure CMA argues was not done.

“In the spirit of good corporate governance, we will be asking KenolKobil to separate the role of managing director and chairman,” Kung’u Gatabaki, the chairman of CMA told the Business Daily in an interview.

“The rules we have currently are not enforceable, but we are working on a framework that will give us legal backing.

The culture of transparency in the boardroom has not taken root in Kenya and as the new chairman I will ensure we stop the old way of doing things, “ he said.

Paul Melly, the CEO and deputy chairman of Standard Group is also expected to come under the radar of the capital markets regulator.
The regulator’s guidelines states that for independent directors of NSE-listed firms to be chairmen, they should have not worked in the firm as executives for the past five years and have no business relationships with the firm in the same period.

Significant suppliers of the company or relatives of senior managers are also not labelled as independent directors.

“There should be a clear separation of the role and responsibilities of the chairman and chief executive, which will ensure a balance of power of authority and provide for checks and balances such that no one individual has unfettered powers of decision making,” says the CMA guidelines.

In the US, the roles of chair and CEO have often been combined, but now more and more companies are splitting the roles. 

Investor pressure has prompted companies such as Sara Lee, Deere and News Corp to split the two roles as more companies consider the merits of enhancing board independent oversight.

The issue of independent directors is being a big issue in corporate Kenya that has relied heavily on old-boy network for boardroom appointments.

The capital markets regulator has been spurred into action by the recent boardroom upheavals at auto firm CMC Motors that saw its chairman Peter Muthoka replaced for doubling up as chairman and key supplier of the troubled auto firm.

The motor dealer allege that Mr Muthoka, the firm’s largest shareholder with a 24 per cent stake, had overcharged it by nearly Sh2 billion over the past five years through over-invoicing.