Corporate Governance - In the Age of Instant Communication

Once
upon a time, when I was at boarding school in Kileleshwa, I used to
wait for my weekly aerogram from my father from Mombasa. I was nine and I
would get excited and the paper was so thin and ephemeral and
inevitably it would tear. There was only one TV Station then, the Voice
of Kenya. Information and knowledge were very slow moving. The ability
of you and me [The Crowd] to interrogate anything did not exist. The
world was asymmetric. There was zero oversight of anyone. In fact,
Samuel Gichuru and Chris Okemo esquires are near perfect examples of
folks who took advantage of the asymmetry. Were these folks  incredibly
intelligent? Did they build value for our economy? Were they incredibly
talented entrepreneurs?

Let’s Fast Forward to today. The year 2011,
I have close to 14,000 followers on Twitter. My Twitter handle is
@alykhansatchu and my  followers include the likes of @bobcollymore and
@OduorMartinO. In fact I invited President Paul Kagame of Rwanda to
#Mindspeak via Twitter. However, within those 14,000 followers, I have
folks who are not so readily recognisable but they are talented. One
follower is a  forensic  accountant, for example, with an uncanny
ability to analyse balance sheets and results, in real time. And there
are thousands of people who reside in the crowd, who have tremendous
skills and they  have a voice and a platform now.The ability to
interrogate is a graph that has flown off the charts.

Now let me take you to the Nairobi Stock Exchange and our 54 listed
companies. There is a bifurcation. There are the likes of Safaricom and
KCB, who have embraced the c21st. They are running operations  which are
transparent and c21st. However, there are other companies  which are
stuck in the Stone Age. Look very hard especially at companies where
there is a majority shareholder.

Allow me to pick on the tea companies. I have a position in George
 Williamson. I entered this company because I had a supreme conviction
 that tea prices were headed a lot higher. When I got into this company,
it was making just under Sh20 a share. For the last two years, it has
been making more than Sh90.00 a share. So I was not wrong. This
company's Dividend Pay Out Ratio is 15.39%, Safaricom and KCB have a
Dividend Pay Out Ratio of approximately 50%.

Tea Companies are hardly Ultra High Growth companies, which need to
 conserve their cash flow. This mean 'Black Swan' Pay out Ratio is like
the 'Theatre of the Absurd.’

Could Mr. Collymore or Mr.  Oduor-Otieno have paid out such a dividend?
In fact, The Blow Back would have been brutal and their  share prices
impaired.
 If my Agenda was to trash the share price, then I would be doing
exactly what George Williamson has done and that is why it trades on a
PE Ratio of 2.124. There is nowhere in the world, where any management would still be
‘rusting on its throne' with its company trading on a PE of 2.124. Of Course, there are other equally egregious examples but I will leave that for another discussion.