An Assessment of Corporate Governance Laws in Kenya: a Case for Institutional Awards Towards Greater Compliance for Private Companies

Abstract

In the last few decades, corporate governance has become a matter of concern, discussion, and efforts by governments and organisations locally and internationally. Ostensibly, this increased focus has been occasioned by scandals rocking corporations and causing their collapse, prompting a need to gradually regulate the inner running of even private organisations. Despite an overhaul of legal regimes over time, issues of effective and compliant governance still loom over corporations and cause systemic collapses affecting industries and the health of national and international economies. This persistent problem calls for new and inventive approaches to corporate governance laws, regulations, and best practices especially for private entities. The current study is anchored on two main hypotheses. The first hypothesis is that whereas Kenya has a positive corporate governance compliance outlook for the public sector, the private sector has an unclear compliance status due to the limited legal and institutional framework governing CG for private companies. The second assumption is that Champions of Governance award as an institutional award system has observed high standards in their assessing and awarding process which translates to shaping a robust corporate governance compliance culture in the country. The research seeks to prove the foregoing hypotheses by addressing four many research objectives namely: to analyse the status of CG compliance in Kenya; to review the various laws and institutions governing CG in Kenya; to define and analyse the legal status and practice of COG Award as part of corporate governance compliance and oversight in Kenya; and to examine the place of institutional awards in realising a corporate governance compliance culture in Kenya. Achieving the above objectives involved outlining and responding to the key research questions: what is the status of CG compliance in Kenya? What are the various laws and institutions governing CG in Kenya? What is the legal status and practice of COG Award as part of corporate governance compliance and oversight in Kenya? And what is the place of institutional awards in realising a corporate governance compliance culture in Kenya? The

research took mixed primary and secondary qualitative research. The research’s main finding is that whereas the country appreciates the relevance of corporate governance compliance as captured in its practices and robust legal and legislative framework, the private sector is disproportionately unrepresented in such compliance. Secondly, the research has recognised the institutional efforts by the ICSK to establish a legal and institutional oversight for corporate governance among private companies, including the enactment of the model corporate governance code for the private sector and the COG Award. Regardless of the success of the COG Award in shaping compliance among its participants, limited private sector engagement calls for a realignment of the laws and institutions to provide for a clear compliance framework. The study recommends more stakeholder engagement on the issue of corporate governance compliance for private companies in Kenya. Parliament should grant ICSK or other institution mandate to regulate corporate governance practices in the private sector. Finally, the study recommends for institutionalization of COG Award as an institutional compliance mechanism for private entities.