NSE pushes for law change to scrap chair, CEO term limits

The Nairobi Securities Exchange (NSE) has petitioned the Capital Markets Authority (CMA) to amend regulations that impose term limits for its CEO and allow the bourse to extend the tenure of its current boss, Geoffrey Odundo, beyond March next year.

Business Daily has established that the board of the Nairobi bourse has submitted a request to the regulator seeking approvals extending the terms of Mr Odundo and the chairman, Kiprono Kittony.

The NSE chief executive is expected to serve for a maximum of eight years and the chairperson for two years under CMA regulations.

Mr Odundo was hired as CEO of the bourse in March 2015 from Co-operative Bank, meaning the stock exchange cannot extend his term beyond March without an exemption from the regulator.

Term caps are common in State-owned companies, but most firms listed at NSE serve on unlimited contracts that have seen an increase in the number of CEOs serving more than 15 years.

The market regulator says the NSE has cited ongoing restructuring of the exchange and need for continuity as the reasons behind the request to scrap the limits.

“We received a request from the Nairobi Securities Exchange to amend our regulations to make the exchange a fully listed company. NSE is undergoing restructuring and one of the points they are asking is for review of the term of the chairman, which is for two years total, and that of the CEO,” the CMA told the Business Daily in an e-mail response.

Mr Kittony was reappointed chairman of the NSE last June after serving at the helm of the board for a year.

The bourse is seeking designation as a fully listed company and regulated as a public firm, placing it at liberty to prescribe the term of its CEO without set limits.

The NSE revised its articles of association at the firm’s latest annual general meeting in June in changes that set the terms of the chairperson at two consecutive terms of three years each and an unfixed tenure for the CEO.

The changes were, however, subject to amendment of Regulation 6(3) of the Capital Markets (Licensing Requirements) (General) Regulations, 2002.

The regulations demand that any securities exchange operating in Kenya provide, under its articles of association, fixed terms for their chairman and chief executive.

They require the chairman to serve for a maximum of two consecutive years and chief executive’s term of four years that is renewable once.

Currently, the NSE is regulated both as a listed company, having gone public in September 2014, and as a licensee of the CMA, which places it under the term limits set in the CMA regulations.

Licensees under the ambit of the CMA include the NSE, the NSE Derivatives Exchange, the Central Depository and Settlement Corporation, investment banks, stock brokers, and fund managers.

The NSE went public in September 2014 when it became the second exchange in Africa to self-list after the Johannesburg Stock Exchange.

The exchange would later receive formal recognition by the CMA as a self-regulatory organisation in July 2016.

Mr Odundo confirmed to Business Daily that the proposal to extend his tenure and scrap the term limits had received the board’s green light pending approval of the market regulator.

He did not disclose what form of restructuring the exchange was undergoing.

Mr Odundo was first hired as the NSE chief executive in March 2015 and rewarded with a four-year contract extension from March 2019, ending in March next year.

The NSE’s net profits for the half year ending June declined 47.9 percent to Sh40.2 million on lower market activity, with international and domestic institutional investors seeking alternative assets like global and local fixed income.

A few companies have an official policy of changing their CEOs after a few years and they are typically subsidiaries of multinational firms.

Frequent executive turnover in NSE-listed firms is often the result of crises and shareholder changes.

This has seen a growing number of CEOs serve in excess of two decades.

Flame Tree’s founder, Heril Bangera, has the longest run of 33 years, followed by Car & General’s Vijay Gidoomal and TPS Eastern Africa’s Mahmud Janmohamed, who have served for 26 years and at least 25 years respectively.

Others are DTB Group’s Nasim Devji (21 years), Co-operative Bank’s Gideon Muriuki (21 years), Equity Group’s James Mwangi (18 years) and Crown Paints’ Rakesh Rao (17 years).

The NSE has sunk to lows last seen at the peak of the Covid-19 pandemic in 2020 on foreign investors’ flight in the wake of rate hikes in the US, wiping out Sh668 billion of investor wealth since the beginning of this year.

The NSE management has been pushing to attract domestic investors to the bourse to boost activity and recently appealed to the government to sell some of its shares in State corporations and end the initial public offering (IPO) drought.

The bourse has also stepped up its lobbying to have the government cut its stake in key listed companies to as low as 10 percent in a bid to bring in new investors

Mr Kittony has said the proposal made to the Treasury will target scaling down of government stake in companies such as Safaricom (35 percent), KCB Group (19.7 percent) and Kenya Re-Insurance (60 percent) which have room for additional re-issuance of shares.

To bring back investors on the bourse, the NSE has in recent months stepped up efforts to attract new firms to list as it positions itself as an alternative source of fundraising for the government, which is looking for other sources of income beyond debt.