Safaricom pays Michael Joseph Sh127.5m bonus

Safaricom Plc #ticker:SCOM paid Michael Joseph an additional bonus of Sh127.5 million in the year ended March, making him Kenya’s best paid non-executive board member of a firm listed on the Nairobi bourse.

The bonus came in a period when he had already relinquished the chief executive post to Peter Ndegwa, whose appointment took effect on April 1, 2020.

It is not clear whether the additional payout to Mr Joseph, which was categorised under executive compensation, is linked to his nine-month stint as interim CEO after Safaricom’s long-time executive Bob Collymore died of cancer in July 2019.

The company did not disclose in the annual report if there was any deferred compensation owed to Mr Joseph.

But it says its executives are entitled to emoluments they have negotiated with the company, adding that non-executive directors, including its chair, do not receive bonuses.

“The executive director’s (the CEO) remuneration is as per the negotiated employment contract and is employed on a fixed-term basis,” the Nairobi Securities Exchange-listed firm said.

“Besides the basic salary, the executive director is entitled to an annual performance-based bonus and Vodafone Plc shares, residential accommodation, utility bills payment, children’s school fees and club membership.”

The company added that its non-executive directors are compensated in the form of fees “but are not entitled to any pension, bonus or long-term incentives such as performance share plans.”

Besides the Sh127.5 million bonus Mr Joseph earned in the review period, he also received Sh6.3 million worth of fees as chairman and non-executive director, taking his total compensation to Sh133.8 million.

After stepping down as CEO, he remained as a non-executive director and was later elevated to chairman on August 1, 2020 to replace Nicholas Ng’ang’a, who retired.

In the previous financial year (to March 2020), Mr Joseph’s earnings also comprised elements of his CEO role and fees as a non-executive director and totaled Sh126.3 million.

This included a salary of Sh88.4 million, a bonus (Sh23.4 million) and a director’s fee (Sh360,000).

Safaricom does not disclose details of the contracts of its executives but says that non-executive directors’ fees are fixed and were not changed in the year ended March.

The chairman, for instance, is paid Sh5.7 million per annum and sitting allowance of Sh85,000 per meeting.

Other non-executive directors are paid fees of Sh2.2 million each per annum and are entitled to a sitting allowance of Sh60,000 per meeting. A person chairing a board committee is paid Sh74,150 per meeting.

Mr Joseph, a Safaricom veteran, provided stability to the telco as it searched for Mr Collymore’s substantive successor.

He had previously served as Safaricom’s chief executive from July 2000 when the company was relaunched as a joint venture between Vodafone UK and Telkom Kenya until his retirement in November 2010.

Mr Joseph is credited with the launch of the pioneering mobile money platform M-Pesa and taking the telco public in June 2008 via an initial public offering that raised Sh50 billion for the government.

During his new temporary term as CEO, he focused on growing the telco’s market share and simplifying the pricing of its various services such as voice and mobile data.

The firm’s net earnings dropped marginally to Sh73.6 billion in the year ended March 2020 amid stagnant revenues. Safaricom maintained its policy of distributing at least 80 percent of its net income, a move that saw it pay a dividend of Sh1.4 per share or an aggregate of Sh56 billion.

Safaricom’s share price and market capitalisation stood at Sh28 and Sh1.1 trillion respectively when he left the CEO role at the end of March 2020, barely changed from when he took the position nine months earlier.

Besides Safaricom, Mr Joseph holds multiple executive and non-executive roles within the larger Vodafone Group. He is the director of mobile money at Vodafone Group Services and Vodafone’s strategic adviser appointed to the board of its subsidiaries, including Vodacom Tanzania.

Safaricom becomes the latest NSE-listed firm to pay its official major compensation after the end of his term.

Oil marketer KenolKobil (since rebranded to Rubis Energy Kenya) in 2017 paid its former chief executive Jacob Segman a record Sh707.1 million to settle a stock-based compensation arrangement he had with the company and whose scale was previously undisclosed.

It remains the largest CEO exit compensation among NSE-listed firms that has been disclosed.

Equity Group in 2019 paid its former long-serving chairman Peter Munga Sh50 million as a reward for his service, which spanned 35 years. The special payout to Mr Munga is also the largest exit compensation a former chairman of an NSE-listed company has received.