Equity Group CEO James Mwangi has rejected his bonus in a rare move for an industry that rewards its leaders handsomely in the wake of profit growth.
The banking mogul qualified for a bonus running into the tens of millions but failed to take up the additional pay after some of the lender’s subsidiaries failed to meet their key performance indicators, meaning that their employees did not qualify for a bonus.
This emerges in a period when banks have posted a surge in profits, triggering huge bonus payouts to their executives.
The banking industry has remained profitable in recent years and posted a profit before tax of Sh226.3 billion last year, albeit a slowdown from Sh244.1 billion in 2022.
For instance, the Kenyan subsidiary of the Equity saw its net profit contribution to the group drop to Sh26.7 billion from Sh33.4 billion previously with the unit being bogged down by high non-performing loans.
The group nevertheless saw a rise in the profit contribution from subsidiaries such as Rwanda and the Democratic Republic of Congo (DRC).
“I declined my bonus in sympathy with our subsidiaries which didn’t qualify and I felt I owed them a duty to have helped them to also qualify for the bonus,” Mr Mwangi told shareholders last Wednesday.
In 2022, he pocketed Sh53 million in bonuses on his way to a total payout of Sh213.6 million in the period.
Last year, Mr Mwangi pocketed Sh158.8 million in total earnings, including a Sh106 million salary, Sh31.8 million in gratuity and Sh4.7 million in non-cash benefits. He is set to earn a further Sh511.2 million from the bank’s dividend distribution off his stake or 127.8 million shares in the lender.
Mary Wamae, who recently retired as the executive director, earned a bonus of Sh5.5 million on her way to Sh69 million in total earnings in 2023.
Other members of Equity’s board who serve in a non-executive capacity do not earn salaries or bonuses and are instead compensated through fees and sitting allowances. Equity Group chairman Isaac Macharia said Mr Mwangi’s bonus is usually premised on the performance of the entire group while that of management and staff in subsidiaries is calculated from the performance of each unit.
“The executive at the group level is compensated on the basis of the group performance and the subsidiaries on the basis of the subsidiary performance. In view of this background, the group reviewed the performance of the Group CEO and he had met the criteria for the bonus,” he noted.
“The Group CEO felt that one of the major subsidiaries had not met the budget that he had promised the board and he felt that, if employees in this subsidiary were not going to get rewards, it was not in line with his principles to accept a bonus payment.”
Mr Mwangi’s remuneration package comprises core fixed elements, including a base salary, pension and other benefits. He is also eligible to participate in the group’s bonus scheme, which is anchored on the achievement of key performance indicators (KPIs) but he does not qualify to earn fees or sitting allowances.
Equity’s board developed a compensation and rewards policy based on a model of ‘shared prosperity’ which it leverages to attract, develop and retain talent. The first of such rewards was paid out in 2022.
The rewards are either long or short term, with the former relating to salaries, benefits and bonuses. The long-term rewards include pension and the employee share ownership plan (Esop). Last year Mr Mwangi helped Equity post a Sh41.98 billion net profit, albeit the performance being a 6.4 percent slowdown from 2022 and its provisioning for bad loans more than doubled to Sh35.2 billion.
The bank nevertheless retained its dividend for the year at Sh4 per share.
