Top bank directors pay races ahead of employee salaries
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Equity CEO James Mwangi at a past event. Equity was the only bank whose directors’ pay dropped as other lenders raised theirs by double digits.
Directors’ pay in Kenya’s top five banks grew at a faster pace than the employee wages on increased workload and the need to attract top talent into the boardroom.
Board members at KCB, Barclays Bank, Equity Bank, Standard Chartered and Co-op Bank saw their pay increase to Sh365 million in the year ended December compared to Sh302 million they earned in a similar period last year – a 28 per cent rise.
Employee costs at the top banks increased by 8.5 per cent to Sh33.1 billion, which is the first time in five years it has grown in single digits, according to the review of the bankers’ financial statements.
Analysts attribute the increase in board pay to rise in fees paid to directors and increased meetings in line with tighter corporate governance arising from changing regulatory landscape.
“Directors’ pay used to be low but this is changing as bank boards are meeting more regularly, especially those in the audit and risk committees, which are translating to more sitting allowances” said Ashif Kassam, the managing partner of RSM Ashvir.
Banks tend to have more meetings than their counterparts in the services and industrial sectors, placing an additional burden and workload on non-executives.
This has made bankers’ boardrooms the most lucrative among the Nairobi Securities Exchange-listed firms.
Last year, for instance, commercial banks held on average 20 meetings save for KCB where directors had more meetings.
Companies in the industrials and service sectors held fewer than 15 board sessions, watering the ground for those sitting in bank boards to generate outsized fees.
Pay includes sitting allowances and yearly cash retainers, while those serving in critical committees such as audit take home fatter paycheques on the increased meeting sessions.
The highest-paid directors were at Standard Chartered Bank as the bank’s total boardroom pay rose to Sh123 million last year, compared to Sh89.8 million in 2010 reflecting an increase of 37.7 per cent.
The directors’ pay was driven by salaries offered to its CEO Richard Etemesi and three executive directors Kariuki Ngari (head of consumer banking), Segun Odusanya (head of origination and client coverage) and Chemutai Murgor (the chief finance officer) who sit in the board.
KCB paid its directors Sh106 million up from Sh91.5 million in 2010 while Co-op Bank paid its directors Sh100.4 million up from Sh89.8 million in the same period.
The KCB board includes Treasury permanent secretary Joseph Kinyua and businessmen Joe Adongo, Sunil Shah and Sue Omanga.
While StanChart directors’ pay was driven by executive salaries that of Co-op Bank was mainly driven by its outsized boardroom, which has 18 non-executive directors.
This is high compared to Equity’s 11 non-executive directors, KCB’s 10 and five at Barclay’s board.
Equity Bank was the only major bank whose board pay dropped marginally to Sh20.9 million from Sh21.1 million while Barclays Bank paid Sh14.5 million from Sh12.4 million, which excluded the pay of three executives, including CEO Adan Mohamed, who hold directorship positions.
The spike in boardroom pay is emerging when commercial banks are racing to strengthen their boards with professionals, including former and serving CEOs in an effort to stay ahead of the pack.
Analysts reckon directors’ pay will keep rising in coming years as companies race to tap talent with deep knowledge of the businesses, globally astute and capable of not only developing but also guiding strategies.
For instance, Barclays Bank has three executives including Mr Ashok Shah, the chief executive of APA Insurance, Mr Brown Ondego, the CEO of Rift Valley Railways, and Jane Karuku, deputy chief executive at Telkom Kenya on its board.
Equity has Mr Benson Wairegi, the managing director of British America Investment Company and Mr Julius Kipng’etich of KWS while Standard Bank and CFC Stanbic recently tapped Les Baillie (chief of investor relations at Safaricom) and Charles Muchene (former head of PriceWaterhouseCoopers in Kenya).
But as directors picked a higher package, employees in Kenya’s banking sector grappled with minimal pay rise and job cuts as executives race to slow down the growing wage bill.
Barclays’ wage bill reduced to Sh7.3 billion from Sh8.3 billion in 2010 as it shed jobs to contain its ballooning wage bill.
