By George Ngigi, gngigi@ke.nationmedia.com
In Summary
- New rules require companies to make specific disclosures of board and CEOs’ emoluments.
- The CMA says the aim is to better equip shareholders for the role of determining directors’ pay, noting that the current situation in which the owners merely vote on previous year’s accounts of directors pay is untenable.
- CMA is also seeking teeth to enforce the regulation requiring executive directors to be put on fixed contracts of less than five years.
Owners of public listed companies will know how
much those running their firms are paid if the Capital Markets
Authority’s newly-published disclosure proposals become law.
Through a set of proposed regulations published in
the official Kenya Gazette last Friday, the markets regulator is
seeking an end to rampant concealment of executive pay in Kenya with the
establishment of a new regime that will require detailed pay
disclosure.
The CMA says the aim is to better equip
shareholders for the role of determining directors’ pay, noting that the
current situation in which the owners merely vote on previous year’s
accounts of directors pay is untenable.
“Currently, the model articles in the Companies
Act give shareholders the right to determine board remuneration at the
AGM. In practice, they only approve notes in accounts stating directors’
remuneration the previous year,” the regulator says in its case for
deeper disclosure.
The legal notice goes ahead to propose a detailed
structure of disclosure that includes “the chief executive’s pay, share
options and other forms of executive compensation that have to be made
or have been made during the course of the financial year.”
If this proposal becomes law, public listed
companies will no longer report executive and non-executive directors’
pay as a lumpsum, but will separate the two and go further to disclose
non-executive directors’ fee as well as their remuneration.
CMA is also seeking teeth to enforce the
regulation requiring executive directors to be put on fixed contracts of
less than five years; a rule the regulator says continues to be
violated.
“Almost all firms did not comply (or did not
understand) the requirement to establish a fixed term service contract
of not more than five years for executive directors,” the CMA committee
mandated to draft the code on corporate governance says.
Meshack Jorum, the chief executive of the
Institute of Directors, supported the recommendations, saying they would
entrench a culture of transparency and accountability in corporate
Kenya.
“The tenure would ensure there is no inbreeding and issues of succession are dealt with more seriously,” he said.
None of Kenya’s 61 public listed companies have
made a full disclosure of what they pay executive directors, forcing
shareholders to generate estimates from the annual financial reports.
Retail chain Uchumi Supermarkets,
has, for instance, recently reported that its CEO Jonathan Ciano got a
pay rise of 38.75 per cent, leaving shareholders with the task of
fishing for the exact figure from a sea of information in the company’s
reports.
In real terms, that disclosure meant that Mr
Ciano’s pay had risen to Sh26.69 million from Sh19.23 million – a detail
that was only available in the retailer’s disclosure notice ahead of
cross listing on the Uganda Securities Exchange.
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