When Bernard Ngugi quit as the boss at Kenya Power in August 2021, unexpectedly, the board explained that he had resigned to pursue other interests.
Questions are now emerging as to whether he resigned or was pushed out of the power distributor’s top seat that many top executives have found too hot to handle over the years.
The Auditor General when auditing Kenya Power’s financial results for the year to June 2023 found that despite having resigned, Mr Ngugi was paid what he would have earned had the company fired him without notice.
As part of his exit package that totalled Sh26.82 million, Ngugi was paid Sh2.5 million, which the Auditor General notes was irregular as it appeared to have been compensation for termination of contract by the company despite the former boss having resigned.
The Auditor General in a new report said that instead, it is Ngugi who should have paid the firm for quitting without giving notice as required by the contract that he had with the company.
“Included in the exit pay was an amount of Sh2.52 million paid as payment in lieu of notice. However, the payment was irregular since it is only payable to an employee whose employment contract is terminated by the company without giving notice. In this case, the former managing director resigned without notice and ought to have paid the company Sh2.28 million,” said the Auditor General in the report.
“In addition, the payment contravened the Staff Regulations and Procedures which provides that if an employee resigned before completion of this contract, he or she will have no entitlement to gratuity or any terminal leave pay.”
The audit report also noted that Ngugi’s pay did not get all the approvals, particularly one from the State Corporations Advisory Committee (SCAC), despite the National Treasury having told Kenya Power to seek advice from SCAC on the payment of the exit package.
It noted that following Ngugi’s resignation through an August 3, 2021 letter “the board considered and approved the request on August 11, 2021 and later approved payment of Sh26.82 million as final exit payment comprising of full compensation of the remaining contract period of 15 months,” said the Auditor General, adding that while this also got approvals from Treasury and the Energy Ministry, Treasury advised Keya Power to seek approval from SCAC.
In the report, the Auditor General notes that Kenya Power did not follow through with Treasury’s advice and that “SCAC approval was not obtained prior to the payment of the gratuity of Sh26.82 million as advised.”
Ngugi’s exit caught many, including insiders, by surprise but some analysts noted it was not entirely unexpected.
The management at the time led by Mr Ngugi was having icy relations with the board of directors.
Ngugi left the firm at a time when there was a raging battle between management and board. At the time, the board – which was then chaired by Vivienne Yeda – was accused of holding frequent meetings, with some of its members having had a heavy presence at Stima Plaza to the extent they were said to be usurping management roles.
In its report for the year to June 2022, the office of the Auditor General raised concerns about the number of meetings that the board had over that financial year.
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The report noted that at the onset, the board had in its approved calendar of 33 board and committee meetings which, according to the Auditor General, exceeded a maximum of six recommended by the Office of the President.
The board and its five committees went on to have 89 meetings, higher than the 33 in the approved calendar.
A March 2020 circular by the Office of the President restricted full board meetings to six every financial year.
It however provided for a process to hold more meetings over the year should the board feel the need to meet over and above the six times.
“Review of the requests made to the cabinet secretary (CS) for extra meetings indicated that the board only requested approval for excess meetings in the board calendar. In addition, the requests did not have justifications, source of funds and budget implications as required in the circular (from the Office of the President).”
“Further, six of the requests for extra meetings were approved by the principal secretary who is a member of the board instead of the CS.”
The board at the time explained that the circular was coming at a time when Kenya Power was in dire need of reforms and the meetings were aimed at understanding the challenges as well as crafting a way forward.
The Kenya Electricity Trade and Allied Workers Union (Ketawu) has in the past noted that one of the things that ails Kenya Power is the lack of stability at the top due to frequent changes in management and board.
The union last year drew parallels between Kenya Electricity Generating Company (KenGen) and Kenya Power, whereby it noted in about 18 years to last year, KenGen has had three managing directors (MDs) while Kenya Power has had 10.
Since Ngugi left Kenya Power in 2021, the firm saw two chief executives appointed in an acting capacity before the current boss Dr Joseph Siror was appointed in a substantive capacity.
“If you look at KenGen, there has been consistency such that the company has been able to come up with strategies and implement them,” Ketawu said at the time. “At Kenya Power, there have been 10 managing directors and about eight boards over a similar period. There have been many strategies but they are never fully implemented.”
“Political interference is a major problem at Kenya Power. The government has refused to let Kenya Power run independently,” it added. The turnover of CEOs has been high in the last decade, with Dr Siror being the seventh chief executive in seven years.