The succession battle to replace Collymore at Safaricom

Monday July 8 2019

 

By PAUL WAFULA

Safaricom had already settled on an outsider to replace the late Bob Collymore as its next chief executive officer and was preparing to make the announcement but the plan was scuttled by the Mr Collymore’s sudden death.

Insiders say the firm was going to unveil a new boss before the end of the month, and was preparing to lift the remaining hurdle of convincing the government to accept its candidate.

“That plan died with Bob. There was going to be a new CEO by the end of this month,” a source familiar with the succession intrigues said.

SUCCESSION

Should the firm fail to have its way, it could confirm Michael Joseph as its substantive chief executive in order to buy it more time to deal with the succession headache following Mr Collymore’s death.

Succession intrigues at the firm started as far back as last year, after one of the board meetings at the firm’s head office in Westlands.

Immediately the shortlist was finalised, the directors of the firm listed on the Nairobi Securities Exchange (NSE) started receiving calls.

Sources said the calls came from a State House operative, who was keen to “remind them” to stick Kenya’s position on the matter.

Before the phone calls, the firm, the most profitable private company in East Africa, had narrowed down to potential successors and the directors were scheduled to vote on the most suitable candidate.

But the process was not entirely in line with an agreement Kenya had entered into with the with the firm’s largest shareholder — United Kingdom’s Vodafone — on who was to have the final say when the time came to replace Mr Collymore.

CRITICAL MATTER

The Safaricom board meets at least four times a year. Before every meeting, comprehensive board papers are prepared and circulated to all the directors for all substantive agenda items at least two weeks before the meeting.

This allows them time to undertake review board documents to facilitate full and effective discussions at the meetings. The submissions and notification period may be waived should an urgent or critical matter arise within the two weeks before the meeting.

Before 2017, the appointment of the firm’s CEO and the Chief Finance Officer (CFO) was the preserve of Vodafone Group PLC, which owned a 40 percent stake in the firm through a company registered in Nairobi as Vodafone Kenya Limited (VKL).

But in 2017, Vodafone wanted to sell 87.5 percent of its shares to its South African subsidiary, Vodacom. This represents a 35 percent stake in Safaricom. But the government of Kenya would have none of it.

It blocked the deal until the firm accepted to make some concessions on the ultimate decision making at the firm, given that, broken down and without combining their stakes, Vodacom would own 35 percent, equal to the Kenyan government held. Its parent would then be left with 5 per cent.

DECISIONS

But that is not how companies work. In times of making decisions, parents and their subsidiaries are always treated as one entity, and this meant that the British firm still controlled the 40 per cent stake through South Africa. But its shareholding structure remained the same in its books.

Vodafone Kenya Ltd remained with 40 per cent, remaining the top shareholder. The second is the government of Kenya, which owns 35 per cent, while thousands of retail and institutional investors listed at the Nairobi Securities Exchange (NSE) own the remaining 25 per cent.

Despite being a private company, Safaricom had become too important to the country’s national security that the government wanted to make sure it had a say on important national interests. The National Treasury had already flagged its successful mobile money platform, M-Pesa, as a potential risk to Kenya’s economy, if it collapsed or something were to happen to it.

But Vodafone was looking at a different set of risks, should the government have its way. Besides qualifications, the firm identified political risks as one of its major considerations in sourcing for its next chief executive.

Divisive politics have come with big risks to its business, and it needs to settle on a candidate seen as neutral, and will not be control led by the state during elections.

But desperate to sell, the Vodafone Group took a step back and reluctantly agreed to the conditions.

ANNUAL GENERAL MEETING

This set in motion some of the events that would see the company amend its articles of association at its Annual General Meeting (AGM) held in September, 2017.

One of the changes ratified was to expound the definition of Vodafone Kenya Limited (VKL), to include its subsidiary or its holding company or any subsidiary of such a holding company, notwithstanding that VKL may change its name from time to time. It also made changes to its size of the boardroom.

Unless and until determined by a special resolution of the company, the number of directors (excluding alternates) shall not be fewer than seven or more than 10. This is includes the independent, non-executive directors who must be Kenyan citizens.

However, it is the third amendment that will have the biggest bearing on who calls the final shot. The firm said that, for a number of important matters, among them the appointment of its CEO and chief financial officer, such a resolution would only pass if got more than 75 percent of the directors’ votes.

What this meant was that without the votes of the directors representing the Kenya government, it would be impossible for Vodacom to have its way on the board.

SHAREHOLDERS

In another resolution that anticipated the latest developments at the firm, the company asked shareholders to allow the board of directors to appoint one of its members to the office of managing director or manager “for such period and on such terms and with such powers, and at such remuneration as they may think fit

This came in handy last week, when the firm appointed its former CEO, Mr Michael Joseph, who was serving on its board, to the position of interim CEO after Mr Collymore’s death.

The AGM also passed a resolution that the “directors shall encourage the retention of a predominantly Kenyan character in the senior management and executive committees of the company”. It also scrapped the position of the deputy chairman and all references to the term in the company’s articles of association.

Instead, it passed the amendment that the directors may elect a chairman for their meetings, who shall be a Kenyan citizen, and determine the period for which they are to hold office.

However, if no such a chairman is elected, or if at any meeting the chairman is not present within 15 minutes after the time appointed for holding it, the directors present may choose one of them to chair the meeting.

The company has to consider all these interests to decide on the next CEO.

When things became too hot, the firm extend Collymore’s contract, which was originally due to expire next month, by a year to August 2020.

current top executives ‘was ready’ to take on the leadership of the firm, in another signal that it was looking outside.