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Kenya's corporate landscape often spotlights a select group of Chief Executive Officers whose annual earnings consistently run into the tens, and even hundreds, of millions of shillings.
Figures like James Mwangi of Equity Group, Peter Ndegwa of Safaricom, and Gideon Muriuki of Co-operative Bank are frequently cited examples, their remuneration far exceeding what might be considered a standard executive salary.
This article delves into the various components that contribute to these astounding figures, exploring the mechanisms through which these top bosses at mostly NSE-listed companies accumulate their wealth, the tax implications, and the non-cash benefits they enjoy, while also examining the factors that lead to significant disparities in CEO compensation.
The foundation: Salary and allowances
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At the core of any CEO's compensation package is their basic salary and a range of special allowances.
While substantial on their own, these often represent only a fraction of their total annual earnings. The salary acts as a fixed component, providing a steady income, while allowances cater to various aspects of their demanding roles.
These can include housing allowances, car allowances, entertainment allowances, and even security provisions, reflecting the high-pressure environment and public profile associated with leading major corporations.
Dr. James Mwangi, Group Managing Director and CEO of Equity Group Holdings Â
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For instance, Peter Ndegwa's compensation at Safaricom for the year ending March 2025 included a significant salary component, though it was dwarfed by other elements of his pay package
These figures, while impressive, are merely the starting point in understanding the full extent of a CEO's earnings.
Performance-driven payouts: Bonuses and long-term incentives
A major driver of the multi-million-shilling earnings for top CEOs is performance-based remuneration.
This primarily comes in the form of bonuses and long-term incentives, often tied to the company's financial performance and strategic achievements.
Bonuses
These are typically short-term incentives, awarded annually based on the achievement of pre-defined targets.
These targets can range from revenue growth and profit margins to market share expansion, successful product launches, or even the implementation of key corporate strategies.
Co-op Bank CEO Gideon Muriuki
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When a company reports strong profits and achieves its objectives, the CEO stands to gain significantly through these bonus payouts.
Longterm incentives (LTI) and shares
This is arguably the most lucrative component of a CEO's compensation, designed to align their interests directly with those of the shareholders over an extended period (typically three to five years).
LTIs are frequently structured as some form of stock-based compensation, including:
Stock options: These grant the CEO the right to purchase company shares at a pre-determined price in the future. If the company's stock price increases, the CEO can exercise these options, buy at the lower price, and sell at the higher market price, realizing substantial gains.
Restricted stock units (RSUs) or performance-vested stock: These are actual shares of the company granted to the CEO, but with certain vesting conditions. The shares typically vest over time or upon the achievement of specific performance metrics. This encourages sustained growth and shareholder value creation.
Employee share ownership plans (ESOPs): Some companies, like Equity Group, offer ESOPs, allowing employees, including the CEO, to acquire shares at a discounted price. This further solidifies their ownership stake and aligns their financial success with the company's performance.
How top CEOS earn their millions in Kenya
How top CEOS earn their millions in Kenya
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Dividends: The shareholder's reward
Beyond their direct compensation from the company, many top CEOs are also significant shareholders in the very companies they lead.
This means they are entitled to a share of the company's profits distributed as dividends.
For CEOs who have been at the helm for many years and have accumulated substantial shareholdings, dividend payouts can represent a significant portion of their annual income.
This is particularly evident with long-serving CEOs like James Mwangi and Gideon Muriuki, whose personal wealth is intimately tied to the success and dividend policies of their respective institutions.
Non-cash benefits and perks
While not directly reflected in the millions of earnings reports, top CEOs often enjoy a suite of non-cash benefits and perquisites that add significant value to their overall compensation package.
These perks are designed to compensate for the extraordinary demands on their time and the unique nature of their roles. They can include:
High-end medical insurance: Often comprehensive and covering worldwide treatment.
Club memberships: Access to exclusive recreational and social clubs.
Company cars and personal drivers: Providing convenience and security.
Housing allowances or company-provided residences: Especially for expatriate CEOs or those requiring a certain standard of living to fulfill their roles.
Education allowances for children: Covering school fees at prestigious institutions.
Security details: Given their high-profile nature and the value they represent to the company.
Professional indemnity cover: Protecting them from legal liabilities arising from their official duties.
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A private jet that some CEOs use
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These non-cash benefits, while not directly adding to their taxable income in the same way as salary or bonuses, significantly enhance their lifestyle and reduce personal expenses, effectively increasing their net worth.
Taxation of CEO earnings
It is crucial to acknowledge that the significant earnings of these top CEOs are subject to taxation in Kenya.
Salaries, bonuses, and allowances are typically taxed under the Pay As You Earn (PAYE) system. Dividends received are also subject to withholding tax.
While their total earnings are substantial, a portion is remitted to the Kenya Revenue Authority (KRA) as tax. The specifics of their tax liability depend on the prevailing tax laws and their individual financial planning.
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Why some CEOs earn more than others
The disparities in CEO compensation among even top-tier executives are influenced by several factors:
Company size and performance: CEOs of larger, more profitable companies, particularly those with regional or continental operations, tend to earn more. The scale of responsibility and the impact on the economy directly correlate with higher remuneration. Safaricom, being a dominant player in the East African telecommunications market, justifies Peter Ndegwa's higher earnings compared to some bank CEOs.
Industry: Certain industries, like banking and telecommunications, are inherently more lucrative and complex, often leading to higher executive pay. These sectors tend to generate significant profits and require specialized skills, commanding a premium for leadership.
Shareholder structure and governance: The composition of the board of directors and the influence of major shareholders play a critical role. Boards, through their remuneration committees, determine CEO compensation. In some cases, insider presence on these committees can lead to more favorable compensation for the CEO.
Performance metrics and incentives: The specific performance metrics used to determine bonuses and long-term incentives vary between companies. More aggressive targets or a greater weighting on stock-based compensation can lead to significantly higher payouts if achieved.
Market demand and talent pool: The market for top executive talent is highly competitive. Companies are willing to offer attractive compensation packages to attract and retain experienced and successful leaders who can drive growth and deliver shareholder value.
Tenure and experience: CEOs with a long and successful track record within a company or industry often command higher compensation, reflecting their accumulated expertise and proven ability to navigate complex challenges. James Mwangi and Gideon Muriuki, both long-serving CEOs, have seen their compensation grow over their extensive tenures, coupled with their significant ownership stakes.
Risk and responsibility: The immense responsibility and inherent risks associated with leading large, publicly traded companies contribute to the high compensation. CEOs are accountable for the company's financial health, strategic direction, and often, the livelihoods of thousands of employees.