Listed companies have been delegating to their boards the approval of policies that only shareholders are legally allowed to approve, the Capital Markets Authority's FY 2024/2025 State of Corporate Governance Report has revealed.
- •The report also shows that boards have been rushing through Annual General Meetings too quickly for shareholders to ask questions, and operating boards filled with directors who are not genuinely independent.
- •The regulator did not specify how many issuers are in breach, a transparency gap that makes it impossible for shareholders to identify whether their own company is among them.
- •The formal registration of the Minority Shareholders Association of Kenya, flagged in the report as a significant governance development, is the organised response to these accumulated failures.
"When boards are better constituted, risk frameworks more rigorous and disclosures more transparent, the market responds: with stronger participation, deeper liquidity and growing investor confidence," Daniel Warutere, CMA's Director, Markets Operations, says in the report.
The policy delegation breach is the most direct with clause 8.21 of the Public Offers, Listings and Disclosures (POLD) Regulations 2023 expressly reserving shareholder approval for five categories of policy: remuneration, stakeholder communication, corporate disclosure procedures, dispute resolution and board member retention.
These govern how executives are paid, how investor grievances are resolved and how the company communicates material information to the market. The CMA found some issuers have handed these approvals to their boards. Under the POLD Regulations 2023, Corporate Governance Code compliance is a legal obligation, not a best practice recommendation.
The reports also shows that some listed companies are conducting AGMs in timeframes so short that shareholders cannot exercise their legal right to question management on company performance, financial results or any matter relevant to the protection of shareholder interests.
"With the increasing adoption of virtual and hybrid AGMs, there is an expectation that these meetings should, as far as practicable, replicate the level of engagement and participation available in physical meetings. The use of technology should therefore enhance, rather than limit, shareholder participation," CMA says.
The regulator is pushing companies to publish AGM questions and responses on their websites but has not attached a specific deadline, describing the requirement only as "within a reasonable period."
For years, the report says, companies have been designating individuals as Independent Non-Executive Directors despite those individuals being employees or executive directors of related entities, a direct violation of definitions the POLD Regulations 2023 introduced. The FY 2023/2024 assessment was the first year the new definitions applied, meaning the misclassification was present in at least FY 2022/2023 and earlier. Shareholders in those years had boards that appeared independent and were not.
The Rights of Shareholders principle scored 77.74% in FY 2024/2025, up from 59.15% in FY 2017/2018, an 18.59 percentage point gain across eight assessment cycles. Six issuers remain in the Needs Improvement band on this principle specifically, eleven scored Good Rating, and sixteen companies, nearly a third of the 53 assessed, have not reached Leadership on the principle most directly concerned with protecting the people who own them.
The Agricultural sector scored 62.22% on Rights of Shareholders, the weakest sectoral performance on this principle, consistent with the sector's overall Fair Rating of 62.80%, the only sector below Leadership in the entire assessment.
The CMA report also calls on issuers under Clause 3.2.1 of the CG Code to disclose specific measures protecting minority shareholders from adverse actions by controlling shareholders, abusive related-party transactions and controlling shareholder dominance. It separately found that boards are not disclosing formal dividend policies or the rationale behind dividend decisions, a material information gap for retail shareholders making investment decisions on income expectations.
On institutional engagement, issuers are not disclosing how they engage specifically with institutional investors under the Stewardship Code for Institutional Investors 2017, beyond the generic mechanisms applied to all shareholders.
