The NSE-listed firms’ commitment to corporate governance has dropped marginally last year on delayed review of draft reports.

The latest annual report by the Capital Market Authority (CMA) shows firms’ commitment rate dropped to 67.13 percent from 77.20 percent last year.

Given that responsiveness is a factor in measuring an issuer’s commitment to good governance, some issuers had their scores dropped due to their delays in reviewing the draft assessment reports and sharing their feedback,” CMA said. 

The report measures several indices including board operations and control, rights of shareholders, accountability, risk management, and internal controls. Others are transparency and disclosure.  

Corporate Governance Scores

The issuer scores zero points on each question if they have not observed the practices.

One point is achieved if they have partially observed, two points if they have fully observed and three points if they have gone above and beyond the requirements of the code.

Issuers are rated in four groups: 

These are Leadership rating (75 percent and above), Good rating (between 65 percent and 74 percent), Fair rating (between 50 percent and 64 percent) and Needs improvement rating (below 50 percent).

Last year, the number of issuers in the leadership category remained 25.

Those in the good rating category dropped to eight from 11 in 2019/2020 according to The Star.

The number of those with fair ratings grew to 10 from eight while five need improvement compared to only four in the previous financial year.

There was an improved performance in three principles including rights of shareholders, stakeholder relations and ethics, and social responsibility.

On the other hand, four principles decreased in performance.

They include a commitment to good corporate governance, board operations and control, accountability, risk management, and internal control as well as transparency and disclosure

The best performing principle was the rights of shareholders while the least performing was the commitment to good corporate governance.

The most improved principle was the rights of shareholders while the commitment to good governance principle was the most dropped.

Banking and Insurance Rating

The banking and insurance sectors had a leadership rating with the banking sector having the best-weighted overall of 81.74 percent.

The energy and petroleum sector, manufacturing and allied, as well as construction and allied sectors, had a good rating.

The remaining sectors had a fair rating with the agricultural sector having the least weighted overall score with a fair rating of 55.04 percent.

All sectors moreover registered a drop in their weighted overall scores saves for the agricultural sector which had a slight improvement of 0.02 percent.

The investment and investment services sector was the most dropped from 75 percent in FY 2019/2020 to 62.31 percent in the current assessment period.

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