Okoiti V The Board, Export Processing Zones Authority & 3 Others; Otieno (Interested Party) (Petition E133 Of 2021) [2022] KEELRC 3771 (KLR) (29 July 2022) (Judgment)

The ELRC clarified that Cabinet Secretaries should not treat State Corporations as government departments. The State Corporations Act and Mwongozo Code recognize the autonomy of State Corporations, which operate through their boards. Cabinet Secretaries should respect this autonomy.

A. Factual background

The CEO of the Export Processing Zones Authority’s term ended in 2018. The Cabinet Secretary appointed various acting CEOs, ignoring the Board’s recommended candidate. The petitioner sued, claiming the Cabinet Secretary overstepped her authority and the acting CEO’s appointment was invalid.

B. Issues

Flowing from the issues above, the matter before Court raises the following issues-

a) What was the role of Cabinet Secretaries in the appointment of Chief Executive Officers of State corporations?

b) Whether a person could be an acting Chief Executive Officer in a State corporation for over 30 days.

c) Whether the Code of Governance for State Corporations (MwongozoCode) was a legally binding instrument in State Corporations governance.  

d) Whether cabinet secretaries could audit the recruitment process of State corporations

C. Holding

1. On the first question on the role of the Cabinet Secretaries in the appointment of Chief Executive Officers of State Corporation, the Court ruled that State Corporations operate through their Boards, not through Cabinet Secretaries. The CEO is appointed by the Board under the State Corporations Act.

Further, in canvassing the role of a Board in State Corporations, the Court applied Section 5(3) of the State Corporations Act, which gives the mandate to engage and employ staff, including the CEO to the Authority. Therefore, the Court ruled that the Board, not the Cabinet Secretary, was the employer. The Cabinet Secretary could only appoint the CEO if the Board recommended them.

2. On the second question on whether one can act as a Chief Executive Officer for more than 30 days, the Court ruled that the Cabinet Secretary’s extension of the acting CEO’s term beyond 6 months was illegal. This violated the Public Service Commission Act, which limits acting appointments to 30 days to 6 months. The Court also found that the extension undermined the appointment of a substantive CEO, making it illegal and void.
3. The third issue raises the question on whether the Code of Governance for State Corporations (MwongozoCode) was a legally binding instrument in State Corporations governance. the Court ruled that the State Corporations Act is the primary law governing State Corporations, while the Mwongozo Code is the primary instrument for their governance. The Mwongozo Code aligns State Corporation governance with the Constitution.

4. On the last question on whether Cabinet Secretaries can audit the process of the recruitment of a Cabinet Secretary, the Court ruled that the Cabinet Secretary had no authority to audit the recruitment process. Only the Inspector-General can conduct such audits upon request.

The Court stated that Principal Secretaries should be on State Corporation boards to represent their ministries. Concerns about CEO recruitment should be raised through the board. Cabinet Secretaries should not treat State Corporations as government departments and must respect their autonomy.

D. Conclusions

The Court’s judgment provided clarity on the management and governance of State Corporations, defining the roles of Cabinet Secretaries and Boards. Therefore, the court held as follows-

1. Cabinet Secretaries must confirm Board appointments without question or reservations.
2. Acting CEOs cannot serve for more than 60 days.
3. The code of the governance for the State Corporations extends to the Mwongozo Code which has gained significant acceptance in Courts and through Presidential directive.
4. Cabinet Secretaries cannot audit State Corporations; this is done by agencies like the Auditor-General, the Controller of Budget, the Inspector General of Police and the Ethics and Anti- Corruption Commission.