Business Daily (Nairobi)
Michael Omondi
28 November 2011
Directors’ pay in Kenya’s top five banks grew at a faster pace than the lenders’ employee wages on increased workload and the need to attract top talent.
Board members at KCB, Barclays Bank, Equity Bank, Standard Chartered and Co-op Bank saw their pay increase to Sh283 million in the nine months compared to Sh220 million they earned in a similar period last year–reflecting a 28 per cent rise.
Employee costs at the top banks increased by 8.7 per cent to Sh24.9 billion, which is the first time in six years it has grown in single digits, according to consulting firm Deloitte.
Analysts and banking executives attribute the increase in board pay to rise in fees paid to directors and increased meetings in line with tighter corporate governance stands arising from changing regulatory landscape.
“Individual directors pay has risen and bank boards are meeting more regularly, especially those in the audit and risk committees,” said Mr Sammy Onyango, CEO at Deloitte East Africa.
Banks tend to have more meetings than their counterparts in the services and industrial sectors, placing an additional burden and workload on non-executives. This has made bankers’ boardroom the most lucrative among the Nairobi Securities Exchange-listed firms.
Last year, for instance, commercial banks held on average 20 meetings save for KCB where directors had about 40 meetings. Companies in the industrials and service sectors held fewer than 15 board sessions, watering the ground for those sitting in bank boards to generate outsized fees.
Pay includes sitting allowances and yearly cash retainers, and those serving in critical committees such as audit take home fatter pay cheques.
But as directors picked a higher package, employees in Kenya’s banking sectors were faced with minimal pay rise and job cuts as executives race to slow down the ballooning wage bill.
Barclays wage bill reduced to Sh5.4 billion from Sh6.4 billion in quarter three of last year, mainly due to the 200 mid-level managers it laid off in December, and helped slow down the industry’s wage bill. The industry’s wage bill grew by 21 per cent last year to Sh47 billion.
The highest-paid directors were at KCB Bank as the bank’s total boardroom pay increased to Sh109 million in the nine months to September compared to Sh89 million in a similar period last year, reflecting an increase of 22.4 per cent.
The board includes Treasury permanent secretary Joseph Kinyua and businessmen Joe Adongo, Sunil Shah and Sue Omanga.Standard Chartered Bank paid its directors Sh82.1 million in the nine months up from Sh56 million in the same period last year while Co-op Bank paid its directors Sh65 million up from Sh52.1 million in the period under review.
However, unlike Co-op Bank, Standard Chartered’s directors pay was driven by salaries offered to its CEO Richard Etemesi and three executive directors Kariuki Ngari (head of consumer banking), Segun Odusanya (head of origination and client coverage), and Chemutai Murgor (the chief finance officer).
For Co-op Bank, its board pay was driven by an outsized boardroom, which has 18 non-executive directors drawn from the co-operative society movement.
This is high compared to Equity’s 11 non-executive directors, KCB’s 11 and five at Barclay’s board in the first half.
Equity Bank was the only major bank whose board pay remained static at Sh18.8 million from Sh18.4 million while Barclays Bank paid Sh8.2 million from Sh4.7 million, which excluded the pay of three executives, including CEO Adan Mohamed, who have directorship positions.
The rise in boardroom pay is emerging when commercial banks are racing to strengthen their boards with professionals, probably former and serving CEOs in an effort to stay ahead of the pack.
Analysts reckon that directors’ pay will continue rising in coming years as companies race to tap talent with deep knowledge of the businesses, globally astute and capable of not only developing but also critiquing strategies.
For instance, Barclays Bank has three executives including Mr Ashok Shah, the chief executive of APA Insurance, Mr Brown Ondego, the CEO of Rift Valley Railways, and Jane Karuku, deputy chief executive at Telkom Kenya on its board.
Equity has Mr Benson Wairegi, the managing director of British America Investment Company and Mr Julius Kipng’etich of KWS while Standard Bank and CFC Stanbic recently tapped Les Baillie (chief investor relations at Safaricom) and Charles Muchene (former head of PricewaterhouseCoopers in Kenya).
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