Kenya’s executive pay gap widens 23.4% y/y: Shareholders demand value for money

The latest report by Standard Investment Bank has revealed that the executive pay gap in Kenya has widened by 23.4% year on year. Shareholders of listed companies are increasingly placing more value on top management by improving their earnings. According to Wesley Manambo, Senior Research Associate at SIB, the report highlighted a shifting trend towards rewarding top executives more generously in order to enhance shareholder value.Over the last three years, Cobb Bank has consistently shown the largest pay gap, while BAT has had the smallest pay gap. This disparity is influenced by various factors, including global peer comparisons and stock compensation practices in different regions. While Cobb Bank led in pay gap disparity, BAT lagged behind, indicating significant variations in executive compensation strategies within the market.The report also emphasized the importance of linking executive pay with performance metrics such as net asset value (NAV) and return on equity (ROE). Manambo suggested that investors should focus on rewarding CEOs with higher stock options rather than cash bonuses to incentivize performance and drive share price appreciation. Drawing from examples like Tesla in the US, where CEO incentives are tied to stock options, the report recommended a shift towards aligning executive compensation with long-term shareholder value. By encouraging CEOs to have a stake in the company's success, shareholders can ensure a more sustainable and value-driven approach to executive pay practices.As Kenya's market matures, the conversation around executive pay is expected to evolve, with a greater emphasis on transparency and accountability. Manambo underscored the importance of enhanced disclosures to facilitate informed decision-making and robust corporate governance. By encouraging a deeper understanding of the link between executive pay and shareholder value, investors can drive a positive shift towards long-term sustainable growth in the market.Overall, the report signals a need for companies to reevaluate their executive compensation strategies and adopt practices that align with shareholder interests. By promoting a culture of accountability and performance-based incentives, organizations can foster a more equitable and value-driven approach to rewarding top management. As Kenya's business landscape continues to evolve, the focus on executive pay disparity highlights the importance of driving meaningful conversations and actions to enhance corporate governance and shareholder value.