NAIROBI, Kenya, Oct 15 – KCB Group, Nairobi Securities Exchange (NSE), and Safaricom tied as the Top 3 companies with the best corporate governance practices among listed companies in Kenya in 2018.
This is according to the annual Cytonn Corporate Governance Report – 2018, that indicates firms with higher levels of corporate governance, outperformed those with lower levels of corporate governance, by 15 percent when looking at share price performance over the last five years.
The ranking is based on 24 metrics that consider different aspects of governance, including board composition, ethnic and gender diversity, board meeting attendance, board independence, remuneration, and overall transparency.
KCB Group, NSE and Safaricom all tied at the 1st rank, each having attained a comprehensive score of 85.4 percent, supported by, among others; gender and ethnic diversity in the board composition, a good proportion of independent directors, defined tenures to accommodate rotation, and high level of exposure to of board members to global markets.
Other Firms on the top ten best corporate governance practices include DTB Bank at fourth place, Standard Chartered Bank at fifth place, NIC Bank, Kenya Power, BAT Kenya, East African Breweries, Liberty and Jubilee Holdings.
The most improved firm in the ranking was Limuru Tea, with a comprehensive score of 41.7 percent, ranking them at Position 46, from a score of 16.7 percent and Position 49 in the 2017 Report due to increase of board members to an odd number, introduction of a female board member, and better disclosure on board member details, work experience, and remuneration.
The biggest decliner was ARM Cement, which recorded a decline to a comprehensive score of 58.3 percent, ranking them at Position 42, due to lack correlation between remuneration and earnings, a high shareholding level at the board, and evenness of the board.
“The top 24 companies in the Cytonn Corporate Governance Report (CGR) have delivered an absolute return of approximately 2.1 percent over the last 5-years compared to the bottom 23 companies, which have delivered an absolute return of (13 percent) over the last 5-years, meaning that the advantage to better governance delivered 15.1 percent better returns to shareholders,” the report notes.
Compared to last year’s ranking, there was an overall improvement in the comprehensive score, board attendance, proportion of non-executive directors as well as ethnic diversity in the 47 listed companies in the report
“Corporate governance reporting standards continue to improve in the country. Earlier in the year, the Capital Markets Authority’s Code of Corporate Governance practices came into full effect and we have witnessed compliance as companies adopted the provisions of the code in their annual reports for the financial year 2017,” the report indicates.
The survey was conducted on 47 companies listed on the Nairobi Securities Exchange with a market capitalization in excess of Sh1. billion.