CEOs lose bonuses amid Covid fallout

Ten Nairobi Securities Exchange-listed firms cut their executive bonuses by Sh284 million last year in the wake of reduced profitability that was largely caused by the economic fallout from the Covid-19 pandemic.

KCB #ticker:KCB, Absa Bank Kenya #ticker:ABSA, Britam #ticker:BRIT, NCBA #ticker:NCBA and Bamburi Cement  #ticker:BAMBare among the firms that either suspended or reduced executive bonuses as part of cost-cutting measures that also saw companies lay off hundreds of rank-and-file workers.

The banking sector, for instance, posted a 20 percent drop in net profit to Sh88 billion in the year ended December compared to Sh110.1 billion a year earlier, according to Central Bank of Kenya (CBK) data.

This hurt bonus payouts to bank executives, including CEOs of KCB, NCBA, Absa and StanChart #ticker:SCBK.

The weaker bank earnings were mainly caused by loan loss provision swelling to Sh110.2 billion from Sh39.2 billion as the lenders braced for increased defaults in the wake of increased job losses, lockdowns and business disruption in the pandemic era.

With few exceptions, executives suffered reduced or zero bonuses to contribute to their companies’ cost-cutting efforts and also demonstrate solidarity with ordinary employees who also missed bonuses and took pay cuts in some cases.

Banks, which have traditionally paid the largest bonuses on rising profits in the past, led in trimming the cash incentives in the review period.

Four firms — KCB, NCBA, Britam and Liberty Holdings — suspended bonus payouts to their executives while six (Absa, StanChart, Bamburi, BOC Kenya, Longhorn and Unga Group) reduced the cash incentives.

KCB’s chief executive, Joshua Oigara, missed out on bonus payment unlike in the previous year when he took home Sh193.7 million — Sh145.3 million in cash and Sh48.4 million deferred.

The bank’s chief financial officer, Lawrence Kimathi, also did not earn any bonus unlike in 2019 when he received Sh29.4 million and Sh9.8 million in cash and deferred respectively.

The missed bonuses came as the lender’s net profit fell 22 percent to Sh19.6 billion in the year ended December on the back of increased provisions for coronavirus-related loan defaults.

“Executive directors are entitled to a performance-based bonus pay. Each year, 25 percent of the bonus is retained with the payment of the retained portion being deferred to be paid over a period of the three subsequent years,” says KCB.

NCBA Group chief executive John Gachora and the finance director David Abwoga also missed out on bonuses as the bank’s net earnings fell to Sh4.5 billion from Sh7.8 billion.

Mr Gachora and Mr Abwoga had received bonuses of Sh38.47 million and Sh14.4 million respectively the year before.

Britam Holdings chief executive Benson Wairegi, who retired early this year, did not get a bonus unlike in 2019 when he received Sh13.48 million.

The insurer says it runs a performance-based bonus, which is paid from the company’s profit.

Britam last year posted a Sh11.67 billion loss, reversing a net profit of Sh5.42 billion the previous year. Another insurer, Liberty Kenya Holdings, did not pay any bonus to its managing director Mike du Toit. Mr Toit had received Sh2.476 million the previous year.

Other companies opted to slash their executives’ bonuses.

Absa Kenya CEO Jeremy Awori did not get a cash bonus but was awarded a deferred bonus of Sh17.5 million as the bank’s net profit shrank to Sh4.1 billion from Sh7.4 billion.

Mr Awori’s bonuses totalled Sh35.3 million the previous year.

Absa Kenya’s chief financial officer, Yusuf Omari, saw his cash bonus fall from Sh16.5 million to Sh7 million.

StanChart cut total cash bonuses to its executive team from Sh64.46 million to Sh36.7 million, with the cash component also falling from Sh26.86 million to Sh6.98 million.

StanChart CEO Kariuki Ngari saw his bonus fall by Sh6.59 million to Sh20.95 million. The bank’s net earnings declined to Sh5.4 billion from Sh8.2 billion.

A few firms raised their executive bonuses arising from special circumstances and the need to adjust the compensation of their leaders to industry levels.

Safaricom, for instance, raised its executives’ bonuses to a record Sh243.1 million from Sh43.5 million.

The telco paid Michael Joseph Sh127.57 million in the year ended March, up from Sh23.4 million a year earlier. Mr Joseph, currently the company’s chairman, previously held overlapping roles of CEO and non-executive director.

The firm’s current CEO, Peter Ndegwa, who took office on April 1, 2020, got a Sh90 million bonus for the year. The telco’s net earnings declined 6.8 percent to Sh68.6 billion as revenues from voice and M-Pesa declined.

Equity paid its executives bonuses for the first time in six years, having previously announced that it would raise their compensation to keep up with industry benchmarks.