Kenya’s Capital Markets Authority has published the 2nd State of Corporate Governance Report which assessed about 53 issuers of securities to the public.
In the report, the Authority’s outgoing Chief Executive Mr Paul Muthaura notes that they have already taken enforcement action against issuers who either delayed or failed to submit their corporate governance reports.
The report follows the evaluation of the second set of regulatory reports submitted in accordance with the Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015 (the Code), which became effective in March 2017.
The Code sets out the principles and specific recommendations on the structures and processes which issuers should adopt in making good corporate governance an integral part of their business dealings and culture
“This report is aimed at raising the visibility of the state of corporate governance of issuers of securities to the public in order to empower investors and urge boards to improve on their practices,” said Muthaura.
Assessment of the 53 issuers at the Nairobi Stock Exchange(NSE) was based on seven areas namely how a firm is committed to good governance, Board operations and control; Rights of shareholders; Stakeholder relations; Ethical and social responsibility; Accountability, risk management and internal control; and Transparency and disclosure.
Construction & Allied sector led in Board Operations and control as well as Ethics and Social Responsibility principle.
Accountability, Risk management and internal control had Energy & Petroleum, Construction & Allied as well as Investment & Investment Services sectors in that order.
The insurance sector performed well on the Board Operations and Control principle while the Manufacturing & Allied/Automobiles & Accessories sector led on the commitment to good corporate governance principle.
Investment & Investment Services performed best on transparency and disclosure principle. Banking, Energy & Petroleum and Construction & Allied sectors were best performers on the Stakeholder Relations principle.
The analysis on the overall weighted performance on each principle revealed that in FY 2018/2019, issuers performed well in Accountability, Risk management and internal control, Rights of Shareholders, Commitment to good governance as well as Board Operations and control. Stakeholder relations was the least performed principle at 53per cent.
“We envision that this report will become the first port of call for any investor, researcher or any other interested person to find information,” said Wycliffe Shamiah –Director in charge of Market Operations at CMA Capital Markets Authority, Kenya.
In the past, there was no mechanism to assess and report on the state of governance for issuers, and an investor or any interested person had to go through disparate annual reports and other fragmented information to establish the state of governance.
With the introduction of the Code, issuers now have an obligation to publicly disclose certain governance documents, including board charters and policies. Given that the assessment on each issuer is wholly reliant on publicly available information, issuers are given incentive to avail the necessary information as part of their overall commitment to transparency and disclosure.
