- The Capital Markets Authority (CMA) recently fined former directors of a Kenyan company for the misapplication of the proceeds of a bond issued in 2015.
- This was in addition to being barred from holding top positions in listed companies and CMA’s licensees.
- The CMA has previously issued enforcement actions against directors of other issuers and licensees following non-compliance in the companies they serve.
The Capital Markets Authority (CMA) recently fined former directors of a Kenyan company for the misapplication of the proceeds of a bond issued in 2015. This was in addition to being barred from holding top positions in listed companies and CMA’s licensees.
The CMA has previously issued enforcement actions against directors of other issuers and licensees following non-compliance in the companies they serve.
Directors of State corporations have not been spared, the KEMSA probe being the latest scandal.
Internationally, directors have served jail terms for indictments arising from issues during their tenure as directors.
Viewed by many as a professional milestone, how does a seat on the board of a blue-chip company ironically become the death of one’s career?
While some directors are simply rogue, a few others get caught up in the crossfire and pay dearly for it.
In this article, I have looked at some of the measures one can take to avoid the pitfalls that come with the territory.
Understand your Roles
It is imperative to understand your duties and responsibilities before accepting the position.
Directors’ roles are found in the company’s documents, such as the articles, the board charter and other board mandates. They are also found in laws depending on the sector, whether it is a public or private company or a corporation.
For companies that have raised funds from the public, the CMA’s Code of Corporate Governance Practices for Issuers of Securities to the Public becomes relevant.
The equivalent for state corporations is the Mwongozo. State corporations are also subject to their establishing statutes.
You should fully understand your capacity, and the limits of such capacity.
Declare your conflict of interest
Most Board meetings will start with an opportunity to declare one’s interests. Declare your interests, if any. A lot of investigations have arisen from the failure to declare conflicting interests.
Disagree in writing
You do not know which decisions will be put under a microscope. When you disagree, make sure your dissent is recorded in writing. This could be captured in the minutes.
Board packs are circulated early enough for you to prepare adequately. Take time to ensure you have read and understood everything that is presented to you. This gives you an opportunity to critically look at the potential loopholes and ask the relevant questions.
Seek independent professional advice
Most companies in their mandates provide for an avenue to seek independent professional advice. Both the CMA Code and the Mwongozo provide that the Board should have procedures within which Board committees may engage independent professional advice at the expense of the company. These professional advisers include lawyers and accountants. Use them when you need to.
If you feel a certain document may help defend your position when called upon to, keep it at hand. You do not know when you may need it.
These are just but a few measures you can take to ensure the Board opportunity on your table is not your last.
To fully appreciate the risks, it might also help to talk to a professional before taking that big step.