Market News

Study proposes prosecution of errant directors

LAW

The study hailed recent developments in Kenya’s corporate regulatory regime. FILE PHOTO | NMG

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Summary

  • Balancing Rules and Flexibility for Growth study said too little enforcement may lead to indifference towards or even disregard of the rules.

A corporate governance study has recommended that errant directors be prosecuted for corporate ills to raise investor confidence.

The KPMG-Association of Chartered Certified Accountants (ACCA) study, which focused on 15 African countries including Kenya, said a strong oversight and enforcement regime was necessary to boost shareholders and stakeholder confidence at the bourse or in private business.

The study, dubbed Balancing Rules and Flexibility for Growth, said too little enforcement may lead to indifference towards or even disregard of the rules.

“Effective corporate governance requires investment in establishing a strong regulatory oversight and enforcement function to ensure the consequences for non-compliance are in place, understood and are strong enough to be a disincentive, for example, increased regulatory scrutiny, fines or delisting,” it said.

The study, which looked at leadership and culture, strategy and performance, compliance and oversight and stakeholder engagement, hailed recent developments in Kenya’s corporate regulatory regime.

It said Kenya continues to enjoy foreign direct investment inflows as investors had confidence with available legal safeguards.

“It has facilitated market confidence and business integrity while signaling the governments’ commitment to create credible arrangements for investors, taking their rights into consideration,” said the study.