Board wars turn focus on CMA’s oversight on listed firms
CMA chairman Kung’u Gatabaki said the regulator had drafted amendment proposals that would make corporate governance guidelines legally enforceable.
Boardroom wrangles at motor dealer CMC and cement maker EAPCC have turned focus on the regulator’s powers over corporate governance practices in listed firms, as investors end the year unable to trade shares of the two companies.
Allegations of fraud by board members at CMC Holdings prompted the Capital Markets Authority (CMA) to suspend the firm’s shares from trading at the Nairobi Securities Exchange, while similar accusations at the country’s second largest cement producer, East Africa Portland Cement Company, have seen its stock temporarily stopped from trading at the bourse. Wrangles at CMC have been in the news since March when long-serving CEO, Martin Forster, exited the firm. He was replaced by Bill Lay in June.
Inflated charges
In September Joel Kibe replaced Peter Muthoka as chairman following a boardroom coup that was followed by allegations that Mr Muthoka, through his logistics company Andy Forwarders, had inflated charges for services rendered to CMC.
The capital markets regulator initially suspended CMC’s shares from trading for seven days, then extended the period for an additional 90 trading days, which are set to lapse on January 26. Last week, acting Industrialisation minister Amason Kingi suspended the board and chief executive officer of EAPCC to facilitate investigations into allegations of malpractices at the firm. On Tuesday, NSE temporarily suspended EAPCC shares from trading at the bourse.
Proactive approach
“I think we have seen a much more proactive approach by the regulator, this is important so that they do not weigh down on market confidence. There might be nothing in the allegations, but we have seen them step in with speed,” said Eric Musau, a research analyst at Standard Investment Bank. In September, CMA chairman Kung’u Gatabaki said the regulator had drafted amendment proposals that would make corporate governance guidelines legally enforceable. At least a third of board members of listed firms will be required to be independent if the rules become law, meaning that among other things, the independent directors cannot have had any business relationships or been employed by the company in the preceding five years.
“They (CMA) should focus on developing the market broadly and enhancing stop gap measures so that they are more proactive than reactive,” said George Bodo, a research analyst with ApexAfrica Capital. He said present regulations were sufficient, adding that CMA should enforce compliance and develop more capacity for supervision.
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