Former Ernst & Young CEO drags the firm to court

by Wakili Liam
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Former Ernst & Young chief executive Gitahi Gachahi. | Photo: NMG

Gitahi Gachahi, a former Ernst & Young chief executive has taken the audit firm to court seeking an additional Sh10 million in retirement perks.

The CEO whose exit last June raised eyebrows had served more than a decade at the helm of the firm.

Mr Gachahi argues in court filings that his retirement package was incorrectly slashed by Sh10 million after the firm capped his pending leave days at 60 instead of 153 while Sh2.8 million was docked from his pay as part of austerity measures to protect the company from the economic effects of Covid-19.

“It is worth noting that as is in the case of chief executive officers and chief operating officers, continuing partners have always been compensated for the days carried forward above sixty days when they eventually take them. So the days above 60 are not forfeited because work schedules do not allow to take prolonged leave,” he says.

“In addition to my leave days being capped at 60 instead of the 153 days, during the month of March 2020, the respondent (Ernst & Young) unilaterally decided to deduct Sh2,838,024 from my drawings over a three-month period.”

Mr Gachahi was the CEO of the audit and advisory firm from October 2009 until June 30, 2020 when he retired.

He claims his attempts to have the company to review his retirement perks failed despite writing several protest letters. He received a reference salary of Sh28.63 million for 2020 when he exited the company. A reference salary means the highest annual rate of base salary paid to an employee by a company at any time during the three-year period ending on the date of termination of a work contract.

“Despite the protests and without engaging me in the process, my reference earnings were reduced by Sh10million,” Mr Gachahi says.

The retired CEO is now demanding that Ernst & Young be barred from distributing its 2020 income among its partners, pending the determination of the case he has filed in court.

In his application, he further demands that the consultancy be compelled to provide a financial statement showing how profits were distributed.

“That pending the hearing and determination of the application and this suit the honourable court be pleased to issue an order directing and/or compelling the respondent, its agents and or assignees to reinstate the claimant’s financial year 2020 reference earning to Sh47,750,000 for purposes of calculating the leave compensation and determination of his full annual compensation,” Mr Gichahi says in application filed through Mwagambo and Okonjo Advocates.

The court filings also question a decision by the firm to lay off 42 senior and long-serving managers in the Nairobi office.

“Despite being a major shareholder in the firm, I was not engaged when Covid-19 economic conditions were used to justify staff redundancy despite not being supported by facts,” Mr Gachuhi says.

Ernst & Young is one of the world‘s four biggest audit firms and counts Co-op Bank, the Central Bank of Kenya and Absa Bank Kenya among its customers.

The Kenyan office falls under its Eastern cluster, which includes Ethiopia, Kenya, Uganda, Tanzania and Rwanda.

The case will be heard this morning before Justice Nduma Nderi.

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