The Effect Of Board Of Directors As A Strategic Resource On Organizational Performance Of Insurance Companies Listed At The Nairobi Securities Exchange

Abstract

Despite the tight regulatory framework, effective board management continues to weaken in Kenya due to lack of professional management and governance malpractices. This research sought to investigate the effect of board of directors as a strategic resource on organizational performance in insurance companies listed at the NSE. The study adopted a descriptive research design. Information was obtained to meet the underlying purposes and the main objective of the study. The study used primary data and secondary data. Primary data was collected through a self- administered questionnaire which was designed to elicit specific responses for qualitative and quantitative analysis respectively. The questionnaires were distributed to the respondents who were the various secretaries of the board of directors in the five (5) listed insurance companies. The Statistical Package for Social Sciences (SPSS version 20) was utilized in running of descriptive statistics such as frequencies and percentages to present in form of tables and graphs. The study found out that the insurance companies had between 8- 10 members of the board; the board is usually involved with the monitoring of the progress of strategic decisions, determining the criteria of the evaluation and requests additional information from the top management team(TMT), independently assesses and ascertains the progress of the strategic decisions, determines the timing of the evaluation and seeks more details and implementation of the strategic decisions. Key areas in which the board of directors influenced the individual performance of their various organizations included: overall firm's performance, after tax return on total assets, after tax return on total sales, the firms’ competitive position, dividends per share and Firms total sales growth. The major ways in which the board of directors influenced performance of the various organizations was through: overall firm's performance, after tax return on total assets, after tax return on total sales, the firms’ competitive position, dividends per share and Firms total sales growth. The study recommends that the board of directors should be actively involved with the monitoring of the progress of strategic decisions and determination of the criteria of the evaluation and requests additional information from the top management team (TMT). The various insurance companies should concentrate on improving management of strategic change/ability to improve change management as well the appointment of board members. To give the various organizations a cutting competitive edge all firms should be keen on all the ways in which the various board of directors’ influence their performance. Unlisted companies should ensure that they institute an actual board of directors. The board of directors should further be actively involved with the monitoring of the progress of strategic decisions.