I live in Kenya, and for all you all out there who have no idea what that means; I will elaborate using recent occurrences here in Kenya; a country that sits pretty as the third most corrupt country in Africa and eying to take the top spot. I always tell those who care to listen that it is indeed a wonder how we remain competitive yet so much that we work for is lost to corruption. But here we are, corrupt as ever and always prone to drowning; yet managing to stay afloat for just long enough to catch a lifeline from donor countries. Speaking of donors, walk with me as I tell you what transpired with one of these non-governmental donor organizations.
Some months back, the CEO of the Youth Enterprise Development Fund, one Mr. Umuro Wario, was sent on a compulsory leave by its Board. He was on official business in Mombasa when he was informed of his suspension. For somebody who has been doing such exemplary work, this indefinite suspension (pending investigations) brought with it its fair share of media scrutiny; and for good reason. This is Kenya and there is always more than meets the eye on every other issue and this was no different. There were the usual nonsense speak from the board when put to task as to the reasons this man was sent home. They said he did something but cannot get into the details. And not getting into details was to cover their own asses as opposed to the commonly peddled reason, “we cannot comment on an ongoing investigation.”
I am loving the Kenyan media every passing day. One of the investigative journalists went digging and the rot that we have to expect in everything made in Kenya came to the fore.
It was revealed that Mr. Wario, the now former C.E.O of the Youth Enterprise Development Fund refused to play ball on a deal that did not make NEITHER financial nor economic sense to anybody with half a mind.
There was a Canadian NGO, Enablis, which needed 300 million from the fund and committed to match that money with 300 million of its own. That was all well and good but as far as basic accounting principles and economic sense went, it was pointless and stupid because there were better deals on the table that were offered by our own banks. Basic ratios have shown you that this NGO could match this KES 300 Million 1:1 but when put into context, this is not even close to an attractive offer, let alone something worth writing home about. But that became the issue that defined the relationship between the Board and the C.E.O, pitting them against each other, and in the end, Mr. Wario, and the Kenyan youth in general lost, and the patriarchs and matriarchs of this country won, again.
And here is the whole picture.
Mr. Wario refused to hand over the money to this NGO yet the board demanded that he did so. Mr. Wario, in the years that he has been there had made deals with banks such that for ever shilling he released to these banks, the would in turn release 9 more in form of loans to the youth for Equity Bank and 8 shillings for KCB. When compare and contrast, will see that the matching ratio for Equity as being 1:9 while that for KCB is 1:8 and yet that for this NGO remained as 1:1. Now you tell me. Mr. Wario could not deny this truth, even for the sake of his bosses. This man not only had brains, and a conscience, he had the balls to say no to his bosses; which is the worst thing you can ever do in a country where the corrupt are your bosses. This man Wario was sacked, unceremoniously, and with the alleged investigation still pending. What actually happened was that one of the Board Members sent an internal memo to all employees telling them that their suspended C.E.O was sacked.
Normally, Boards are established to serve as the overseers of the management’s activities. Boards should check the awry activities of the management but this is Kenya; the exact opposite is the case here. Where the Management is competent, the Board is lopsided towards the powers that be and in the end almost always sacks those with the education, competence, capacity and the moral authority to do what is right as opposed to what the board demands. This was the case wit Mr. Wario and once again a good man is on the tarmac looking for a job. This of course brings to the fore the question of the composition of these Boards. Going back to out independence, Board Members in Kenya have been appointed on the basis of tribe, nepotism, politics etc. And to this day, little has changed in the way of appointment to Boards, even in the most crucial of positions.
If you are cognizant of such issues, you understand the issues of conflicts of interest as far as the composition of Boards go. If you are not aware of this, the following is the CFA Institute has to say as far as Corporate Governance and composition and independence of Boards go:
This is quoted verbatim from the CFA Institute Curriculum, Volume 4, page 157 and 158.
Corporate Governance is the arrangement of checks and balances, and incentives a Company needs to minimize and manage conflicting interests between insiders and external shareowners. Its purpose is to prevent one group from expropriating the cash flows and assets of one or more other groups.
