By Stephen Makabila
and Azael Masese
A directive by the Government that Sacco board directors should not be paid honoraria or a send off package has raised a storm in the vibrant co-operative sub sector.
Board chairs who spoke to Sacco Review noted that the two packages are only meant to reward and recognise the invaluable contribution towards the business’ success. Honoraria is paid based on the entity’s improved performance while the send off package is for directors exiting the society after the expiry of their terms or when they quit on voluntary basis.Ordinarily, board members are paid sitting and any other allowances as deemed necessary in the course of their work.
Recently, Commissioner of Co-operatives Mary Mungai warned board members that a co-operative is not an employment to warrant retirement packages when one leaves.
“A few co-operatives are introducing retirement packages for its board leaders and that is wrong and unacceptable because the work of board members do is not formal employment,” Mungai told Sacco Review in an exclusive interview.
She said it was also wrong for co-operatives to pay board members honoraria from turnovers generated by the Sacco.
“We are going to be very keen and even board members who have not declared their wealth as required by the law will have to go,” added the commissioner.
However, Tower Sacco board chair John Gitundu said that paying directors who have served their term is a gesture of appreciation for their contribution towards the growth of the society.
“We are not working for a social organisation and our contribution should be recognised,” he said, adding that it creates a bad picture for one to exit the board without any monetary reward.
Gitundu, who has served the Ol Kalou based society for close to 25 years in various capacities, said that he has overseen the society register improved performance over the years hence he deserves recognition.
Though they do not offer a send off package for retiring directors or those who leave voluntarily, he noted that it is not a bad idea if their contribution is appreciated.
“When we look back and evaluate the directors’ contributions, we feel that the society should have offered a send off package,” he said.
Besides, he said offering them the send off package and the honoraria will motivate other directors to work harder to improve return on the members’ investment.
Kisumu Teachers Sacco Society Ltd (Kite) board chair Tom Onyona said that they hoped to get some honoraria this year, which has been quashed by the directive.
“We were in high spirits that we were to get some honoraria but the Government is against it and cannot work against the law,” he said.
“We are struggling to ensure that the society registers improved performance having come from an era where the previous board was at fault with alleged mismanagement,” he said.
He however expressed optimism that the door is not closed on the same if the turnaround strategy for the society works hence the need to recognise their invaluable efforts.
Kenya Highlands Sacco chairman Richard Mutai noted that board members work hard to ensure the success of the Saccos and that there should be nothing wrong if they are rewarded in a small way.
“If boards do not work hard, there will be no profits. And if there is profit because they have worked hard, why not reward them?” posed Mutai.
Wakenya Pamoja Sacco board chair Ezekiel Nyasamba agrees with Gitundu that directors deserve a send off package as a show of appreciation for their contribution. “It would be a shame to walk home empty handed after serving the society serve for years,” he said, adding that they go an extra mile to ensure the interests of the society are catered for.
Currently, the society does not offer any send off package for directors who retire but Nyasamba said that if the society makes profit then they also need to get honoraria.
However, in the event the society performs dismally, they should not be blamed as the top management holds the key in executing the policies implemented by the board.
Imarika Sacco chair Renson Ndoro said honoraria payment as well as the send off package for retiring board directors is subject to discussion.
During their previous interaction with the members and their representative, the subject drew mixed reactions.
The same was witnessed during the NSSF Sacco Annual Delegates Meeting, held at the Mwalimu Plaza in March, Nairobi.
Paying retiring directors Sh150, 000 was one of the top agendas during the meeting with varied reactions registered.
Failing to pay Sacco directors compares unfavorably with commercial banks where directors draw huge remunerations, which are usually linked to performance.
This, to a large extent aims to attract and retain the best talent to drive the bank’s growth. Some societies have a provision for honoraria after a given financial year besides the send off package accorded to retiring board directors.
According to the Safaricom Investment Co-operative, there is a policy that governs the honoraria payment, largely informed by the role of the board which is to create value for shareholders and make returns on investment.
“The Board monitors the behaviour of the management on behalf of the shareholders, plays a strategic decision and policy support role by offering input to decisions on strategic direction, through the expertise, wisdom, and information of its members,” the policy states.
It further states that the board, as the policy-making body and representative of the co-operative’s members, is responsible for maintaining the special character of the co-operative and is responsible for acquisition and preservation of co-operative assets as well as assess the co-operative’s performance on policy implementation and actions taken during the year and to plan effectively for the future sustainable growth.
“The board is always under increasing pressure to perform well and justify their decisions to members. The honorarium payment, therefore, is in recognition of the contribution of time, knowledge, skills and lived experience that the board provides to spur growth of share capital and deposits,” it adds.