To improve corporate governance, the Capital Markets Authority (CMA) has limited company secretaries to serve a maximum of three listed firms at any given time.
The Authority's move to curb cases of over-commitment is its latest attempt to improve corporate governance. In its latest report on the state of corporate governance for Nairobi security exchange-listed firms, the regulators say they noticed an increasing trend of company secretaries serving multiple firms concurrently.
According to the authority, the potential for overcommitment raises concerns about the ability to provide dedicated and effective service. The authority acknowledges that while the secretary's expertise is invaluable, overcommitment is a threat to their delivery.
A company secretary serves as the cornerstone of a firm’s compliance and governance framework. Their roles extend far beyond administrative duties including regulatory compliance, corporate governance, board administration, and shareholder communication.
In listed firms, these roles become even more vital due to the stringent regulatory requirements of the CMA, the NSE, and global corporate governance codes.
The CMA’s rationale for introducing this regulation stems from a need to improve focus and dedication, reduce conflicts of interest, strengthen corporate governance, and align with global best practices.
The move however has potential impacts on listed companies, company secretaries, and the market at large. Listed companies relying on highly sought-after company secretaries may need to find additional qualified professionals to meet compliance requirements.
With fewer companies to serve, secretaries will be expected to deliver higher-quality governance and compliance services.
Additionally, companies have been urged to continue to adhere to governance codes and key regulations to stay competitive. The report showed that governance compliance improved from 78.6 per cent to 81. 3per cent with slight gains in ethics and social responsibility being accountable for the improvement.
The CMA report indicated a gap in full adherence to all provisions, particularly in board composition, shareholder protection, and risk management.
Listed firms have been directed to conduct regular compliance audits and transparently record the findings in the annual reports. Companies have also been advised to promote board diversity in terms of gender skills and perspective to ensure balanced and informed decision-making.
The CMA had warned companies that noncompliance with corporate governance regulations and lack of transparency could undermine investor trust which could deter both domestic and foreign investment, resulting in lower capital inflows, increased stock price volatility, and decreased market liquidity.
