CMA releases Corporate Governance Code for Listed Companies


Nairobi, May 19, 2014…The Capital Markets Authority (CMA) has today released a draft Code of Corporate Governance Practices for public listed companies in Kenya, in exercise of the powers conferred by sections 11(3) (v) and 12 of the Capital Markets Act. The draft Code will be placed on exposure to the public for a period of 30 days commencing 20 May, 2014. 

The Code of Corporate Governance Practices has been drafted after extensive engagement and rigorous input from listed companies, licensed intermediaries, government officials, academia, multinational and foreign investors and global corporate governance experts. Its drafting was necessitated by the need to address developments at national, regional and international levels so as to strengthen the market against risks that would threaten the financial system and stifle private sector dynamism, entrepreneurship and ultimately, economic growth. The Code is also intended to move away from simple compliance and ‘box-ticking’ towards fundamental change.

Mr. Paul Muthaura, the acting Chief Executive of CMA noted, ‘The exposure period provides a chance to all stakeholders to review the Code and give their input. Once stakeholders comments have been taken into consideration the Authority will channel the draft Code to the Cabinet Secretary, The National Treasury for enactment.’ Once enacted, the Code of Corporate Governance will supersede the Corporate Governance Guidelines issued in 2002.

The new Code is organized into seven pillars namely, board operations and control; rights of shareholders; stakeholder relations; ethics and social responsibility; accountability, risk management and internal control; transparency and disclosure and supervision and enforcement. Under each pillar, principles and recommendations are proposed and this is reinforced by a rationale which is termed as ‘guidelines’. The rational seeks to present the Authority’s perspective having extensively reviewed domestic and international corporate governance standards and practices. 

“The Capital Markets Corporate Governance Steering Committee that has been responsible for the development of this Code has broadly reviewed corporate governance standards from all over the world all the while taking into account the special circumstances in Kenya to ensure this Code is highly localized and contextualized’, Mr. Muthaura added.

He also noted that a fundamental difference in the draft Code is that it is predicated on an ‘apply or explain’ principle, whereas the current guidelines are on a ‘comply or explain principle.

‘The ‘apply or explain’ model recognizes that no set of regulations can be applicable to all types of listed companies and therefore those areas that each and every listed company must comply with, at a bare minimum, have been extracted from the Code as an annex and the same are also exposed for comment. These provisions will be enforceable by the Authority once they are captured in the CMA legislation’, Mr. Muthaura stated.

The members of the Capital Markets Corporate Governance Steering Committee are  Catherine Musakali (Chair) representing Institute of Certified Public Secretaries of Kenya (ICPSK),  Jackline Nyandeje representing State Corporations Advisory Committee,  Maryanne Macheru and Jennifer Ng’ang’a both representing Registrar of Companies, Mahmood Manji representing the Authority’s Board, Prof. Gituro Wainaina, the acting Director General of Vision 2030, James Mworia representing listed companies, Job Kihumba representing the Nairobi Securities Exchange, Mirie Mwangi, representing the academia and Rev. Geoffrey Njenga representing the insurance industry.

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