The Capital Markets Authority has published the first State
of Corporate Governance Report based on an assessment of 56 issuers of
securities to the public in 2017/18. The report is aimed at raising visibility
of the state of corporate governance of issuers of securities to the public in
Kenya in order to empower investors and respective boards to encourage
continuous improvement in practices.
The report follows the evaluation of the first 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 that issuers should
adopt in making good corporate governance an integral part of their business
dealings and culture.
To facilitate the Code’s goals, and in consultation with
stakeholders including issuers, CMA developed offsite self-evaluation tools
together with a scorecard methodology for reporting, measuring and monitoring
the application of the Code.
The corporate governance reporting template serves to
enhance adherence to corporate governance requirements and disclosure of the
status of each issuer’s application of the respective requirements. The
corporate governance scorecard is assessed internally by the Authority to
inform engagement with the reporting issuers and the development of market-wide
trend analysis through the State of Corporate Governance Report.
Issuers were required to submit the completed reporting
templates together with the complete set of annual reports within four months
following the end of their financial year. The submitted templates for the
financial year 2017 were individually assessed and rated based on information
which is publicly available to shareholders and potential investors.
Thereafter, CMA shared feedback with every issuer detailing strengths and areas
The CMA Chief Executive Paul Muthaura noted, ‘’the 55
percent overall score compares favourably with other jurisdictions around the
world. Comparatively, the Association of South-East Asian countries developed a
corporate governance report on the countries in the association which indicated
that Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam scored
43 percent, 62 percent, 49 percent, 56 percent, 68 percent and 28 percent
respectively in 2012 when the public companies in these countries were first
assessed. The public companies assessed under the ASEAN Corporate Governance
initiative have since shown significant improvement in adopting good corporate
governance best practices’’.
Mr Muthaura acknowledged that the 55 percent average score
was a good starting point in the assessment of issuers on their application of
corporate governance principles. The best implemented principles were those
relating to, “commitment to good governance”, “accountability, risk management
& internal control” and “rights of shareholders” with a combined total of
22 issuers in leadership positions. The
report aims at encouraging issuers of securities to become model corporate
citizens by adopting and fully implementing the Code and related corporate
governance laws, standards and practices.
Mr Muthaura said that in line with the relevant laws, the
Authority has engaged all the issuers who have been assessed during the
development on its findings prior to the publication of the Report. This
engagement is evidenced by a feedback statement from those consultations also
published on the Authority’s website.
Going forward, the Authority will seek to continually
improve, and where appropriate, refine its assessment of the quality and
improvement of corporate governance practices of individual issuers against the
Code and other globally accepted corporate governance standards. In this
regard, both the Corporate Governance Reporting Template and the Scorecard will
be refined to provide a responsive basis for such a dynamic review and
comparison within the Kenyan context. The Authority will continuously provide
feedback to the respective issuers at the end of every assessment to enhance
and deepen good corporate governance practices in Kenya. The report is
available on the CMA website, www.cma.or.ke.