Queries as firms pay bosses huge salaries while junior staff struggle
- Shareholders, unions question huge perks listed companies are paying their CEOs.
It’s that time of the year when listed companies have to file information about what they pay their chief executive officers — and critics are questioning the hefty amounts.
This has seen the ever contentious debate of the expanding gap between top executives of Kenya’s listed companies and the lower ranks of workers rear its head again with a section of union leaders and shareholders calling for harmonisation of the pay scales.
The widening wealth gap between bosses and workers has also raised questions about the moral defensibility of big bonuses, when workforces face falling average earnings, according to union leaders and shareholders.
Many workers have been going through a rough time in recent months amid tough economic times which eroded their earnings.
A relentless rise in inflation to a 19-month-high in April, coupled with a raft of newly-introduced statutory deductions, risk eroding the Kenyan workers’ take-home this year, reversing gains from 2018 when employment earnings were above the cost of living.
According to Mr Alloys Chami who holds a stake in several of Kenya’s leading blue chip firms, the widening gap between executive pay and that of junior workers is alarming and should be addressed so that all staff are motivated to deliver value for shareholders.
“Motivating lower level workers ensures they uphold their integrity and are not vulnerable to fraud,” said Mr Chami. “It also ensures they live in dignity at a time the cost of inflation has gone up.”His sentiments are echoed by Gabriel Okomo, who is the interim deputy secretary general of the Banking Insurance and Finance Union of Kenya (BIFU).
Mr Okomo says senior management of local commercial banks in Kenya should move quickly to address what he says is the “skewed” pay structure that has left financial institutions with “huge discrepancies” in pay.
“Reducing cost of operations has created opportunities for officials to pay themselves hefty perks,” he claimed.
“There is need to address this to motivate the junior employees who are key contact between customers and banks,” he added.
A majority of Kenyan firms have frozen fresh recruitment amid uncertainty in regulatory and trade environments, an industry survey suggested. This has come on the backdrop of job cuts mainly focused on lower rung employees, according to company records.
But human resource experts said it is an open secret that top executives of Kenya’s blue chip firms have always “been pampered”.
Perks for some have included round-the-clock security, access to private jets for official trips, personal chefs, personal trainers and even armoured luxury limousines.
This, the experts say, is just a sneak peek of the envious perhaps outrageous world of executive privileges for a few elite Kenyan CEOs and senior executives.
For the average employee the pursuit of a “benefits package” resembles images of a huge cash compensation which may include salary, bonuses and stock options. Not for this group of highly paid pampered CEOs. Blue chip companies in Kenya are pulling out all the stops to keep their top managers happy.
According to experts, company boards are making big bets with corporate executives, offering them luxurious privileges in their contracts to woo and retain them.
These include luxury holidays, wardrobe allowances, car and personal drivers, bodyguards, private club membership, housing, entertainment allowance and elite school fees benefits.
Some of the other perks the CEOs enjoy include flying on private jets or first class, entertainment and holiday allowances, country club and gym memberships, mortgages and worldwide medical covers, which enables them to seek treatment abroad.
Other perks include reimbursement for taxes paid.
“Surprisingly it is not only the multinationals and big companies doing it. We recruit for top medium-sized firms and in the last couple of years they have started to offer perks to their senior executive staff with the main goal being to retain them and spur productivity,” said Perminus Wainaina, the managing partner of Kenyan recruitment agency Corporate Staffing Services in an earlier interview.Consequently, the modern-day CEO of a blue chip firm is a different breed of a leader from what we have always known.
“If an executive is to focus all their energies on a company then they need some things taken care of as a minimum,” said Mr Wainaina.
“This include profit share/bonuses, club membership, housing, entertainment allowance, school fees, and an enhanced medical cover. Some also request for a risk and travel allowance.”Other experts defended the high executive pay.
Hunt for talent
According to independent analyst Aly Khan Satchu, the hunt for talent has fuelled the rush to pamper senior executives.
Mr Satchu said in an earlier interview firms realise CEOs can be the difference between success or failure for companies hence the craze to outdo each other in offering privileges.
“A singular corporate leader can create outstanding and exponential value for a company’s shareholders. Just look at companies like Apple under Steve Jobs, Ali Baba under Jack Ma and more,” he says.
“So there is no problem paying up for a CEO’s talent as long as the value is being created. Mr Collymore is a classic example of a CEO delivering exponential returns.”
Last week, KCB Group revealed in its annual report, its chief executive officer Joshua Oigara earned Sh273 million in salary, bonus and allowances in 2018, a year when the lender which is Kenya’s biggest bank by assets announced a record net profit.
Mr Oigara’s 6.6 per cent (Sh17 million) pay increase mainly came in the form of a higher bonus of Sh180 million that went up from Sh147 million in 2017, and which more than compensated for a Sh20 million drop in allowances to Sh10 million.
His higher bonus (and total pay package) was in tandem with KCB’s 21.8 per cent growth in profit last year to Sh24 billion, the highest-ever earnings reported by a Kenyan bank.KCB ties bonus payments to achievement of multiple metrics, including the profitability of the group.
Equity Bank Group another of Kenya’s giant banks, left the pay of chief executive James Mwangi unchanged at a total of Sh60.4 million last year when its net profit jumped by five per cent to Sh19.8 billion for the year ending December 2018.
The bank, Kenya’s second largest by assets, says Mr Mwangi was not paid a bonus for 2018 but earned a salary of Sh56.73 million or Sh4.72 million per month and an allowance of Sh3.744 million in the year ended December, same as the previous year.