NSE trading floor. FILE PHOTO | NMG Three-quarters of Nairobi Securities Exchange (NSE) firms have a strong corporate governance rating, latest audit by the regulator has shown, marking an improvement from the previous findings.
Latest report by the Capital Markets Authority (CMA), shows that 36 firms— an equivalent of 75 percent of the 48 companies that were assessed—passed diverse corporate governance requirements such as transparency and shareholder protection.
The report shows that 25 firms achieved excellence and were placed in the “leadership” category while another 11 were ranked “good.” This was an improvement from the inaugural repot of year to June 2018 where only seven firms were given the leadership rating as 17 scored “good.”
The improvement has lifted the overall score for the listed firms to 72 percent from 61 percent in the previous financial year and 55 percent in 2017/2018.
“We continue to note steady improvements, which underpin our continuing work on training, capacity building partnerships and enforcement,” said Abubakar Abubakar, CMA acting director for market operations.
“It is noteworthy that other sectors outside banking and finance have understood the importance of good governance and are making significant strides to become sustainable, stable and strong.”
CMA scores companies based on seven principles —commitment to good, rights of shareholders, accountability and risk, board operations, transparency and disclosure, ethics and shareholder relations.
Firms that display highest corporate governance across the seven areas are given “leadership” rating, which is a score above 75 percent while those with good practices on most of the principles are rated as “good”—a score of 65-75 percent.
Those partially following some practices but leaving out others are rated as fair (a score of 50-64 percent) while those with non-compliant practices are marked as needing improvement and scored below 50 percent.
Some eight firms were rated as “fair,” while four were rated as needing improvement. This is in contrast in 2017/2018 when 31 firms and 17 firms were rated as fair and needing improvement respectively.
The CMA did not however disclose the names of the companies and only referred to them by their core business or their sector grouping, despite the 2019 promise to do so.The banking sector was the only one that got “leadership” rating across all the parameters.The CMA report, which covers the year ended June 2020, is the third to look at how listed firms and companies raising funds from public markets are faring in terms of compliance to good corporate governance.Such companies […]