Columnists

Danger of fighting graft at Kenya Power

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Kenya Power workers. FILE PHOTO | NMG

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Summary

  • With corporate scandals becoming rampant, a director of a company today will find himself or herself confronting many oversight responsibilities while at the same time having to deal with issues to do with personal risks and liability.
  • In today’s world, boards are forced to be more engaged and vigilant because the way they conduct affairs carries implications on fiduciary responsibility.

This is my take on the ongoing orchestrated attacks on the directors of electricity utility, Kenya Power who are accused of breaching the rules of good corporate governance by crossing the demarcations between functions and roles of boards of directors viz a vis those of the management.

Broader questions touching on the state of corporate governance of parastatals in Kenya are at play here. I will start with brief comments on corporate governance theory.

In traditional textbook theory, the roles and duties of boards and management are supposed to be distinctively different. According to the theory, boards function best when they concentrate on high-level policy decisions and where implementation is left to management.

Yet, when you follow the modern and contemporary practice in corporate governance, you will observe that when boards see negative results today, especially on matters that raise big financial stakes, it is a red flag to get more intrinsically involved in day-to-day issues.

With corporate scandals becoming rampant, a director of a company today will find himself or herself confronting many oversight responsibilities while at the same time having to deal with issues to do with personal risks and liability.

In today’s world, boards are forced to be more engaged and vigilant because the way they conduct affairs carries implications on fiduciary responsibility.

If as a director, you are appointed to a board of a corruption-riddled State corporation like Kenya Power and therefore an environment that demands extra transparency and accountability, you must be prepared to go well beyond basic compliance. You must be prepared to dirty your hands and to give true strategic counsel.

The way I see it, it is ironic to persecute the board of Kenya Power for interfering and micro-managing procurement when what they are doing is well within its core responsibility for oversight over corporate financials — when all it amounts to is trying to bring the company back on track and to reduce its risk profile.

Enough of theory. What — exactly — is the context of the controversy surrounding the board of Kenya Power? Two processes are shaking the status quo in electricity today.

The first is the activities of the board of Kenya Power. Secondly, is the work of the Presidential Task Force on Renegotiation of Power Purchase Agreements chaired by the prominent investment banker, John Ngumi.

The way I see it, the Kenya Power board is trying to disrupt corrupt and old boy networks that have captured the utility by turning its supply chain into a veritable source of inexhaustible largesse.

Indeed, corruption in the supply chain of Kenya Power had been flagged by the Auditor-General as one of the biblical millstones sinking the company deeper into insolvency.

The second biblical millstone around Kenya Power’s neck that was also flagged in the Auditor-General’s latest report is heavy capacity charges paid to independent power producers.

This explains the intrigues behind the current assault on the board of directors of Kenya Power. It is a case where the hunter is being hunted.

Yesterday, the board appeared before the Energy Committee of Parliament to be grilled over allegations of interfering in the work of the procurement department of the company and of attending too many board meetings.

On Tuesday, it was the turn of the Secretary-General of the Kenya Electricity and Workers Union, Ernest Nadome to attack the board and threaten to call a strike if the board was not removed from office.

Attacking entrenched bureaucratic corruption is a task fraught with dangers because you have to deal with an interlocked system of operatives sharing not only rewards but also risks and whose activities are coordinated across a broad spectrum, including oversight agencies and trade unions. These are operatives that are adept at freezing out critics.