KCB Group #ticker:KCB has quietly extended the term of Chief Executive Officer Joshua Oigara by a year as it continues the search for a successor to the long-serving leader ahead of December.
The extension, until December 31, is the second extension for the 47-year old who earlier said he was open to ending his nine-year term end of last year.
The firm tacitly got shareholder backing on the subject after changing the term of Mr Oigara to a five-year term in its latest annual report from four years, effectively extending his contract.
This extension came without the lender expressly indicating to shareholders or investors that it had done so in a market where on average top managers don’t serve in excess of a decade.
It’s also usual in corporate Kenya to extend the CEO’s term by one year, a pointer that KCB was still searching for a capable hand to step into Mr Oigara’s shoes.
“The bank said they will inform us of the transition before the end of the year. Oigara’s term was extended to December 2022,” said a top official at the Capital Markets Authority (CMA) who sought anonymity.
CEO’s contract is among the key actions firms are expected to publicly reveal to investors and shareholders.
Originally, Mr Oigara had said he would retire at the end of his second term that was in December after being first appointed to the position in January 2013.
The nine-year term has been the most rewarding, benefiting from the performance-based pay that has cemented his position among Kenya’s top-paid executives.
KCB, which also operates in neighbouring Uganda, Tanzania, Rwanda, Burundi and South Sudan, has returned double-digit profit growth for most years since it hired Mr Oigara.
The bank’s net profit stood at Sh19.6 billion in 2020 from Sh25.6 billion a year earlier on effects of Covid-19 economic hardships, rising from Sh14.3 billion in 2013.
This has translated to outsized compensation for Mr Oigara. The bank’s shareholders are also happy.
In the past four years, KCB has paid a collective dividend of Sh40.2 billion, accounting for 45.4 percent of its total earnings over the period.
At the Nairobi Securities Exchange (NSE) #ticker:NSE , shareholders have seen the worth of their holding jump by Sh60.5 billion over past five years, nearly doubling its capitalisation from Sh83.1 billion in 2016 to Sh143.6 billion at the end of last year.
He has more than tripled the bank’s asset value from Sh390 billion in 2012 to Sh1.22 trillion.
This expansion is on the back of expansion outside Kenya into markets like Uganda, Rwanda and South Sudan and acquisition of National Bank of Kenya #ticker:NBK .
Kenyan commercial banks are looking beyond their borders for acquisitions, seeking to tap opportunities in East Africa which are driven by rapid economic growth and trade integration.
Mr Oigara did not pick our calls or respond to text messages seeking comment.
At 37 years when he was appointed to the top job, Mr Oigara was the youngest leader of a publicly-traded bank.
He was poached from Bamburi Cement in November 2011 as chief financial officer, before his elevation to replace Martin Oduor-Otieno as CEO.
Mr Oigara joins a small club of CEOs who have served nearly a decade. The club includes the chief executive of DTB Group’s Nasim Devji (20 years), Co-operative Bank’s Gideon Muriuki (20), Equity Group’s James Mwangi (17) and Crown Paints’ Rakesh Rao (16).
Their relatively longer tenures are due to a mix of factors, including being founders of the companies, being credited with success of the firms and a policy of not arbitrarily limiting CEO’s term.
There is a correlation between extended CEO terms and corporate performance, which is influenced by many factors such as the nature of competition, regulation, demand, technological changes and dynamics in a particular industry.
Companies with long-serving CEOs draw several benefits, including stability at the top, institutional memory and strong contacts developed among key stakeholders such as customers, regulators and investors.
Companies, however, tend to be more willing to replace CEOs when performance starts to dip, especially if it is due to management missteps.