Gender-conscious firms record better profitability

Business Daily Kenya:  Listed firms at the Nairobi Securities Exchange (NSE) that have incorporated gender diversity on their boards record...

Business Daily Kenya: 

Good corporate governance is directly correlated to gender, expertise and ethnic diversity at the board composition. Photo/COURTESY

Listed firms at the Nairobi Securities Exchange (NSE) that have incorporated gender diversity on their boards recorded improved profitability last year, a study by Cyntonn Investment indicates.

According to the report, companies with a well-diversified board in terms of gender, and also ethnicity, outperformed those with an undiversified composition highlighting importance of gender balance.

Speaking yesterday while unveiling the ‘Corporate Governance Index Report’, Cytonn Investment Analyst John Ndua said a well-diversified board should not be seen as an undesirable burden but as an opportunity to improve the governance and decision-making of a company. “Corporate governance is directly correlated to stock price performance, profits and dividends,” he said.

KCB Group, Diamond Trust Bank Group (DTB) and Jubilee Holdings emerged as the top three listed firms that have strived to embrace ethnic and gender balance. The three firms had the best corporate governance structures and practices amongst the 50 listed companies at the NSE with market capitalisation exceeding Sh1 billion.

Sanlam Kenya, KCB Group, East Africa Breweries and Flame Tree Group are some of the companies that performed well in ethnic diversity this year by scoring 87.5, 81.8, 81.8 and 80.0 per cent respectively.

DTB and Jubilee Holdings also performed well in gender and ethnic diversity in their board of director appointments. The report, released once every year, ranks listed firms using 24 metrics.

Maurice Oduor, Cytonn’s Investments Manager, said good corporate governance is directly correlated to gender, expertise and ethnic diversity at the board composition. The metrics revolve around disclosures, board composition, board meetings attendance, transparency and independence.

“Compared to last year’s ranking, there was an improvement in the comprehensive score, board attendance, proportion of non-executive directors as well as ethnic diversity for all 50 listed companies in our index,” said Oduor.

The companies, however, performed poorly on gender diversity at an average 16.4 per cent female representation on the board compared to a score of 18.3 per cent last year.

According to the report, Uchumi was the most improved company with a comprehensive score of 60.4 per cent from a score of 37.5 per cent in the last report.

“Improvement was due to better disclosures on board composition and activities such as meetings and evaluations, shareholding of directors and rotation of their auditor to KPMG from EY,” he said.

WPP Scangroup also improved to 66.7 per cent from a score of 45.8 per cent last year . East African Cables was the top decliner with a comprehensive score of 54.2 per cent from a score of 62.5 per cent last year mainly due to a decline in female representation on the board, decline in board meetings attendance and an increase in the average age of board members.

Professional ethics Elizabeth Nkukuu, Cytonn’s Chief Investment Officer said good corporate governance and sound professional ethics are essential to well-functioning financial markets, which in turn protect the interest of the investing public.

The post Gender-conscious firms record better profitability appeared first on Mediamax Network Limited.

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