By Editorial Team
The decision by the Capital Markets Authority ( CMA) to ban a set of directors who previously served on the board of troubled motor dealer CMC Holdings from holding such position in other firms is a positive indicator of its resolve to enforce good corporate governance in public companies.
The story of CMC, its rot and how some directors in whose hands shareholders entrusted the company’s running turned against it, perpetuating financial and moral malaise that ended up defrauding the company of billions is a sad story that should not recur.
The depth of transgressions at the motor firm is contained in a report prepared by Webber Wentzel, following investigations that involved the CMA. The directors blacklisted include former Attorney General Charles Njonjo, Jeremiah Kiereini, Martin
Forster and Sobakchand Shah. The largest shareholder at the firm Peter Muthoka, Richard Kemoli and Joseph Kivai complete the list.
This means that blacklisted directors serving on any other board will be forced out and will not be allowed on any company, including a securities exchange in the capital markets in Kenya. We laud this, probably as the most decisive move ever made by the market regulator.
It will help weed out corruption and check impunity in boards that are increasingly being dominated by powerful, financially endowed individuals who enjoy unfettered political support, sometimes from very highly placed individuals from Kenya’s political circles.
The investigations revealed all sorts of breaches of corporate governance principles, including one where a firm owned by Muthoka, Andy Forwarders Ltd, over billed the motor company for services that would have been rendered at more affordable rates by its competitors. Muthoka was never questioned for this obvious conflict of interest, but it does leave his judgement and that of directors who allowed this to happen in question.
While on CMC’s board, Muthoka presided over his firm’s relationship with the motor dealer. That doesn’t necessarily mean any impropriety, but is a serious pointer to the litany of conflicts of interest that CMC allowed to fester.
By allowing this kind of relationship, CMC’s management and board showed astonishing disregard for decent corporate governance. It also blew up the ideal chance to appoint a company unquestionably independent to perform the task Andy
Forwarders was awarded. Simply put, Muthoka’s firm did not fit the bill.
The fact that another set of directors set up a secret offshore account where monies belonging to CMC was funnelled displays in excruciating detail, a culture in the motor company that treated the rest of shareholders as ‘insignificant people’. It also shows a complete disregard for probity and honesty.