The Capital Markets Authority (CMA) has released its annual report on the state of corporate governance for issuers of securities in Kenya. The seventh edition, covering the period from July 1, 2023, to June 30, 2024, revealed a 2.15% decline in overall corporate governance scores among companies listed on the Nairobi Securities Exchange (NSE). The report assessed 52 issuers based on their adherence to the 2015 Code of Corporate Governance Practices (CG Code) and the newly introduced 2023 Capital Markets (Public Offers, Listings, and Disclosures) Regulations (POLD Regulations).
Corporate Governance Performance: Key Findings
CMA’s comprehensive assessment highlighted both achievements and challenges faced by listed companies in Kenya. The weighted governance score dropped from 75.71% (Leadership Rating) in 2022/2023 to 73.56% (Good Rating) in the 2023/2024 period. This decline was attributed to the difficulties issuers encountered in aligning with the new mandatory provisions of the CG Code following the introduction of the POLD Regulations.
Among the 52 issuers assessed, 27 companies earned a Leadership Rating, demonstrating excellence in governance practices. Thirteen companies received a Good Rating, while eight were categorized as Fair. Four companies were flagged for further attention due to poor governance standards.
Areas of Improvement and Challenges
Despite the overall decline, the report noted positive strides in several areas of governance. The commitment to good corporate governance increased significantly, rising from 78.60% to 81.31% in 2023/2024. Other key areas, such as Ethics and Social Responsibility, showed minor improvements, increasing from 74.82% to 74.94%. Additionally, scores for Accountability, Risk Management, and Internal Control increased slightly, from 80.7% to 80.72%.
These areas of improvement suggest that, although overall scores have dropped, there is still a notable commitment to enhancing corporate governance in Kenya. The report also highlighted a steady rise in governance scores since 2017/2018, when the overall rating stood at just 55%.
Future Outlook for Corporate Governance
CMA CEO Wyckliffe Shamiah emphasized that the report serves as an important roadmap for issuers to identify strengths and areas for improvement. He noted that the ultimate goal is to build a more robust governance framework, which will enhance long-term growth, sustainability, and transparency in Kenya’s capital markets. The findings of this year’s report will undoubtedly be key in shaping the direction of corporate governance practices across the country’s public companies.
As the Kenyan capital markets evolve, the introduction of the POLD Regulations marks a significant step in strengthening governance frameworks. While challenges remain, the consistent improvements across various governance pillars offer a glimmer of hope for a more transparent and accountable future for listed companies.
