The Treasury has pushed for the ouster of two directors at KCB Group and the elevation of the former head of public service, Joseph Kinyua, as chairperson of the bank in a boardroom coup aimed at asserting the influence of the Ruto administration.
Treasury Cabinet Secretary Njuguna Ndung’u has demanded that the tenure of Andrew Kairu be cut short ahead of the bank’s annual general meeting, a letter seen by the Business Daily shows.
The State has backed Mr Kinyua to replace Mr Kairu as chairman after the former head of public service joined the KCB board on March 24 as a non-executive director.
This mirrors the script at Safaricom where lawyer Adil Khawaja joined the board in December before replacing President Uhuru Kenyatta’s ally, John Ngumi, as chair of the telecoms firm.
At KCB Group, it started with the sudden announcement that Anne Erickson, a long-serving director at the bank and a former East Africa CEO of PricewaterhouseCoopers (PwC), had exited the board.
Ms Erickson was initially seen as a routine departure from the bank’s key policy-making body.
But it is now emerging that she threw in the towel after Prof Ndung’u informed KCB that the Treasury would not support her re-election to the board at the upcoming AGM.
The Treasury’s moves are hinged on its position as KCB’s single-largest shareholder and come as the Ruto administration replaces directors in listed firms where the State has significant ownership like Safaricom and Kenya Power.
The Treasury has a 19.76 percent stake in KCB while the National Social Security Fund (NSSF) owns 8.39 percent of the lender.
“The National Treasury do hereby notify the KCB Group PLC Board of support to Mr Joseph Kinyua as the new KCB group PLC chairman. The appointment of Mr Andrew Kairu will therefore lapse on the back of Mr Kinyua’s fit and proper test,” said Prof Ndung’u in the letter sent to the bank on March 22.
“This is to notify you that the National Treasury shall not support the re-appointment of Anne Eriksson in the upcoming Annual General Meeting.”
Ms Eriksson joined the KCB board in December 2019 after retiring from PwC in 2018 while Mr Kairu was first appointed a director of the bank in 2016 before being tapped as chair in 2018.
KCB directors are eligible to serve for up to eight years based on the bank’s board charter, which allows a boardroom of between five and 11 members.
The shareholding of KCB is widely dispersed but the combined NSSF and Treasury stake of 28.15 percent has granted the State an outsized influence that binds the dispersed minority to the government’s decisions.
The third and 10th largest shareholders have ownerships ranging from 4.01 percent to 0.8 percent.
The de facto control the State has over voting rights in the company is entrenched by the low level of shareholder activism and consciousness in firms listed at the Nairobi bourse.
Mr Kinyua, 70, has had an illustrious career spanning over 44 years in public service.
Prior to his appointment as the head of the public service in 2013, Mr Kinyua served in various senior positions in government, including as Permanent Secretary to the Treasury.
He brings to the board of the bank institutional memory, a sharp antenna for economic issues, and experience dealing with and engaging assertive shareholders.
Mr Kinyua has an intimate understanding of the budget process and has spearheaded the transition to the Medium Term Expenditure Framework budgeting system.
He understands monetary policy and the inner workings of the Central Bank of Kenya where he served for many years as Director of Research.
He is taking over the critical role at a time of tectonic shifts, with a new administration that expects and wants the bank to play a more ‘developmental’ role in society, including support for a massive fertiliser and food imports programme.
The KCB boardroom shake-up emerges in a period when nearly 200 directors in parastatals have been replaced under the Ruto administration.
At the Nairobi bourse, KCB is the latest firm with significant State ownership to face a boardroom shake-up.
In December, Kenya Power chairperson Vivienne Yeda quit the utility firm after the Treasury opted not to support her re-election at the AGM in changes that saw seven new directors, including a lawyer who was part of Dr Ruto’s legal team in the International Criminal Court (ICC) case, appointed.
Last month, KenGen appointed a new chairperson and three directors in a board overhaul.
KCB Group’s net profit in the financial year ended December grew 19.5 percent to Sh40.8 billion, driven by a similar revenue increase.
It cut its annual dividend by a third to Sh2.00 per share on earnings of Sh12.71 for every stock.