Response of state owned enterprises to corporate governance reforms
Abstract
State owned enterprises (SOEs) employ approximately 200,000 people and at one time,
controlled nearly 30% by value of the GDP in Kenya. Most of the SOEs have
performed poorly since inception and problems, largely attributable to poor corporate
governance have been identified to be the main contributor to poor performance.
In the past, corporate governance reforms have mainly concentrated on companies
listed at the Nairobi Stock Exchange. However, as Yener(2001) notes, corporate
governance is an essential tool to combat corruption, which is one of the major vices
in the SOEs. The researcher finds it essential therefore, to identify the responses of
state owned enterprises to recent corporate governance reforms undertaken worldwide
and in Kenya specifically, to gauge the level of acceptance of the principles of good
governance and make recommendations on what needs to be done.
Literature indicates that institutional development will assist in the formation of good
corporate governance structures. Theories and models of corporate governance have
been reviewed in an effort to identify the most suitable model classification, of
corporate governance structures in the SOEs and thereafter, predict the most workable
approach to developing solutions for their corporate governance problems. There is no
particular identifiable model that fits SOE's governance structures. A suitable model
can be crafted by combining the best practices in all the models.
Literature on recent developments influencing change in corporate governance and the
resultant laws and recommendations reveal that, though dealing with companies
quoted at the stock exchanges, the general principles are also applicable to SOEs. The
research findings indicate that most of the employees consider issues dealing with
corporate governance in SOEs as very confidential information and are therefore
unwilling to participate in the research for fear of reprisals. The majority of the
respondents are middle level managers aged between 31 to 40 years.
The research revealed that the positions of Chief Executives and the Board
Chairpersons are held by different persons. All the respondent organizations have
board committees, with Audit and staff committees being common to all. This is a very
commendable level of corporate governance structure development.
The diversity in the answers given on the type and numbers of Board Committees,
indicates that the majority of the respondents were not sure of the type of board
committees that exist in their corporations. Ranking 4 on a scale of 1 to 5,
independence of the Board emerged as the most influential factor affecting board
performance. The CEO/CFO certification however was identified as the most
important factor influencing good corporate governance. All respondents felt that the
vision of good corporate governance would be facilitated through improved
communication between CEOs, senior managers and the other cadres of staff.
Citation
Masters in Business Administration, University of Nairobi (2003)Publisher
University of Nairobi. Faculty of Commerce