Equity Bank on the spot in HF boardroom war

Housing Finance on Thursday defended itself over the resignation of three directors, but attention shifted to Equity Bank, the single largest shareholder in the mortgage company, which is being accused of instigating a boardroom coup.

Ms Beatrice Sabana, who has resigned alongside chairman Kung’u Gatabaki and National Social Security Fund (NSSF) representative on the board Mr Naftali Mogere, said they had resigned to “protest” a scheme by Equity Bank and British American Investment Company (Britak) to take control of the board by installing their chosen chairman.

“Equity is entitled to four board seats, but it has always expressed a desire to take control of the board,” said Ms Sabana, who tendered in her resignation letter yesterday stating in part that: “I am deeply aggrieved and ashamed to have witnessed such a circus in what can best be described as corporate terrorism.”

Equity Bank and Britak jointly own 24.9 per cent stake in Housing Finance acquired from the Commonwealth Development Corporation (CDC) in mid 2007.

Equity chairman Peter Munga, who also sits on the HF board, said Equity was not flexing its muscle. “No, no, no,” he said on phone, “We’re not known for that. We don’t even have the muscle.”

‘Voluntary resignation’

Housing Finance denied any boardroom intrigues, saying the board changes were geared at boosting its strategic initiatives and enhancing adherence to corporate governance principles.

“The former directors,” said the company in an unsigned statement sent through its PR company, “voluntarily stepped down as per discussions and agreement by the Board during a special board meeting held to discuss, amongst other issues, the upcoming statutory Annual General Meeting.”

According to the AGM notice issued on March 25 this year, four directors – Prof Shem Migot Adholla, Mr Steve Mainda, Mr Gatabaki and Mr Mogere – were to retire and seek re-election.

Mr Gatabaki and his sympathisers read mischief in what they see as behind-the-scenes intrigues, claiming not only were they sidelined in the notice for the April 29 AGM, but also that Equity and Britak representatives on the board had vowed to block his re-election.

“....The two directors representing these shareholders threatened to veto my re-election if I am an independent director,” says Mr Gatabaki in his resignation letter.

Mr Gatabaki and Mr Mogere had served the board for three consecutive terms.

He served both as a board member and chairman since 2004, during which the company re-branded and turned around through a five-year strategy and a successful rights issue.

“As part of refreshing the board, the board has for the last couple of years encouraged directors to seek only three consecutive terms,” Housing Finance said.

“Despite a successful tenure under his belt, the board felt that not enforcing the agreement would amount to reneging on its earlier promise to shareholders.”

Mr Mogere was appointed a director in July 2004, while he was the NSSF Managing Trustee.

Upon his exit from the NSSF in 2005, Housing Finance said, the board retained him to tap his experience and expertise in financial matters during the restructuring.

However, in a letter dated August 27, 2009, the NSSF Board of Trustees chairman, Mr Adan Mohammed, wrote to Housing Finance seeking to replace Mr Mogere at the next general meeting.

Mr Gatabaki has been replaced by Mr Mainda in an acting capacity.