Corporate governance practices: A case study of the Kenya Union Of Savings and Credit Co-operatives Limited
Abstract
Over the last two decades there has been an increasing desire to make
organizations more visibly accountable, transparent and responsible not only to
the owners but also to the other stakeholders and the community in general.
Corporate governance is about promoting corporate fairness, transparency and
accountability. The focus has been on strengthening the boards so that they can
be in a position to direct the affairs of the corporation as a distinct body separate
and independent of the management.
In the SACCO sub sector, the issue of corporate governance is increasingly
becoming a matter of concern. This has arisen due to the huge amounts of funds
and diversified financial products that have been introduced, which calls for
boards to be transparent and accountable on the use of such resources. The
regulation of the SACCOs has not ensured the highest standard of governance.
This study was conducted with the objective of establishing the current
governance practices within the Kenya Union of Savings and Credit Cooperatives
Ltd (KUSCCO).KUSCCO is the umbrella body for all SACCOs in the
country and is charged with the responsibility of providing products and
services and ensuring proper internal management of SACCOs. This is a case
study that has tried to establish the prevailing governance practices in KUSCCO.
The pillars and principles of corporate governance as postulated by the private
sector initiative for the corporate governance (1999) were explored in the study.
The study found out that whereas there is an independent governance body
separate from management, in practice this body does involve itself in
management. This arose because some board members did not clearly
distinguish between what are board and what are management roles and
responsibilities.
The study also found out that the legal framework in terms of holding the board
accountable and ensuring transparency was weak and that members were not
quite aware of the systems and procedures required to hold the board
accountable. It was also established that the level of member participation was
rather low. The board, it was established has endeavored to put into practice
good corporate governance. However there are still several areas that need
attention. These include the criteria for board election, evaluation of performance
for the board members, the CEO and the organization in general, human
resource practices, assessment and mitigation of risks and the policies and
procedures in general.
Arising from the above findings, several recommendations have been put
forward. In terms of the board minimum academic and professional criteria
should be set and a system be put in place to ensure that there is a balanced mix
in the board skills. Criteria should also be developed to evaluate the performance
of the board collectively and individually, the CE.O, and the organizational
performance in general. It is further recommended that the human resource be
thoroughly evaluated in order to attract and retain the right caliber of staff. This
should be coupled with a proper structure, systems and procedures that ensure
proper internal controls in order to minimize the operating risk. It is also
recommended that the union's internal audit be strengthened and that the union
gives the CE.O power to operate professionally without political influence.
For further research it is suggested that replicative studies could be carried out
after a few years to determine what practices may have changed, or studies to
determine the relationship between corporate governance and organizational
performance. Cross sectional studies could also be carried out to compare
corporate governance practices among the national cooperative organizations in
Kenya.
Citation
Masters thesis University of Nairobi (2005)Publisher
University of Nairobi. Faculty of Commerce
Description
Masters in Business Administration