CMA Restricts Company Secretaries to Three Listed Firms

To enhance corporate governance, the Capital Markets Authority (CMA) has introduced a cap limiting company secretaries to serving a maximum of three listed firms concurrently. This policy aims to mitigate risks associated with overcommitment and strengthen governance practices across Nairobi Securities Exchange (NSE)-listed companies.

The Rationale Behind the Decision

The CMA’s latest corporate governance report highlighted a growing trend of company secretaries juggling responsibilities for multiple firms. While their expertise remains critical, the Authority raised concerns that overcommitment could hinder their ability to provide effective and dedicated service.

Company secretaries play a pivotal role in ensuring compliance and governance within organizations. Their responsibilities go beyond administrative tasks and include regulatory compliance, corporate governance oversight, board administration, and shareholder communication. In listed firms, these duties become even more critical due to stricter regulatory requirements enforced by the CMA, NSE, and global governance standards.

Impact on Governance and the Market

The CMA’s new regulation aligns with global best practices, aiming to:

• Improve focus and dedication from company secretaries.
• Minimize conflicts of interest.
• Strengthen corporate governance frameworks.

However, this directive will require listed companies to adapt. Firms that rely heavily on in-demand company secretaries may face challenges in sourcing additional qualified professionals to meet compliance needs.

For company secretaries, serving fewer firms offers an opportunity to deliver higher-quality governance and compliance services. The move emphasizes the importance of maintaining robust governance frameworks while adhering to CMA regulations and governance codes to ensure market competitiveness.

Corporate Governance Trends

According to the CMA report, governance compliance among listed firms improved slightly, from 78.6% to 81.3%. Key gains were observed in ethics and social responsibility. However, gaps persist in areas such as board composition, shareholder protection, and risk management.

To address these challenges, listed companies have been directed to:

• Conduct regular compliance audits and transparently disclose findings in annual reports.
• Promote board diversity in terms of gender, skills, and perspectives to ensure balanced decision-making.

The CMA has also cautioned firms that noncompliance could erode investor trust, deterring both local and foreign investments. Consequences could include reduced capital inflows, increased stock price volatility, and diminished market liquidity.

Conclusion

The CMA’s move to limit company secretaries to three listed firms underscores its commitment to fostering a culture of strong corporate governance. By addressing issues of overcommitment and promoting adherence to governance codes, the Authority aims to build a more transparent, resilient, and investor-friendly market environment