In general, good corporate governance practices seek to ensure that:
ª Board Members act in the best interest of Shareowners;
ª The company acts in a lawful and ethical manner in their dealings with all stakeholders and their representatives;
ª All Shareowners have the same right to participate in the governance of the Company and receive fair treatment from the Board and management, and all rights of Shareowners and other stakeholders are clearly delineated and communicated;
ª The board and its committees are structured to act independently from management, individual, or entities that have over management, and other non-Shareowner groups;
ª Appropriate controls and procedures are in place covering management’s activities in running the day to day operations of the company; and
ª The Company’s operating and financial activities as well as its governance activities are consistently reported to Shareowners in a fair, accurate, timely, reliable, relevant, complete, and verifiable manner.
The part that deals with independence has the following.
Generally, to be considered Independent under these codes and rules, a Board Member must not have a material business or other relationship with the following individuals or groups:
ª The company and its subsidiaries or members of its group, including former employees and executives and their family members;
ª Individuals, groups or other entities – such as controlling families and governments – that can exert significant influence on the Company’s management;
ª Executive management including their family members;
ª Company advisors ( including external auditors) and their families; or
ª An entity which has cross-directorship relationship with the Company.
In light of the above, ponder on the following:
The man who sent the memo terminating Mr. Wario’s job at the Youth Enterprise Development Fund is also the Lawyer of the NGO that Mr. Wario had denied the KES 300 million. Is there a clearer indicator of conflict of interest?
This is unfortunately too common to even raise eyebrows.
Looking at the list above and the rest of it that I could not squeeze into this post, I can assure you and you will see that in Kenya, most directors if not all contravene most if not all of the corporate governance principles laid out above and elsewhere. That is why no eyebrows have been raised after Mr. Wario became a victim of the conflict of interest with one or more of the board members. And it is no wonder that we rival the corruption bigwig countries of the world.
For some warped reasoning on the part of most leaders in Kenya, they have this twisted idea that Board positions are a reserve of family, friends, and loyalists. The moment ministers took office, they always went ahead to appoint family and friends to the boards if not management
This also takes me back to the Kenyatta and Moi governments where many loyalists who failed to capture seats in parliament were rewarded for their loyalty by being made directors of boards especially of national companies. Most of those companies died, making thousands jobless and their director millionaires. As I wrote a while back, board members used these companies to take personal loans and that was the time in our history when the non-performing loans in our banks made some collapse, and more non-financial companies to go under the hammer in auctions that sought to recover any monies that board members had borrowed for personal use. Still; you would think that this was legitimate business since it took place all around. It is still taking place.
And then there is the thing of titles that Kenyans are infatuated with. Most of the directors of these boards also serve as directors of more than two dozen companies and yet they continue to be appointed as directors of more companies. These are people with day jobs and who cannot logically do their jobs as directors of all these companies. They are paid ridiculous amounts of money yet their commitment are to their day jobs and to a few select companies that they serve as directors. Of what use are they to those organizations that they are appointed as directors, whose meeting they have never attended, whose activities they do not scrutinize, whose supervisory responsibility they have neglected, and whose competencies or experience are not up to or cannot match that required of a director in these boards.
Whichever angle you look at it from, we are in a bad place that is damning us to the deepest darkest part of the hell hole we are already in.
Mr. Wario got his matching orders because a compromised board member (there may be more) was angry that his client would not benefit from public funds that they do not deserve.
People ask where we should start in ridding this country of corruption; I say start by removing the rot that is in the majority of these boards. In the meantime, I hope that there is somebody with some moral authority in this Government who will not allow the 300 million to be given to this Canadian NGO. The opportunity cost is too great for we will be forfeiting 2.7 Billion from our local banks for KES 300 Million from this Canadian NGO.
Kenya! It is tough living here but we try to make due. We are winning an inch at a time, and will finally get out country back, maybe after I am long dead. But I will train my kids to keep up the good fight.
