- A format of reporting is used to obfuscate remuneration of individuals in the company's board.
- Kenya lags behind other capital markets in maintaining high corporate governance standards
- The effect of non-disclosure of board pay is to maintain an information asymmetry to the detriment of retail investors.
Tyre distributor Sameer Africa #ticker:FIRE has raised the bar for disclosure of executive pay with the publication of detailed accounts of what each took home, turning the spotlight on the large number of public listed companies that have been using multiple tactics to hide what the top bosses earn.
The Nairobi Securities Exchange-listed firm, in its annual report, details emoluments to each of its board member, including the CEO Allan Walmsley.
This is the highest level of transparency ever in corporate Kenya whose impact is to offer the company’s shareholders additional information they can use to measure the management’s performance against their pay.
Most Nairobi Securities Exchange (NSE) firms continue to treat executive pay as a strongly guarded secret and often use reporting tactics that only meet the minimum regulatory requirements while making it difficult for shareholders to know what each individual on the board earned.
READ: 7 NSE firms reveal details of CEO pay
To meet the regulatory requirements, most companies merely publish block figures of amounts paid to executive and non-executive directors – making it impossible to know what each took home.
Impossible to tell
This method of reporting means that in the event there is more than one individual in either categories, it is not possible to tell what each one takes home.
Under this framework of reporting, only companies with one executive director (usually the CEO) – such as the Nairobi Securities Exchange — inadvertently end up disclosing details of the pay.
Such disclosures are however never direct and often comes with information that is either ambiguous or confusing.
For instance, the structure of the lumped sums are never broken down, and some companies indicating that the figure contains multiple items such as fees, allowances and honorariums – the aim being to keep minority shareholders in the dark.
Major shareholders suffer no such information blackout as they are in charge of hiring and replacing the directors including the top management.
The effect of non-disclosure of board pay, then, is to maintain an information asymmetry among the shareholders, which has been proven the world over to have an impact on the quality of corporate governance.
Kenya is lagging behind other capital markets in maintaining high corporate governance standards, part of which has been blamed on lack of transparency and democratic remuneration of top management and board members.
In leading jurisdictions such as the United States and Europe, all shareholders are given a chance to set remuneration of the top management at annual meetings.
Proxy statements, for instance, are made available to shareholders detailing the CEO’s pay and how he or she has performed in relation to the set targets.
Shareholders are also asked to vote on proposed changes to the CEO’s compensation in the new financial year.