The pay for top Kenya Airways executives dropped by 8.4 per cent in the financial year ended March 2015, breaking a trend where their salaries and allowances have been on the rise even as the carrier sank into losses.
KQ’s latest annual report shows that the annual take-home for executive directors declined from Sh105 million to Sh95 million, in a year when the national carrier posted a Sh25.7 billion after-tax loss, a corporate Kenya record.
The airline’s chief executive Mbuvi Ngunze (who took over the position in November 2014) and group finance director Alex Mbugua are listed in the report as KQ’s only executive directors.
“Nine out of the 11 members of the board are non-executive including the chairman of the board,” KQ states in its newly released 2014/2015 annual report.
The year to March 2015 pay package includes Titus Naikuni’s salary for seven months from April 1 to October 31 and Mr Ngunze’s pay for the five months that followed until the end of the financial year this March.
The annual report does not reveal how the money is shared between the two current executives, but Mr Ngunze is expected to be taking a larger portion than Mr Mbugua.
However, given the Sh8 million drop in pay this year, it can be deduced that that the new CEO was hired at a lower salary than his predecessor.
The airline did not respond to the Business Daily’s queries on this matter, including whether the Sh95 million executive pay included the send-off package for Mr Naikuni or whether Mr Ngunze was indeed hired on a lower salary scale than his predecessor.
KQ’s substantial payments to its two executives is in sharp contrast to the carrier’s poor performance.
For instance, in the 2013/2014 financial year, the airline’s executive pay rose by one third, defying the Sh3.4 billion loss it reported in the same period.
Two years earlier, the airline had seen its profits decline from Sh3.53 billion to Sh1.66 billion, but executive pay that year went up by nearly a quarter to Sh82 million.
Last year’s executive pay cut is just the fourth in the past nine years. KQ’s management cited a tourism slump, the Ebola epidemic in West Africa and high operating costs as some of the causes of the record-setting slump in profitability.
Its debt-fuelled aircraft acquisition spree more than doubled its fleet ownership costs to Sh25.9 billion, dragging the airline further down to its record-breaking loss.
The airline’s 4,002 employees — representing a slight increase in the staff count from the previous year’s 3,989 — earned a total of Sh16.9 billion in the 12 months ended in March compared to the previous year’s Sh15.3 billion.
Executive pay is a hot subject globally over which shareholders and management have fought vicious battles in recent years.
Corporate governance experts say remuneration of executives should be an important yardstick against which shareholders, especially in listed companies, can assess the performance of senior management.
Most corporations use salaries, stock options, and allowances as incentives for retaining top talent and driving management performance.