Kenya's CMA urged to punish more errant top bosses

Workers and security guards outside Uchumi Supermarkets in Eldoret town, Kenya on March 21, 2016. The outlet is among those that were closed by the retailer. PHOTO | JARED NYATAYA  

By JAMES ANYANZWA

In Summary

• Questions linger on how the quantum of the sanctions was determined and why other directors who have been accused of bringing down public institutions such as Mumias Sugar Company and Kenya Airways have not been punished as well.
• CMA chief executive Paul Muthaura defended the decision by the regulator to punish former Uchumi chief executive Jonathan Ciano, finance manager Chadwick Okumu and other directors, but was non-committal on whether similar action will be taken against others.

The decision by the Kenya Capital Markets Authority to impose hefty financial penalties on former directors of the troubled Uchumi Supermarkets and bars them from holding office appeared to signal a new era in the regulator’s war against errant directors of public institutions.

But questions linger on how the quantum of the sanctions was determined and why other directors who have been accused of bringing down public institutions such as Mumias Sugar Company and Kenya Airways have not been punished as well.

CMA chief executive Paul Muthaura defended the decision by the regulator to punish former Uchumi chief executive Jonathan Ciano, finance manager Chadwick Okumu and other directors, but was non-committal on whether similar action will be taken against others.

“The authority does not comment on investigations that are ongoing,” Mr Muthaura told The EastAfrican, while admitting that the sanctions imposed are not anchored in the law but were informed by the “nature and scope” of the offences committed.

Former Uchumi CEO Jonathan Ciano was barred from holding office as a director of a public listed company or any CMA-approved institution for five years and a financial penalty of Ksh5 million ($48,185). He was also directed to return Ksh13.5 million ($130,100), which was deemed as profits obtained due to non-disclosure of conflict of interest.

READ: CMA bars former Uchumi directors, chief from public-listed firms

Former finance manager Chadwick Okumu was barred from holding office as a chief financial officer or director of a public listed company for a period of two years.

Faida Investment Bank was banned from carrying out transaction advisory services for a period of six months together with a regulatory caution to ensure its role as a lead transaction adviser in future is conducted in full compliance with the requirements of a regulatory framework.

Former Uchumi chairperson Khadija Mire was banned from holding office as a director of a public listed company or any institution approved by CMA for a period of two years.

Ms Mire was also ordered to return board allowances of Ksh1.77 million ($17,057).

“The disciplinary actions were informed by investigations and the findings of hearings that were held by the Board to allow all persons to be heard. It is only when such investigations are completed and hearings held that the authority can then proceed to take action,” said Mr Muthaura.

Gap in the law

However, Kenneth Akide, a corporate lawyer and former chairman of the Law Society of Kenya, said there is still a gap in the law on how shareholders of public companies who have lost their money as a result of poor corporate governance and mismanagement by directors should be compensated.

By last week, Uchumi shares listed on the Nairobi Securities Exchange had lost 72.15 per cent of their value for the past 12 months’ trading, closing as low as Ksh3.05 ($0.03) per share.

During the same period, Mumias shares fell 25 per cent to Ksh1.20 ($0.01), while KQ stock plunged 21.43 per cent to Ksh5.95 ($0.06) per share.

“I think CMA needs to do more in terms of proposing legislation to bring to account those directors  who have been accused of bringing down companies,” said Mr Akide.

Action is yet to be taken against former managers of the Mumias Sugar Company who were implicated in the Ksh1.1 billion ($11 million) illegal sugar importation in 2014. Action is also yet to be taken against Kenya Airways managers who have been accused of bringing down the national airline.