CMA Issues the Seventh Edition of the State of Corporate Governance Report
Nairobi, 06 January 2025…The Capital Markets Authority (CMA) has issued the Seventh Edition of the Report on the State of Corporate Governance for Issuers of Securities to the Public in Kenya. The report is for the financial year 1 July 2023 to 30 June 2024.
The annual publication outlines CMA’s independent assessment of companies listed on the Nairobi Securities Exchange (NSE) and the issuers of corporate bonds are applying the principles and recommendations contained in the Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015 (CG Code).
The CMA Chief Executive Officer, Mr. Wyckliffe Shamiah, observed; “This comprehensive assessment serves as a crucial roadmap for issuers, showcasing areas of excellence while identifying opportunities for improvement. Our ultimate goal is to strengthen corporate governance and sustainability practices, fostering long-term growth, transparency and enhanced stakeholder confidence in the capital markets sector.”
The Authority assessed fifty-two Issuers, and the performance was as follows: 27 assessed issuers securing a Leadership Rating, 13 issuers achieving a Good Rating, 8 Issuers demonstrating a Fair Rating and 4 Iissuers within the Needs Improvement category. The assessment was based on corporate governance principles under the Capital Markets (Public Offers, Listings and Disclosures) Regulations 2023 (POLD Regulations 2023) and the Code of Corporate Governance Practices for Issuers of Securities to the Public 2015 (the CG Code).
One of the outstanding achievements is the significant improvement in the annual weighted overall governance score of issuers (listed companies). From a Fair Rating of 55% in the financial year 2017/2018, issuers have advanced to an impressive Good Rating of 73.56% in 2023/2024. This remarkable improvement underscores the collective effort by issuers to refine & implement their governance frameworks, elevating corporate transparency, accountability, investor confidence and market integrity.
However, the annual weighted overall score for all issuers showed a decrease in performance, declining by 2.15% from 75.71% (Leadership rating) in the 2022/2023 financial year to 73.56% (Good rating) in the 2023/2024 financial year. The decline was attributed to failure by issuers to adhere to the principles of the CG Code following the enactment of POLD Regulations 2023 which has made the application of the CG Code mandatory.
There is also a move from disclosure-based assessment by the Authority to implementation-based approach where issuers are expected to document specific initiatives on how they were implementing the provisions of the CG Code.
Despite the decline in the annual weighted overall score by Issuers, the following three principles improved in comparison to the FY 2022/2023: Commitment to good corporate governance improved from 78.60% (Leadership Rating) to 81.31% (Leadership Rating), Ethics and Social Responsibility principle improved from 74.82% (Good Rating) to 74.94% (Good Rating) whereas Accountability, Risk Management and Internal Control improved from 80.7% (Leadership Rating) to 80.72% (Leadership Rating).
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BACKGROUND INFORMATION
The Capital Markets Authority (CMA) was set up in 1989 as a statutory agency under the Capital Markets Act Cap 485A. It is charged with the prime responsibility of both regulating and developing an orderly, fair, and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence. CMA also regulates the commodity markets and online forex trading. The regulatory functions of the Authority as provided by the Act and the regulations include; Licensing and supervising all the capital market intermediaries; Ensuring compliance with the legal and regulatory framework by all market participants; Regulating public offers of securities, such as equities and bonds & the issuance of other capital market products such as collective investment schemes; Promoting market development through research on new products and services; Reviewing the legal framework to respond to market dynamics; Promoting investor education and public awareness; and Protecting investors’ interest. For more information, please contact: Antony Mwangi, Manager Corporate Affairs & International Relations on amwangi@cma.or.ke
