CMA seeks to limit the number of directorships an individual can hold in public companies to three.
Directors of public listed companies are currently allowed to hold up to five board positions – a reality that is seen to encourage in-breeding and cartel-like behaviour in corporate governance.
Individuals serving as chief executives of public listed companies will sit in the board of only one other company other than their own.
CMA, the capital markets regulator, has published a new set of proposed regulations that will limit the number of directorships an individual can hold in public companies to three.
Directors of public listed companies are currently allowed to hold up to five board positions – a reality that is seen to encourage in-breeding and cartel-like behaviour in corporate governance.
Companies have, however, responded to the criticism with the argument that finding knowledgeable and experienced directors is a difficult task that has forced them to share the few in the marketplace. If the proposed code of conduct is adopted and enacted into law, individuals serving as chief executives of public listed companies will sit in the board of only one other company other than their own -- a proposal that is likely to force Britam’s managing director Benson Wairegi to surrender one of the board seats he holds in two other public companies.
“A director of a listed company other than a corporate director shall not be a director in more than three public listed companies at any one time.
An executive or managing director of a listed company shall be restricted to one other directorship of another listed company,” reads the proposal by CMA.
Besides Britam, Mr Wairegi also sits in the Housing Finance and Equity Bank boards, where the insurer holds an 8.8 per cent and 7.1 per cent stakes respectively.
Mr Wairegi on Tuesday said he was yet to go through the recommended guidelines that are subject to public debate in the next 30 days.
A director will also not chair more than two boards according to the new rules that the Capital Markets Authority (CMA) has published for public scrutiny.
No Kenyan boardroom operator is currently beyond the set three seats limit, but some like Daniel Ndonye who serves in the boards of Kenol Kobil, cement maker ARM and I&M Holdings are on the brink.
Mr Ndonye also sits in the board of the recently delisted technology firm AccessKenya.
Well known boardroom operatives who have two chairmanships and three directorships in listed companies include John Simba, Francis Okello, Nicholas Ng’ang’a and Evanson Mwaniki.
Their multiple directorships has been attributed to long boardroom experience, cross ownership of firms in whose boards they sit and their reliance on a network of corporate associates built over the years to win the confidence of key shareholders.
CMA is further proposing that non-executive directors’ term in one board be limited to nine years after which they will have to convert to executive directors or exit.
CMA drew the code of corporate governance following recent boardroom wrangles in some of the listed companies such as CMC Motors and East African Portland Cement Company.
The power wars saw the regulator suspend the two firms from trading at the Nairobi bourse exposing investors, especially minority shareholders, to possible value loss.
To entrench corporate governance, board members will be required to attend at least 12 hours of training on the subject each year.
It will also be mandatory for all listed companies to have an audit committee and a nominating committee if the proposed rules become law.
A report by the committee commissioned to write the corporate governance code noted that three listed companies did not comply with the recommended composition of the audit committee while 10 did not disclose membership.
An audit committee is required to have at least three independent and non-executive directors because it plays an important oversight role in financial reporting and internal controls.
The nominating committee recommends new nominees for appointment to the board as well as assesses the performance of directors.
Listed companies are expected to apply for exemption that allows them to skip regulations that are not applicable to their industry.
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