Chief Executive Officers (CEOs) of the 10 largest firms listed on Nairobi Securities Exchange (NSE) took a Sh82 million hit on their collective annual bonuses in 2023, as shareholders returns in the form of dividends declined amid flat profits.
An analysis of bonus payments published on respective annual reports by the firms shows that their top executives took home Sh734.7 million in the 2023 financial year, down from Sh816.3 mullion in 2022.
At the same time, total dividends distributed by the companies last year stood at Sh112.8 billion, down from Sh119 billion in 2022.
The companies analysed include Safaricom, Equity Group, EABL, KCB, Co-operative Bank and Absa Bank Kenya. Others are Standard Chartered Bank Kenya, NCBA Group, I&M Bank and BAT Kenya. Stanbic Holdings, which is the NSE’s ninth-largest listed company by market capitalisation, does not disclose the breakdown of the Kenyan unit’s CEO’s pay.
Companies reward their executives with performance-based bonuses primarily for protecting shareholder returns via improved profitability, courtesy of their role as strategy leaders in the C-suite.
The bonuses are based on business performance parameters such as the growth of profits and cash generated by the business, the performance of the company’s share in the stock market, shareholder returns such as dividends, and the development of new revenue lines.
The executives are also offered non-cash rewards such as free shares, usually under the umbrella of a company’s employee share ownership plan, which rewards long-term good performance.
In 2023, these top firms at the NSE saw their collective net earnings go up by just 1.6 percent to Sh248.5 billion, reflecting the tough economic conditions such as high inflation, elevated interest rates that raised the cost of capital, and a weaker shilling that raised the cost of imported inputs.
Safaricom, the NSE’s largest company, saw its consolidated net profit for the year to March 2024 rise marginally to Sh62.99 billion from Sh62.26 billion, with its share of losses from its recently established Ethiopian subsidiary eating into the profitability growth in its Kenyan unit.
The telco cut its CEO bonus by Sh62.2 million to Sh134.1 million in the period, while its dividend payout remained flat at Sh1.20 per share or Sh48.08 billion in total.
Among the banks, the profit growth picture was mixed, with the two largest listed lenders Equity Group and KCB reporting profit falls of 6.5 percent and 8.3 percent in 2023 to Sh41.9 billion and Sh37.5 billion respectively.
Equity did not pay its CEO James Mwangi a bonus last year, with the lender disclosing that he declined to take up the additional pay in solidarity with employees in some of the subsidiaries that failed to meet their key performance targets and therefore did not qualify for a bonus. In 2022, Mr Mwangi had been paid a bonus of Sh53 million.
Like Safaricom, Equity kept its dividend for the year unchanged, paying investors Sh4 per share or Sh15.09 billion cumulatively.
KCB’s CEO bonus in 2023 fell to Sh69.04 billion from Sh124.2 billion, in a period when the lender opted against paying a dividend to shareholders, having paid Sh6.4 billion in 2022.
Among the other listed lenders, Co-operative Bank raised the bonus paid to its CEO Gideon Muriuki to Sh301.1 million from Sh287.5 million in 2022, while NCBA Group’s John Gachora’s bonus was bumped up to Sh71 million fromSh40 million in 2022.
Similarly, the CEO bonus at Absa went up by Sh3.5 million to Sh28 million in 2023, as the lender went through a leadership change with the exit of Jeremy Awori in October 2022 and the appointment of Abdi Mohamed in March 2023.
I&M Group executive director Sarit Raja Shah’s bonus for 2023 went up to Sh15.8 million from Sh5.74 million in 2022, while that of Standard Chartered Bank Kenya CEO Kariuki Ngari dropped to Sh35.6 million from Sh39.8 million in 2022.
In the manufacturing segment, BAT Kenya paid its chief executive Crispin Achola a bonus of Sh13.1 million last year, compared to Sh14.7 million in 2022. The cigarette maker’s dividend payout for the period dropped to Sh5 billion, or Sh50 per share, from Sh5.7 billion, or Sh5.70 a share in 2022.
EABL, whose financial year closed in June 2023, raised the bonus for its chief executive Jane Karuku to Sh66.9 million from Sh30.9 million a year earlier, even as its total dividend payout declined to Sh4.35 billion from Sh8.7 billion, and net profit to Sh12.3 billion from Sh15.6 billion in the year to June 2022
