There is what the hardworking Kenya Power technicians fix on the ground. Then there is what the hardworking Kenya Power owners fix up there in the rarefied ownership air. On October 17, Kenya Power issued a press release on X.
Headed 'Kenya Power moves to change board composition to reflect the company’s shareholding structure', the accompanying statement was an eye-watering 50 megawatts of rapid-fire shuffling of a governance deck of cards.
The usual sweet nothings prevailed: “To safeguard the interests of minority shareholders in line with good corporate governance standards…” was the first red flag for me. A company that regularly switches up its billing methodology depending on what side of Greenwich Mean Time it woke up is not one that will safeguard anyone. Ever.
The press statement gave a heads-up about an extraordinary general meeting (EGM) coming up with an agenda to amend the memorandum and articles of association.
This was in order to, and I quote Kenya Power, “The amendments provide a mechanism for appointing Directors in a manner that proportionately reflects the Company's shareholding structure. Currently, the Government holds 50.09% of the Company's shares. In the proposed restructuring, the Government, who is the majority shareholder, will appoint five directors while the remaining shareholders will elect four directors.”
It gets interesting. The government, with a majority thinner than a mosquito’s proboscis, was looking to protect minority shareholders by appointing five directors to the minority’s four. The author of the press statement had been thoroughly set up to write a telenovela script. So when the company put out a full-page advertisement two days later with the EGM notice, I sipped a cup of very hot tea and slowly read each special resolution proposed in this carefully scripted act.
The amendments to the articles will create two classes of shares. Class A shares or economy class in the governance Boeing 787 Dreamliner to be held by the hoi polloi and Class B shares or business class to be held by the National Treasury.
While both classes get to the same destination in terms of rights and privileges, Class A shares are entitled to elect four directors.
The Class B shares are entitled to appoint the balance of the directors. Elect versus appoint. That is the class difference.
I do not want to impute mischief in the intentions of the press statement’s author, but the proposed amendment to Article 96 of the company’s articles states that “the directors shall be not less than seven and not more than ten in number.”
Why would the press statement say that the government would appoint five directors when the articles provide that they can appoint up to six directors?
Legally speaking, if these changes pass, shareholders at the next annual general meeting will only have the power to elect four directors. The government will have a right to appoint up to six, or the “balance”.
What this does is protect the government-appointed directors from being rotated out of the board during an AGM. And yet the same notice of changes includes article 96 (B) which says the composition of the Board shall comprise a number of directors which fairly reflects the company’s shareholding structure.
Since Article 96 provides for up to 10 directors, I don’t think a 60:40 director split reflects a fair split for a shareholder who owns 50.09 percent. Fluff. Period.
It gets even more interesting. The chief executive officer of Kenya Power in the past has also been a managing director, meaning he has a seat on the board of directors.
For some listed companies, executive directors are usually exempted from going through the vagaries of election at AGMs through express exemption clauses in the articles.
Going forward, will the CEO’s directorship be elected or appointed? I went to the governance section of the KPLC website and found hastily and very poorly scanned board charter and board manual documents. There was no sign of the existing articles.
According to section 2.4 (iv) of the soon to be re-written board manual, all directors are supposed to submit themselves to election at the AGM every three years. So will shareholders elect the MD to take up one of their “fairly distributed” four seats on the board? Or will he be appointed by the majority shareholder?
What these changes are purporting to do is ensure the majority shareholder’s directors have guaranteed seats on the board, while inelegantly controlling the appointment of the MD who is quite likely the missing sixth director in the press statement.
