Thousands of years ago, a few hundred years after the Almighty had created Earth, its inhabitants had become insanely wicked. So wicked that the creator, despondent with the results of his hard work, felt perhaps pressing the control, alt and delete button on his creation could wipe out the nonsense and reboot his creation. But he loved one good fellow called Noah, who he believed would save the concept of humanity. Noah and his sons were guided to build an ark.
Then more guidance was given as to who (both man and animal) would get boarding passes. The ark was populated with samples of all creatures on Earth together with his wife, his three sons and their wives. Then it rained non-stop for 40 days and nights with the result that those who had not boarded, together with their evil ways, were wiped off the face of the earth. When the rain eventually stopped, Noah and kin better known as humanity 2.0 emerged.
The Capital Markets Authority (CMA), as a regulator, occasionally issues sets of rules to curb the wicked ways of errant players. One of its earliest set of comprehensive rules was issued early at the turn of this century in 2002. The Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations (2002 Regulations) was a comprehensive framework for corporate governance in Kenya. It was one of the regulator’s first attempts at laying out a roadmap for the way issuers of securities to the public should ensure that stakeholder interests were covered.
The CMA, in its eternal quest to self-improve, appointed a steering committee of nine very well-respected professionals in December 2012 to do many things, the key of which was driving the implementation of amendments to the corporate governance guidelines. Two years later, in 2014, the diligent committee issued a Corporate Governance Blueprint that led to the development of the very comprehensive and modern 2015 Corporate Governance Code issued by the CMA.
Why am I giving all of this mind-numbing history? Because it demonstrates the long, tortuous road to Canaan, the land of Noah’s first-born son Ham. The Canaan of good governance. Where boards have stipulated structures, have directors well trained, have independent directors defined into their membership, have functioning audit committees and many other good things. Yes, that Canaan.
I started on this journey last week, talking about the new set of CMA regulations published and gazetted in late last year. Since the title of those regulations will take up all the space on this column, let me refer to them as the October 2023 regulations. I said that they were long on procedure for issuers of securities and short on governance.
Not a problem really because they were serving a procedural purpose, which has merit in a city like Nairobi looking to become a regional financial centre. Until they sneaked in new definitions of independent directors and one or two other curious definitions. Like the 1990 C&C Factory hit song Things That Make You Go Hmmm, the 2023 regulations made legal practitioners “go hmmm”.
The 2023 regulations essentially threw out the 2002 regulations plus all the amendments that came with that, including the still-hot-off-the-charcoal-presses 2015 Corporate Governance Code. How you ask? Nestled somewhere on page 53 out of 232 pages lies an innocuous-looking regulation 92 that revokes the 2002 regulations. So the 2015 CMA Corporate Governance Code, which ended up as CMA regulations in 2016, that were amendments to the 2002 regulations (You may need some a caffeinated drink to read all these dates) are now water. Under the Canaan governance bridge.
With these 2023 regulations, somehow corporate governance as we know it in Kenya has been submerged, nay, drowned in the regulatory floodwaters. So do listed companies stop following all the governance rules that had been laid out before in light of this heroic revocation? No one seems to know. The CMA, like many government issuers of proclamations, can only save face by asking for public participation through the parliamentary process. Once corrective submissions are made, a great deal will be made about how they have listened to the public and made adjustments to cater for stakeholder interests.
Truth is, expensive lawyers and analysts will have provided all the curative inputs to this piece of regulation and the legal team over at the CMA will have gotten, for free, advice that they should have sought in the first place before publishing the travesty that is the CMA 2.0 regulations. Let me gaze at this regulatory ark from afar. Like the wicked sinners of Noah’s time, I have not been invited to board.
