Kenya: Online Access to Share Registrar, Silence from Listed Companies
Thursday, 15 April 2010
Kenya’s Custody and Share Registrars are now giving shareholders access to their data online and through mobile. Rob Stangroom, however, would like to see more initiative from the other capital market players. |
The quality of shareholder communications governance in Kenya has deteriorated in the past three years, but the recent announcement by Custody and Share Registrars (CSRLD) to provide shareholders with online and mobile access to account information is welcome news.
Except that someone is missing something
In fact, it’s the directors and boards of listed companies that are missing something. Given the extent of savings that listed companies will enjoy from not being required to send proxy and annual report hardcopy materials to shareholders, one would expect companies to fully endorse an internet-based share register interrogation system and, more importantly, also pay for it.
CSRLD announcement that shareholders will be expected to pay for the online service provides an insight into the way directors view this product. They see it as a nice-to-have rather than a key tool to reduce systemic governance risk. The Nairobi Stock Exchange (NSE), in turn, is silent: it’s not their problem, they have passed the responsibility of determining the manner in which listed companies communicate electronically to the board. The board doesn’t want the hassle and the cost. They put it to the shareholders to vote on it. The un-educated investors. Un-educated because not enough effort has been devoted to this issue on the level of government, companies and the NSE.
The USA's SEC investor protection doctrine puts the onus on listed companies to deliver material to shareholders. Not so in Kenya: Shareholders are required to look for information and pay for the privilege. These little quirks will continue to reveal themselves and provide insights into the true corporate governance attitude in Kenya. But it’s the long term costs that people are ignoring. I asked Dominic Jones , a world leader in online investor relations, about the trends in African markets about de-linking a direct communications channel with shareholders:
"Scrapping requirements for companies to mail printed disclosure documents to investors is a global trend, but it has exacerbated shareholder apathy in every jurisdiction where it has been implemented. This is largely because regulators have failed to replace printed disclosures with suitable standards of online disclosures. Apathy and an uniformed investing public is, to my mind, the single worst thing that can happen in any market. It ultimately will lead to market abuses."
If I were managing a listed company in Kenya, I would look at it this way:
Not having to dispatch printed documents to shareholders saves me money. A lot of money. What could I sensibly do with this money? Implement the most comprehensive online shareholder education programme any African market has seen. Put my logo at the bottom of each communication and publication. Encourage feedback, summarise it, and use it to improve my business and the education initiative.
You may believe that the route taken by the NSE is justifiable because of trends elsewhere. Well Africa's uneducated investor masses have far more chance of being educated when they are being engaged with directly than when they are not.
Rob has contributed to Ratio Magazine’s three-part analysis of investor relations management in East Africa:
Kenya: Investor Relations Management: Practices in East Africa
Kenya: Investor Relations Management: Dealing with the Public
Kenya: Investor Relations Management: Perspectives