Investors are looking for companies that will be accountable and transparent. FILE PHOTO | NMG Over the years, there has been intentional effort in enhancing corporate governance in companies, not just in Kenya but worldwide and especially where investors are involved. Corporate governance in Kenya has evolved as witnessed through recent regulations and judicial rulings seeking better governance of both public and private institutions.
An investor must have confidence in the organisation, but more so, in the management who are involved in the day to day running of any organisation. Where there is no confidence in the management, then investors might be unwilling to engage in investment opportunities which might lead to adverse loss making and ultimately the running down of an organisation as witnessed with Uchumi, Mumias Sugar, ARM Cement and many others.
Many organisations have seen the fruits of good corporate governance, where the organisation is able to achieve long term sustainability. Many organisations have also seen the unfortunate results of poor corporate governance, where some have collapsed, some have witnessed very poor performance while others have been put under receivership or administration.
The importance of corporate governance has seen regulatory bodies come up with regulations to ensure companies survive, and investors are protected. The Capital Markets Authority (CMA) has been instrumental in ensuring investor protection, through the code of Corporate Governance Practices for Issuers of Security to the Public 2015. With this code in place, important issues such as legal and ethical compliance, full disclosure of annual reports as well as performance evaluation are taken into account.
This code also gives guidelines on multiple directorships, independence of directors and mandatory professional training for the directors. With such policies in place, an organisation is assured of effective, entrepreneurial and prudent management that can deliver the long-term success of the company. Where there is good governance, companies operate efficiently, witness long term sustainability and also retain current investors and encourage new investments.
Investors are looking for companies that will be accountable and transparent. This can only be achieved by putting in place sound policies that ensure accountability. Conflict of interest is a key issue that can break or make an organisation, and is something that investors are keen on. Conflict of interest occurs mostly at the board level. This can happen when there is a clash between self-interests of directors and the needed professional interest. A good example of this is insider trading […]
