Kenya Power shock and succession plan

On the nightmare that was on Friday July 13, the Director of Public Prosecutions (DPP) switched off the lights of the management suite of offices over at the Kenya Power #ticker:KPLC by ordering the arrest of 11 senior managers for having been involved in economic crimes.

A press statement was issued the following morning by a chairman, who remained nameless, assuring stakeholders that all was well and the lights continued to shine brightly over at the management suite in Stima Plaza. Eventually the board got it together and by late that afternoon, the Energy and Petroleum Cabinet Secretary had stepped into the whirlpool to announce that an interim leadership team had been identified and appointed.

It is what happened between the lukewarm statement issued by the nameless chairman and the eventual appointment of the acting CEO that warrants corporate governance attention. To begin with, the leadership team which included the substantive managing director and 10 senior managers was upended. This means that the Kenya Power board needed to urgently establish continuity of leadership and a strong perception of stability. If the human resource committee of the board had been executing its mandate as reported in the company’s June 2017 annual report, then it should have developed the succession plan for senior staff.

At the very minimum there should have been at least one potential successor to each general manager’s role as well as the role of the managing director. The aim is not to fill Noah’s succession Ark per se. The objective of a well-functioning succession plan is to identify which candidate is “ready now” and which other candidates are ready in the next three years. The latter candidates would have a professional growth plan that identifies what areas of growth are required to move them to “ready now” status, be it further training or career exposure through challenging assignments.

A good board would always ensure that the succession plan is well documented and is an annual and active agenda item in the human resource committee’s work plan.

The nightmare on Kolobot Street that was the DPP’s action is a strong wake up call to boards of public and private sector organisations in Kenya. Who would keep the lights burning if half your management team left today and do you have the framework to identify the candidates?

In case you missed it, Kenya Power is a limited liability company listed on the Nairobi Securities Exchange. Their most recent published annual report for June 2017 is a handsomely crafted document, with a lot of graphics and information about the organisation including their corporate governance framework which is guided by, amongst others, the Companies Act 2015, the Capital Markets Act and the State Corporate Guidelines.

The report states that as at June 30, 2017, the government owned 50.086 per cent of the company. Which means that 49.914 per cent is owned by other shareholders. The press conference that was called late in the afternoon to announce the appointment of the acting leadership team was revealing.

The chairman of the board (whose face and name were now revealed as Mahboub Mohammed, a former civil servant) invited Energy PS Joseph Njoroge to invite CS Charles Keter to make the announcement of the management changes.

Government protocol was clearly in play here which was slightly incongruent with the message that was necessary at this stage. Who was in charge? The government or the board? Who had driven the selection of the new management team earlier that day and who would be overseeing the critical transition process that would now ensue?

The subsequent written statement issued to media houses announced that the Kenya Power board had appointed a number of people to act in an interim capacity for three months. But the physical press conference showed who was really in charge. As the government moves towards privatising more parastatals and potentially listing them on the stock exchange, there has to be some introspection about what the rules of engagement are when it comes to demonstrating true governance independence. Whether a majority owned government entity is strategic or not, for as long as it is a publicly listed company the board must not only be seen to be in charge but must be in charge. That is a key tenet of publicly listed companies.