A Survey of the applicability of the principal-agent theory in Determination of the compensation packages used by commercial Banks in Kenya
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Date
2008Author
Mugambi, Peter, G I
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
The purpose of this research was to find out the compensation systems uti! ized by
commercial banks in Kenya, establish the determinants of the compensation system and
the extent to which the principal agent theory can explain the variations in the payment
systems.
The population of the study was all commercial banks operating in Kenya. A sample was
drawn form this population. The sample consisted of 8 commercial banks, which control
over 80% of the market share. These are Barclays Bank of Kenya, Kenya Commercial
Bank, Standard Chartered Bank, National Bank of Kenya, Co-operative bank of Kenya,
Stanbic-CFC bank. Commercial Bank of Africa and Citi-Bank
The structured questionnaire used in the study was coded with respect to questions for
ease of electronic data processing prior to the commencement of the fieldwork.
The data collected was analyzed using descriptive statistics. This involved the use of
percentages, mean scores and standard deviation. Frequency tables were used for
arraying data obtained to facilitate working out percentages in order to address the
objectives of the study. Percentages revealed the proportions of different attributes being
studied.
According to the results oftbe survey, salary increments were tbe most frequently applied
compensation systems for employees of banks in Kenya. This applied to both junior staff
and middle level management staff. However, the executive directors compensation was
in the form of salaries, performance based systems and bonuses. Holiday bonuses and
executive life insurance cover were not applicable compensation systems.
The findings of the study conclude that the principal agent framework does use bonus pay
but only in part. It is undeniably true that the cost of measuring individuals output is
important in explaining the use of bonus payor any other compensation system. The
existence of alternative determinants of compensation system such as merit pay, stock
price value, and company cash flow does not negate in itself the validity of th principalagent
model.
Publisher
University of Nairobi
Subject
Principal-agent TheoryRights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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