How sitting in boards of profitable firms pays off

Dar es Salaam. Little is generally known about how much companies pay to members of their boards of directors as sitting allowances during board meetings.

Board members in banks and some profit-making organisations are being paid millions as fees and other emoluments for their role of ensuring success of the companies every year.

An analysis of four blue-chip companies listed on the Dar es Salaam Stock Exchange (DSE) revealed that a non-executive director in some firms earns on average higher than the average benefits (including salary) paid to permanent staff.

The annual reports of the companies also indicate that the directors’ remunerations differ from one company to another.

CRDB Bank

CRDB Bank paid Sh801 million – the highest among the companies analysed - to its 14-member board in 2018, making an annual average of Sh57.2 million per director. However, actual payment of individual directors ranged from Sh23 million to Sh77 million per year - depending on the number of meetings participated both in the board and in board committees.

The CRDB Bank board held 11 meetings during the year, eight (8) meetings as planned and three (3) meetings being special. In 2017, the bank paid Sh680 million for the same purpose, according to its 2018 annual report.

The bank’s chairman, Mr Ally Laay, walked away with Sh69 million in 2018, the same amount he received in the previous year, according to the report.

The CRDB Bank also said it distributed Sh159.223 billion to its 3,101 employees as salaries, incentives and medical schemes during the year. This translates into an average of Sh51.345 million per individual employee.

NMB Bank

On the other hand, the NMB Bank paid out a total of Sh309 million to its nine non-executive board members in 2018 as fees and other emoluments, averaging Sh34.33 million per member per year. In 2017, the bank paid out Sh333 million. Individual payments ranged from Sh1.384 million to Sh67.245 million, according to the bank’s 2018 report. Two members were appointed to the board in June 2018.

The bank’s chairman, Prof Joseph Semboja, received Sh37.45 million in 2018.

The NMB Bank paid Sh124.228 billion as salaries and other benefits to its 3,450 workers in 2018: an average of Sh36 million per employee.

Generally, the board of directors of banks are expected to meet at least quarterly to discuss the banks’ business affairs based on reports submitted by management, according to the Bank of Tanzania (BoT) guidelines.

The guidelines also require the board to regularly review its mix of skills and experience, as well as other qualities for its effectiveness.

To avoid conflict(s) of interest, the government restricted members of the Union National Assembly, Zanzibar House of Representatives or local government authorities to be appointed directors of banks.

Vodacom Tanzania

Tanzania’s leading telecommunications company, Vodacom Tanzania Plc, paid Sh380 million to its ten non-executive board members in the year which ended on March 31, 2018, down from Sh548 million paid in 2017, according to the firm’s annual report.

The figures translate into an average of Sh38 million per director in 2018 - and Sh54.8 million per director in the previous year. However, the report reveals only the summary without the details of either the individual directors or that of the chairman, Ali Mufuruki.

TBL Group

The Tanzania Breweries Ltd (TBL) Group paid Sh144 million to its nine non-executive directors. The company’s chairman, Mr Cleopa Msuya, received Sh39 million during the year that ended on March 31, 2017.

TBL Group also paid Sh97.857 billion as wages, salaries and other benefits of its 1,818 employees. That translates into an average of Sh53.8 million per employee per year.

From the reports of the four firms, it was also reported that some board members may appear in more than one company’s board.