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CEO at the helm of Kenya’s ‘best employer’ to get paid one shilling a month

FINANCIAL STANDARD
By By JEVANS NYABIAGE | December 10th 2013

By JEVANS NYABIAGE

KENYA: From his second-floor corner office overlooking the posh suburbs of Lavington, Kamal Budhabhatti sits at the very top of the Kenyan tech scene.

And on this cool Thursday morning, Budhabhatti is dressed down in a casual shirt, jeans and moccasin shoes. He is at his feisty best as he tells Business Beat why he thinks he is the lowest-paid chief executive in Kenya.

In a move that’s wise as well as partly symbolic, the Craft Silicon founder and chief executive officer is cutting his monthly salary from seven figures to just Sh1 from next month.

It is wise because while the company certainly has grown tremendously, the business environment has been rough for customers and shareholders.

It is partly symbolic because Mr Budhabhatti anticipates that what he will earn from bonuses will likely eclipse his annual salary.

Not struggling

It is not that Craft Silicon is struggling; in fact, the firm is worth more than $50 million (Sh4.3 billion).

“Actually, my board agreed that I should take Sh1 as salary, so that makes me the lowest-paid CEO in Kenya,” Budhabhatti told Business Beat. “Companies have to compensate their employees, so working for free is out of the question.”

However, it is a decision that is likely to elicit questions on how it will impact existing employment guidelines on minimum wages. The Kenya Revenue Authority may also see it as a way to evade personal tax.

“I will be paid a bonus depending on the company’s performance,” Budhabhatti said. “I’m given targets by the board, with various slabs for corresponding bonuses.”

If the firm performs well, he will earn more. But if there is a hit, his pay also goes down. It is a big gamble, he says. 

Craft Silicon is one of the largest software providers across emerging countries. The company provides software for the financial industry, with products ranging from core banking, microfinance and sacco solutions, to electronic and mobile commerce payment gateways.

The company has close to 250 customers spread across 40 countries in Africa and Asia.

The Kenyan office has more than 170 employees, with the Indian city of Bangalore having 100 staff.

In October, Craft Silicon was named the best company to work for by consulting firm Deloitte for its ability to provide an environment conducive to motivating and retaining talent.

At Craft Silicon, they have flexible working hours. Employees do not have to report at 8am, except those in support and administration who must get in early to serve clients.

Those involved in developing software can begin work at 4pm and then continue until midnight.

The only caveat is that the work must get done. Employees have deadlines within which to complete projects; it is them up to them to set up a schedule that will ensure timelines are met.

And on Fridays, they are allowed to work in departments that intrigue them.

“Let’s say I’m working on a banking project, but that’s not really my interest. If my interest is in mobile, I can use Fridays to hone my skills in this,” said Budhabhatti. “It is a free working environment.”

The average age of Craft Silicon staff is 26 years and five months.

“I’m 34,” Budhabhatti said, so managing this group of talented Generation Ys can get a bit difficult. “That’s why we have tried to create a conducive environment that brings out creativity.”  

The salaries

And the salaries offered could also offer some motivation. The lowest-paid, entry-level programmer gets about Sh50,000, while those who have risen up the ranks to senior positions earn up to Sh2 million.

Budhabhatti adds that nearly 80 per cent of the employees own cars.

“We help them get a car in their first year of joining Craft Silicon. We also assist them own a house after three to five years,” he said.

The employees also own a piece of Craft Silicon: “We have employee stock options.”

He strongly believes that with hard work and a committed team, he will end up taking home a hefty bonus at the end of the year that would work out to a higher amount per month than the salary he is giving up.

This makes his income purely performance based; a nice theory indeed. Craft Silicon shareholders will save a lot of cash each month, and the move will motivate Budhabhatti to work harder to raise stock value, helping all shareholders make more money.

Though this concept is new to Kenya, it has been in practice in the West for quite a long time, especially in the technology industry.

Other $1 (Sh86) CEOs have included Steve Jobs, the CEO and founder of Apple; Facebook founder Mark Zuckerberg; Oracle Corporation CEO Larry Ellison; Google co-founders Sergey Brin and Larry Page, who both ultimately ended up going home with about $480 million (Sh41.4 billion) in bonuses.

Form of punishment

Decisions to cut salaries to one digit are also sometimes a form of punishment or self-flagellation.

For instance, Citi Group CEO Vikram Pandit’s salary was reduced to $1 in 2010 as the firm struggled to recover from a financial crisis at a time when executive compensation packages on Wall Street were facing intense public criticism. Mr Pandit was still fired two years later.

The $1 phenomenon is believed to have been taken mainstream by Lee Iacocca, who was brought in to save Chrysler from bankruptcy in 1978.

Realising the automaker was in dire financial straits, Mr Iacocca fired executives and pushed the United Auto Workers to accept salary and benefit cuts. In an effort to lead by example, he lowered his own salary to $1 a year. Five years later, and with a helping hand from the government, the company was restored to financial health.

While CEOs with single-digit salaries are a rare breed, those who really work for nothing but a bonus are rarer still. These executives, sometimes big shareholders, only benefit if the stock rises or dividends are paid – an alignment of interests that appeals to some investors.

Budhabhatti will not be living on too tight a budget anytime soon though, as he said the company paid him a bonus last year that is enough to help him maintain his “simple” lifestyle.

Further, other top brass at Craft Silicon will have the opportunity to make more than ever before with a new executive compensation programme.

The purpose of the new scheme is to retain and motivate executives and to align the executive pay structure with that of the company’s overall performance-based incentives.

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