Corporate Governance and what it Means to the Economy -#CytonnReport

Corporate governance is the application of best management practices, compliance with laws and regulations and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of stakeholders.

In a report on Corporate Governance released by Cytonn Investments, the integrity should be a fundamental requirement in choosing corporate officers and board members. Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making.

A good corporate governance structure should encompass independence of the directors to the regulators. This will reduce instances of collusion and non-compliance due to connections with the regulators.

All financial and corporate actions should be disclosed to the public and made available for all. Proper disclosure stipulates ease of access to this information to the public, and increases transparency, especially in public companies for the investing public.

A good corporate structure should encompass responsibility and accountability for every action undertaken by the directors in relation to the company. This will ensure that all decisions are made knowing that the firms resources and reputation are being committed, which will assist in prudent decision making.

Regulators, including but not limited to, CBK, CMA, IRA, NSE, RBA and SASRA are all involved in seeing out corporate governance guidelines for companies to adhere to. These regulatory bodies are charged with responsibility of supervising, licensing and monitoring the activities of market intermediaries.

The Capital Markets Authority published the “Code of Corporate Governance Practices” which is a based on a ‘comply or explain’ approach to a most recent rules that front an ‘apply or explain’ approach. The “comply or explain” approach lets individual companies to decide whether to follow set codes or not but the “apply or explain” approach requires companies to actually follow the set out corporate governance codes.

Read: Putting NSE into Perspective: Capital Market Authority on the Spot

The Institute of Certified Public Accountants (ISPACK) continue to play a critical role in enhancing corporate governance disclosure in Kenya. ISPACK is credited for spearheading the adoption of international Accounting and Audit standards in Kenya in 1999.

Other professional associations that has contributed to promote corporate disclosure include The Institute of Certified Public Secretaries of Kenya, Law Society of Kenya, Institute of Directors of Kenya and The Association of Practitioners in Advertising.

Article by Juma Fred.