The Capital Markets Authority has set sights on reviewing the code of governance audits to, among other things, gift the well-behaved companies with a relaxed schedule of up to a five-year cycle. Currently, the practice is annual.
The CMA’s acting CEO Wycliffe Shamiah, in a circular to the chief executives of listed firms on the Nairobi Securities Exchange, says the amendment will cover the frequency, cost, cycle and scope with a focus on risks. The regulator says companies with previous strong scores will be audited in three to five years while the laggards will be restricted to the annual scrutiny.
While honouring good behaviour is one of the goals of monitoring, we warn the CMA that five years is such a long time. It is enough for an entity to derail and cause harm not just to themselves, but also the regulator and the economy. This is partly tied to Kenya’s history of appointing people to boards, which has sometimes revealed gaps in expertise, ability, and the commitment required to achieve compliance and design growth.
We urge the CMA to find a way of tethering the well-behaved firms, even if they are not on a tight leash of the annual assessment.