The Employment and Labour Relations Court has recently quashed the appointment of board members of certain state corporations, citing a lack of transparency and competitiveness in the recruitment process. The latest casualties include the Kenya Medical Supplies Agency (KEMSA) and the Kenya Bureau of Standards (KEBS), highlighting the need for strict adherence to good corporate governance principles by state corporations.
In a recent ruling delivered by the High Court, the court held that the appointment of various persons to the Board of KEMSA by the Cabinet Secretary (CS) for Health was uncompetitive. The appointments were not based upon competence and suitability, did not afford adequate and equal opportunity on account of gender, ethnicity or regional balance and contravened the provisions of the Constitution and the KEMSA Act.
In a separate ruling, the court revoked the appointments of Bernard Njiraini as chief executive officer of KEBS and Bernard Ngore as chairman of the National Standards Council (NSC). The court also quashed the appointments of NSC’s board of directors, saying the recruitment was not subjected to public participation. The judge further directed that the appointments ought to be done in strict compliance with the Constitution and relevant legislation.
Key considerations when appointing public boards
Article 10 of the Constitution sets out the binding national values and principles of governance. Among these include good governance, transparency, accountability and public participation. These values are embedded in the recruitment process of state and public officers.
Chapter Six of the Constitution further sets out the guiding principles of leadership that require selection based on personal integrity, competence and suitability.
Some State Corporations are established under an Act of Parliament. The respective Act will generally outline the requirements for the appointment of the board members.
According to the KEMSA Act, the board of directors should be competitively recruited and appointed by the CS. The potential appointees must be persons who fulfil the following requirements:
- Have at least a university degree in a relevant discipline;
- Have at least 10 years of experience in management or in the health sector (15 years for the chairperson); and
- Satisfy the requirements of Chapter Six of the Constitution.
The CS is also required to ensure that the appointments fulfil the requirements of gender and regional balance as enshrined in the Constitution and that at least one person is appointed from each of the following categories:
- A procurement or supply chain management specialist;
- A pharmacist experienced in drug and medical supplies management; and
- One person with knowledge and experience in finance or commerce.
The Code of Governance for State Corporations, popularly referred to as the Mwongozo Code, was issued to exorcise the governance challenges that bedevilled state corporations. Mwongozo was developed as a critical building block in entrenching principles and values of public service and best practices in corporate governance.
We set out below some of the governance practices concerning board appointments as outlined under the Mwongozo Code:
- Board appointments shall be made in line with Article 27 (Equality and freedom from discrimination) of the Constitution.
- The board should be appointed through a transparent and formal process governed by the overriding principle of merit.
- Board appointments should consider the mix of skills and competencies required for the achievement of the organisation’s long-term goals.
- Board appointees must satisfy the fit and proper requirements.
Impact of non-compliance
Irregular board appointments manifest in inefficiencies and wastage of public resources. In addition, service delivery to citizens is hampered when the courts revoke such appointments.
Furthermore, the public must contend with losses of unduly allocated taxpayer funds paid out as salaries and allowances to the unlawfully constituted board. This begs the question as to whether such funds should be refunded or not.
With the heightened scrutiny on public board appointments, appointing authorities such as the Cabinet Secretaries for the relevant ministries must adhere to good corporate governance and ensure appointees are subjected to the requirements set out under the law.
The recent developments indicate the courts’ willingness to revoke irregular board appointments for state corporations in instances of non-compliance with the legal requirements, including the principles of good corporate governance.