Money Markets
By GEORGE NGIGI
In Summary
- The disclosure was to help company owners gauge whether directors’ remuneration was in tandem with their performance. Executive pay has been a subject of intense public debate globally driven by shareholders’ push for pay disclosure including performance bonuses and share options.
- None of Kenya’s 61 publicly listed companies has made a full disclosure of what executive directors earn, forcing shareholders to generate estimates from annual financial reports.
Capital Markets Authority proposals that would have
helped shed light on executive pay in listed companies have been watered
down by market players.
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CMA had proposed in a draft code of governance that each
director’s pay be disclosed to shareholders, but this has been dropped
from the script that will be forwarded to Parliament for consideration
as subsidiary legislation.
Also dropped was a requirement that executive directors serve for only five years.
“Due to privacy issues and security of individual
remuneration, disclosure will be aggregated in two blocks without a
breakdown of the individual members,” said CMA’s acting CEO Paul
Muthaura.
Remuneration of non-executive directors will be
lumped together while that of executive directors will be consolidated
and reported as one figure in the company’s annual report.
The disclosure was to help company owners gauge
whether directors’ remuneration was in tandem with their performance.
Executive pay has been a subject of intense public debate globally
driven by shareholders’ push for pay disclosure including performance
bonuses and share options.
With the proposals Kenya looked set to join an elite group of countries which have opted to lift the veil on the issue.
None of Kenya’s 61 publicly listed companies has
made a full disclosure of what executive directors earn, forcing
shareholders to generate estimates from annual financial reports.
The regulator’s effort to enforce a rule requiring
executive directors to be put on fixed contracts of less than five years
was also dealt a blow after being rejected by the public. The market
players argued that the process of recruiting executives was time
consuming and expensive.
CMA had set the rule in order to avoid in-breeding
in companies and entrench succession plans but contributors to the
proposals rejected the move stating that it was unfair to let go of a
performing executive based only on expiry of their terms.
However, the time cap of nine years placed on non-executive director was retained.
Public commentators also rejected CMA’s proposal
that listed firms disclose their top 10 procurement contractors, arguing
that the move would expose them to legal suits due to confidentiality
clauses.
CMA had sought the disclosure so as to enforce
transparency, especially in instances where a principal shareholder is
also a major supplier to a company.
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