Mwebesa exit: Did he jump or was he pushed out of NSE?

By Kenneth Kwama

Chris Mwebesa, the outgoing Chief Executive of the Nairobi Stock Exchange (NSE), had every reason not to trust his board.

From December last year, whenever he walked into the bourse’s board meetings, he expected the renewal of his three-year contract, which was to expire February 25, 2008. But the topic never found its way to the board’s agenda until last July — a good five months after the contract’s expiry. But even when it did, the man under whose tenure the bourse manifested some of the most serious mood swings in corporate Kenya, could not get the better deal he had anticipated and was instead put "on a not very lucrative" contract, according to a boardroom source who declined to be named.

"Things got so bad for him and at times he felt helpless because some major decisions about operations at the NSE would be made without regard for his opinion," says our source.

Three months after the renewal of his contract, October 15, to be precise, Mwebesa tendered his resignation to the NSE Chairman, James Wangunyu. The following day, Wangunyu summoned a board meeting. The board’s feeble attempts to persuade Mwebesa to stay on as Chief Executive became a cropper.

At International Life House, just a few blocks from where Mwebesa’s resignation was being discussed, Peter Mwangi who was last week named as the successor to the outgoing NSE boss was also tendering another shock resignation as managing of Centum Investments.

Chris Mwebesa

Whether the two events happened by coincidence or were choreographed to take place at the same time is only a matter of conjecture, but they sent shockwaves across the NSE spectra and left tongues wagging with speculation, especially about what could have driven out Mwebesa and brought in Mwangi.

Although he agreed to this interview, Mwebesa flatly refused to talk about why he was leaving the NSE, only defending the recruitment of Mwangi and saying that he was part of the team that recruited him.

"We conducted a number of interviews and he emerged the best candidate. The process was transparent and I have every confidence that we got the right guy for the job," said Mwebesa who refused to respond to questions as to why the post was not advertised in the media.

According to our source, Mwangi joined on a salary scale that is slightly better than what Mwebesa had initially requested in order to stay on as CEO. Mwangi’s package, disclosed our source, nearly doubles Mwebesa’s current pay package.

According to our source, the replacement of Mwebesa was conducted in bad faith and sounds like healing a hemorrhaging bourse with a bandage, rather than using surgery to solve deep-rooted problems.

Though this is Mwangi’s first foray into a stock market, he comes with credentials that hit through the roof. Those who know him say that he is no pushover when it comes to standing his ground in the face of interference from outside.

coincidence

"He rubbed many shoulders the wrong way at Centum because he refused to comply with their impracticable directives," says our source. However, the manner in which he left Centum and the coincidence with Mwebesa’s exit of the NSE has led to questions as to whether some people could have deliberately been frustrating Mwebesa, while propping him for the NSE job.

Outgoing NSE chief Chris Mwebesa (left) welcomes Peter Mwangi who takes the plum job at the region’s biggest bourse. [PHOTO: collins kweyu/STANDARD]

Centum, formerly ICDC Investments is owned by a host of powerful business people whose interests are spread across various investments and stocks at the NSE. It is a public limited company listed on the NSE whose business is investing its shareholder capital in the equity of other companies for a favorable return.

According to information on its website, the group’s strategy is to raise capital cheaply (when share prices are favourable) and to invest in undervalued companies in sectors that are a significant contributor to the region’s economic growth. While our source believes that NSE’s is a study case of how effective bosses can always be made to pay for management blunders, Mwebesa insists his decision to exit NSE was not forced and that the timing was not wrong.

"The market moves in circles. It is just a coincidence that I’m leaving when it is bear, but I am confident that it will finish the current circle and resume the healthy run," says Mwebesa.

Why the board did not automatically renew the outgoing CEOs contract and how it lost confidence in him is not hard to fish out. At the core of the issue was Mwebesa’s insistence on a number of issues said to have been good for the bourse, but that could have rubbed some of the board members the wrong way.

For example, Mwebesa is reported to have solely pushed for a system that would allow the NSE to oversee the operations of individual stockbrokers and auditing of their accounts, a proposal that was vehemently opposed at the board level, but was reluctantly approved later following the collapse of some stockbrokers.

From the start, Mwebesa’s vision was to transform the bourse into a major, modern brand driven by technology and sound corporate governance structures. More important, he knew that the NSE was going nowhere if it didn’t get automated so he pushed for the introduction of the Automatic Trading System, which was successfully launched two years ago.

He also oversaw the entry of the most profitable company in East and Central Africa-Safaricom into the NSE. Safaricom introduced a massive 10 billion shares, which pushed market capitalisation past the psychological shilling one trillion mark.

Writing on the wall

Despite the mixed fortunes-some too good and other bad ones like the collapse of stockbrokers, for Mwebesa the writing has always been on the wall. The fact that he could have been fighting a losing battle became apparent early this year when he was short listed for the Capital Markets Authority (CMA) boss’s position, which was then vacant, but failed the mark.

Despite the fact that he had qualified for the job, he was bypassed, allegedly on the advice of some influential individuals who were not keen to see him head the market regulator and the post re-advertised. The post was later filled by Stella Kilonzo.

According to our source, the problems at the NSE have been chiefly caused by a self-referential ‘caucus’ with vested interests in certain stocks. These individual(s) through their interference have also infringed on the NSE’s board’s fiduciary responsibility, prompting unflattering questions about who exactly owns the NSE. Then, there was the other issue of conflict of interest.

The composition of NSE’s board presents a big problem with issues of conflict of interest. This is because it is dominated by shareholders and stockbrokers who between them own millions worth of stock either as individuals or associate companies, yet the shares being traded are for public companies.

Rogue stockbrokers like Nyaga, Discount Securities Ltd and Francis Thuo and Partners were allowed to sinking with investors’ funds points to a situation where the board either failed to make the right decisions early enough or was not in the know — which is very unlikely.