Seven chief executives of Nairobi Securities Exchange-listed firms have served for more than 15 years and are expected to extend their tenure in a market where on average top managers don’t serve in excess of a decade.
Flame Tree’s #ticker:FTGH founder, Heril Bangera, has the longest run of 32 years, followed by Car & General’s #ticker:CGEN Vijay Gidoomal and TPS Eastern Africa’s Mahmud Jan Mohamed, who have served for 25 years and at least 24 years respectively.
Others are DTB Group’s #ticker:DTB Nasim Devji (20 years), Co-operative Bank’s #ticker;COOP Gideon Muriuki (20 years), Equity Group’s #ticker:EQTY James Mwangi (17 years) and Crown Paints’ #ticker:CRWN Rakesh Rao (16 years).
When it comes to these CEOs, the mantra in boardrooms may well be: “If it ain’t broke, don’t fix it.”
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 CEOs’ terms.
Mr Bangera founded Flame Tree in 1989 and maintains an 84 percent stake in the fast-moving consumer goods manufacturer, securing his CEO post.
DTB and TPS Serena are majority-owned by the Aga Khan Development Network (AKDN), whose portfolio companies have smaller CEO turnover in general.
Mr Muriuki and Mr Mwangi are credited with the growth of their respective banks to the top of the industry in less than two decades.
Co-op Bank is the third-largest bank by assets while Equity recently ascended to the pole position, relegating KCB Group to second place on the back of aggressive regional acquisitions and suspension of dividends.
Mr Muriuki and Mr Mwangi each retain minority stakes in their companies and are expected to continue leading the firms into the future, riding on the above-average returns shareholders have booked via dividends and capital gains.
The banks have not officially disclosed succession plans but it is understood that their leaders have the latitude to stay as long as they choose to.
“The earliest maybe on my own volition that I would ask to retire is when I turn 75,” Mr Mwangi told the Business Daily in 2019.
“I have another 20 years. I take consolation from one of my role models, Warren Buffett who is still chief executive at the range of 87.”
Co-op Bank has also previously indicated that Mr Muriuki’s performance has earned him the right to continue leading the bank. “It is a celebrated transformation journey now with the bank for over 18 years,” the lender said in a statement to the Business Daily in 2019 in remarks about his performance at the time.
There is no correlation between extended CEO terms and corporate performance, which is influenced by many factors including the nature of competition, regulation, demand, technological changes and dynamics in a particular industry.
Management effectiveness does, however, play a significant role in competitive sectors and leaders of successful firms typically take the credit for the performance of their firms.
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.
Critics of long CEO tenures fear that the leaders may be less willing to take risks and venture into new business models, potentially resulting in stagnation or decline.
Companies, however, tend to be more willing to replace CEOs when performance starts to dip, especially if it is due to management missteps.
CEO longevity looks set to grow among NSE-listed firms. The chief executives of Centum Investment Company (James Mworia), Liberty Kenya Holdings (Mike du Toit) and Williamson Tea Kenya (Alan Carmichael) have already served for 13 years each.
A few companies have an official policy of changing their CEOs after a few years and they are typically subsidiaries of multinational firms.
They are BAT Kenya, TotalEnergies Marketing Kenya and East African Breweries Plc. Their parent companies frequently move CEOs of the subsidiary companies around, partly to help them gain skills and experiences across multiple geographies and departments of their vast operations.
The companies, enjoying large market shares in fast-moving commodities businesses, are less sensitive to the frequent CEO turnover.
Besides the subsidiaries of multinationals, frequent executive turnover is often the result of crises and shareholder changes.
Loss-making Kenya Airways and Kenya Power, for instance, have changed their leaders at a rapid rate in the past few years in search of new bosses to steady the ship.
KQ, as the national carrier is known by its international code, parted ways with Mbuvi Ngunze and Sebastian Mikosz as losses continued to pile up.
Kenya Power has had four leaders in the past five years, most of them departing after being charged with fraud at the monopoly.
Other long CEO tenures were cut short by shareholder changes. WPP Scangroup’s founder Bharat Thakrar resigned as the company’s boss in March, ending his 22-year term.
Mr Thakrar had fallen out with the new majority shareholder WPP Plc.
Benson Wairegi retired from Britam Holdings last year, ending his 26 years at the helm of the insurer. His exit came after the entry of new institutional investors, including the International Finance Corporation (IFC) and private equity firm AfricInvest.
The company’s ownership was previously dominated by individual investors, including Mr Wairegi and other local businessmen.
That most CEOs leave only in the wake of shareholder changes, fraud and major losses is a testament to the bias to keep leaders for long.