Court suspends Ruto's directive on management of State-owned firms

The High Court has suspended President William Ruto’s new guidelines on the management of State corporations.

Judge Lawrence Mugambi froze the implementation of Executive Order 3 of 2024 which provides guidelines on management of more than 300 State-owned companies and public universities pending the hearing of the petition lodged in court by the Law Society of Kenya (LSK).

The new guidelines set a high threshold in State agencies where employees with a record of three years poor performance will lose their jobs.

According to LSK, the guidelines are a direct usurpation by the Executive on the functions of Public Service Commission (PSC) and the establishment of a parallel public service under the office of the President.

If the revised guidelines were to take effect they were expected to provide salary bands and allowances for CEOs and board members. Also to be affected were vice chancellors, chancellors and members of university councils.

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President Ruto ordered through a gazette notice dated May 24, 2024 that the 2024 guidelines on management of State corporations supersede the guidelines issued in November 2004.

The President said the proposed revisions seek to promote efficient, effective, and prudent use of public resources while fostering productivity at both the agency and the individual staff level.

The lawyers’ body secured the orders after informing the judge that the guidelines were illegal and unconstitutional as there was no lawful public participation and no parliamentary approval as required by the law. 

“The said guidelines contravene Articles 230 and 234 of the Constitution as they usurp the constitutional functions and powers of the PSC and SRC and give them to the State Corporations Advisory Committee and the National Treasury respectively,”  LSK told Judge Mugambi.

The society contends that the powers and functions of the Inspector of State Corporations as outlined in the impugned guidelines are the powers and functions of PSC as stipulated under Article 234(2)(d) of the Constitution which provides for the powers of the Commission to investigate, monitor and evaluate an organisation and it’s administration.

In addition, LSK says that human resource management practices in State corporations is the preserve of the PSC.  

“The consequence of not suspending the guidelines is that all State corporations and public universities will be moved to the office of the President and their terms and conditions of service determined and reviewed contrary to the dictates of the Constitution and the Public Service Commission Act,”  LSK lawyer Calvin Oira stated. 

“I do hereby direct all boards of State corporations to secure the immediate implementation of the 2024 guidelines on the management of State corporations (May 2024),” he said.

The President said the proposed revisions seek to promote efficient, effective, and prudent use of public resources, fiscal sustainability and performance of State corporations while also fostering productivity at both the agency and the individual staff level.

Dr Ruto acknowledged that state corporations play a dynamic role in enabling the socio-economic development of the nation.

The Head of State said the effective and accountable governance and management of State corporations is vital to fully unlocking their contribution to the national development agenda.

He noted that in November 2004, the government issued guidelines on the terms and conditions of service for the chairperson, members of the board, and Chief Executive Officers of State corporations.

In a bid to enhance service delivery and in response to the ever-changing operating environment, emerging needs and challenges, as well as global trends; Dr Ruto said it had become necessary to review the 2004 Guidelines in keeping with international best practices.

The LSK says it is aggrieved by a gazette notice dated May 24,2024  in which Ruto ordered that the terms and conditions of service for board members and staff of State corporations shall be as set out in the 2024 guidelines on the management of State corporations (May 2024).