A boss with no skin in the game has
little incentive to manage a company in shareholders’ best interests. Various CEO’s
of some specific companies in Kenya have a certain known amount of controlling
interest in the companies they head.
The bible talks of putting your treasures where your heart is, but they put their money where their mouths are… The chart below shows a list of the six Kenyan CEOs who owned at least $250,000 worth of their own companies’ stock at the end of 2008. Just check this list….
The bible talks of putting your treasures where your heart is, but they put their money where their mouths are… The chart below shows a list of the six Kenyan CEOs who owned at least $250,000 worth of their own companies’ stock at the end of 2008. Just check this list….
COMPANY
|
CEO
|
Value of Stake in Company (Dec 31, 2008
|
Percent of Company Owned (Dec 31, 2008)
|
Access Kenya Group
|
Jonathan
Somen
|
$6,681,063.00
|
14.96%
|
Athi River mining
|
Pradeep
Paunrana
|
$18,829,535.00
|
18.1%
|
Co-operative Bank of Kenya
|
Gideon
Muriuki
|
$6,712,098.00
|
1.95%
|
Equity bank
|
James
Mwangi
|
$3,471,373.00
|
5.37%
|
Rea Vipingo Plantations
|
Neil
Cuthbert
|
$264,100.00
|
2.29%
|
Scan Group
|
Bharat
Thakrar
|
$10,953,845.00
|
20.63%
|
As you can see, these aren’t just token
amounts. The financial interests of each of the above CEOs were clearly aligned
with those of other shareholders.
Taking
Care of Business
The
average return of these companies should have crushed the market since then. Why?
Many listed companies are managed by CEOs who don’t eat their own cooking.
Managing Directors without substantial ownership stakes tend to be motivated by
a paycheck or prestige, not share performance.
Share
performance of each stock since 2008.
COMPANY
|
Return
Since December 31, 2008
|
Access Kenya Group
|
-73.4%
|
Athi River Mining
|
109.7%
|
Co-operative bank of Kenya
|
33.5%
|
Equity Bank
|
45.0%
|
REA Vipingo Plantations
|
38.1%
|
Scan Group
|
181.9%
|
Average
Return
|
55.8%
|
Apart from AccessKenya Group, the rest show a
very solid performance. A portfolio comprised of these six companies would have
fared better compared to the return on the entire Kenyan stock market over the
same time period. Five out of the six CEO-owned stocks outperformed the
market’s return, which was around 26.7%.
Granted, this is a very small sample, but it
did not run counter to the theory that CEO-owned companies tend to outperform other
companies and the market in whole over the long-term.
What’s your take? Does this theory hold water? Do you
know of other African companies with heavy CEO-ownership that we should compare
to the overall market?
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