Cairo puts pressure on firms to meet governance rules

11 April 2008
Listed companies will be asked to explain how they comply in annual reports.

Egyptian companies are coming under pressure to become more transparent and adhere to tougher corporate governance rules, with a series of initiatives by government-owned bodies.

Cairo & Alexandria Stock Exchanges (Case) is planning a fresh clampdown on poorly managed companies, according to vice-chairman Mohamed Omran.

Since 2006, listed companies have been required to use external independent auditors for their accounts and to ensure that a majority of board members are non-executive directors.

However, Case has had difficulty finding out whether companies have been following these rules as firms have not had to give details of their compliance.

It is planning to introduce a requirement for companies to explain how they comply with the rules in their annual reports.

Ultimately, firms could have their shares delisted from the bourse if they fail to comply.

“We try to monitor firms listed on the stock exchange in a more aggressive way,” says Omran. “If we keep pushing, we will improve corporate governance.”

The new regulations are likely to be introduced within weeks.

However, the bourse has ruled out seperating the roles of chairman and chief executive officer.

“We cannot make this separation between the chief executive and the chairman compulsory but we might make them have a risk management committee,” says Omran.

Egypt’s main regulator, the Capital Market Authority, recently introduced a separate code of environmental, social and corporate governance requirements for quoted companies. The new Case rules will also compel firms to comply with this code of conduct.

In a separate initiative, the IT Industry Development Agency (Itida) is to start asking IT companies to disclose the revenue they earn from exports.

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