Listed companies fall short on corporate disclosures

Nearly a third of companies trading on the Nairobi bourse did not adhere to corporate governance rules in the year June 2019, findings by the regulator show.

The Capital Markets Authority (CMA) indicates that at least 19 or 29.69 percent of the 64 firms whose shares or bonds are currently listed on the Nairobi Securities Exchange (NSE) failed the corporate governance tests.

At least 11 issuers of securities to the public failed to publicly disclose part or large chunk of information for scrutiny to help existing or potential investors make informed decision.

The regulator assessed disclosures by 53 firms only, eight of which achieved below par rating in implementation of governance standards over the review period.

“The authority has already taken enforcement action against issuers who either delayed or failed to submit their corporate governance reports,” CMA chief executive Paul Muthaura says in the report.

The State of Corporate Governance Report 2018/19, the second issue since the rules were gazetted in 2015, did not disclose the identity of the firms which did not avail books for assessment.

Past corporate governance malpractices have largely been responsible for the troubles by loss-making firms such as East African Portland Cement Company (EAPCC), Kenya Airways (KQ), Mumias Sugar Company and Uchumi Supermarkets.

The compliance levels in the 2018-19 period, however, improved from 27 of 67 securities issuers in the 2017-18 reporting period, including 11 that did not publish information for assessment the year before.

The number of companies whose governance rules need improvement more than halved to eight from 17 a year earlier.

Overall, issuers of securities to the public achieved a weighted governance score of 61 percent in 2018 from previous 55 percent.

Leadership rankings

“We now have more issuers moving from Need Improvement to fair ranking, with the ultimate objective to have most of the issuers being on good and leadership rankings,” Mr Muthaura said.

“We are confident that if this trend continues, good corporate governance will become an integral part of each issuer’s business dealings, and our market will be more stable, competitive, resilient and attractive.”

CMA has rated adherence to corporate governance rules by 21 firms as “fair” (50-64 percent) compared with 31 the year before, while compliance by 17 other firms was categorised as “good” (65-74 percent) also improved nearly three-fold from five previously.