Cyton report says Safaricom, KCB, NSE best in corporate governance

Cytons Investment Associate, John Ndua. Cyton (CGR) report indicates that Safaricom, KCB and NSE as best corporate governance companies in Kenya. [Photo: Courtesy]

Cyton Corporate Governance Report indicates that Safaricom, Kenya Commercial Bank and Nairobi securities Exchange as best corporate governance companies in Kenya.

Considering the share price performance in the last five years, the annual report (Cyton CGR) demonstrated that firms with higher levels of corporate governance in the top 50 percent in Cyton CGR, outdid those with lower levels of the same by 15 percent in the bottom 50 percent in Cyton CGR.

A total of 47 companies listed on the NSE were ranked on basis of governance, ethnic and gender diversity, board meeting attendance, remuneration, board independence, board composition and transparency among other 24 considerations in the global market. All the companies share market capitalization of Sh1 billion.

“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, themed ‘Improved Corporate Governance Key to Investor Protection’, analyzed the information these companies made available to us and employed other metrics to rank their corporate governance structure. We also acknowledge the integral role that oversight bodies like the Capital Markets Authority and the Central Bank of Kenya have played in ensuring that good corporate governance principles are upheld,” said Investment Analyst at Cytonn Investments Derrick Kieya.

The three companies were found to have the best corporate governance practices among the listed firms in the country by Nairobi Securities Exchange by posting an average of 21.7 percent in 2018 from a previous of 17.1 percent in 2017.

Cytons Investment Associate, John Ndua held that, “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 our report.”

John Ndua, Investment Associate at Cytonn Investments said, “we continue to see a direct and strong correlation between corporate governance and share price performance. Of the 47 companies we analyzed, the top 24 firms have delivered an average return of 2.1 percent over the last five-years while the bottom 23 companies have had a negative return of 13.0 percent over the same period, which means that the top 24 firms delivered 15 percent better returns. This indicates the importance of strong corporate governance in delivering sustainable and attractive returns to investors.”

Kenya Commercial Bank group, Safaricom and NSE all secured the first position by getting a score of 85.4 percent.

‘’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. This was 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. However, they are still below the 50.0 percent mark, indicating that they still have governance gaps in their overall structure,’’ read the report.

On the decline was ARM Cement which scored 58.3 percent from 66.7 percent ranking position 42 from position 22 in the last report due to lack of correlation concerning remuneration and earnings, evenness of the board and a higher shareholding level.