The Capital Markets Authority (CMA) has released the Seventh Edition of its Report on the State of Corporate Governance for Issuers of Securities to the Public in Kenya.

Covering the financial year from July 1, 2023, to June 30, 2024, the report offers an independent assessment of how companies listed on the Nairobi Securities Exchange (NSE) and issuers of corporate bonds are aligning with the Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015 (CG Code).

According to CMA, the latest report evaluates fifty-two issuers based on principles outlined in the Capital Markets (Public Offers, Listings, and Disclosures) Regulations 2023 (POLD Regulations 2023) and the CG Code.

CMA Chief Executive Officer Wyckliffe Shamiah described the report as “a crucial roadmap for issuers, showcasing areas of excellence while identifying opportunities for improvement. Our ultimate goal is to strengthen corporate governance and sustainability practices, fostering long-term growth, transparency, and enhanced stakeholder confidence in the capital markets sector.”

CMA noted that 27 issuers earned a Leadership Rating, 13 achieved a Good Rating, eight were rated Fair, and four fell into the Needs Improvement category.

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Despite these rankings, the overall annual weighted governance score dropped by 2.15 per cent, moving from 75.71 per cent in the 2022/2023 financial year (Leadership Rating) to 73.56 per cent in 2023/2024 (Good Rating).

CMA attributed this decline to challenges in complying with the mandatory CG Code requirements following the enactment of the POLD Regulations 2023.

One significant highlight was the improvement in governance scores among listed companies over the years. CMA reported that issuers’ scores rose from a Fair Rating of 55 per cent in 2017/2018 to a Good Rating of 73.56 per cent in 2023/2024.

“This improvement underscores the collective effort by issuers to refine and implement their governance frameworks, elevating corporate transparency, accountability, investor confidence, and market integrity,” CMA observed.

Additionally, the report noted improvements in three key governance principles compared to the previous financial year.

The principle of Commitment to Good Corporate Governance improved from 78.60 per cent to 81.31 per cent, while Ethics and Social Responsibility showed a marginal increase from 74.82 per cent to 74.94 per cent.

Accountability, Risk Management, and Internal Control also saw a slight rise, moving from 80.7 per cent to 80.72 per cent.

CMA highlighted a shift in its assessment approach from disclosure-based evaluations to implementation-focused reviews.

Issuers are now required to document specific initiatives demonstrating how they apply CG Code provisions.

The Authority assured the public of its continued oversight, noting that the report aims to enhance corporate governance standards and bolster confidence in Kenya’s capital markets.