Corporate governance practices in housing finance company of Kenya
Abstract
Corporate governance is about putting in place the structure, processes and
mechanisms by which business and affairs of the company or firm are directed and
managed, in order to enhance long term shareholder value through accountability of
managers and enhancing firm performance. In other words, through such structure,
processes and mechanisms, the well-known agency problem - the separation of
ownership (by shareholders) and control (by managers) which gives rise to conflict
of interests within a firm may be addressed such that the interests of the managers
are more aligned with those of shareholders.
The Organization for Economic Cooperation and Development (OECD), which in
1999 published its Principles of Corporate Governance, offers a more detailed,
definition of corporate governance as the internal means by which corporations are
operated and controlled, which involve a set of relationships between a company's
management, its board, its shareholders and other stakeholders. Corporate
governance also provides the structure through which the objectives of the company
are set, and the means of attaining those objectives and monitoring performance are
determined. Good corporate governance should provide proper incentives for the
board and management to pursue objectives that are in the interests of the
company.
In the current and past century corporate lapses have been blamed on lack of good
practice corporate governance. Globalisation has enlarged the operating business
area of companies. Research on corporate governance has gained some
momentum after several large companies collapsed around the world in the
beginning of 2000s. These collapses were typically caused by accounting fraud and
bribery among other things. Scandals had many effects to the governance practices
in many companies, but also they accelerated the development of a legislation of
corporate governance.
The study objective was to establish and explain the corporate governance practices
in Housing Finance Company of Kenya. This objective was tested using a case
study design. The findings from the study indicated that HFCK has good corporate
governance practices as recommended by the various banking industry
stakeholders. The Board of HFCK is responsible for the overall management of the
bank and is committed to ensuring that its business and operations are conducted
with integrity and in compliance with the law, internationally accepted principles and
best practices in corporate governance.
A study can be done in future on mapping the impact of corporate governance
practices on the key business drivers of the company. A different research design
can be used in future studies. A survey on corporate governance practices across
the banking sector can be conducted. This will help to address the limitations of
using case study methodology.
Further study can be carried out to determine the correlation between good
governance and employee motivation at HFCK. The presence of employees makes
it possible to have governance body separate from the management, which is a
major pillar of corporate governance. Also a study can be conducted on whether
there is any relationship between good corporate governance and good customer
service. Nowadays one of the key business drivers is good customer service and
hence the need to have this coming right from the governance level and therefore
the need to test the relationship. Other studies on corporate governance could be
done using other forms of research designs like a survey. This will illuminate the
similarity of corporate governance practices across organisations and also help to
inform the level of implementation of best practice corporate governance within and
across sectors.
Citation
Masters of business administrationSponsorhip
University of NairobiPublisher
school of Business, University of Nairobi