dc.description.abstract | Corporate governance is central to the success of any business entity, irrespective of its legal
formation. This is because corporate governance encompasses the processes, practices and a
system of rules that anchors the interests of all shareholders and stakeholders hence, good decision
making. In the recent times, corporations have focused on corporate governance to avoid corporate
failure after the collapse of major corporations both globally and locally. One of the major foci in
the aftermath of major corporate failure in corporations has been the efficacy of the legal and
regulatory framework in anchoring corporate governance in corporations. In Kenya, the sugar
industry is currently insolvent yet it is an industry that played a major role in the economic and
social development in Kenya and supported the livelihood of its citizens before and after
independence in 1963.
This study endeavoured to prove that corporate failure is detrimental to the social and economic
growth of a country, a conduit of devastating losses of investment by the shareholders and
stakeholders and a core factor for a myriad of social effects such as school dropout, rise in crime
rate which emanates from unemployment and loss of a livelihood. The major factor that has
contributed to the collapse of the sugar industry is the lack of proper corporate governance
mechanisms majorly; improper ownership structure, the improper composition of board of
directors and lack of optimum internal controls and disclosure mechanisms. The study was
therefore conceived to analyse these and their contribution to the collapse of the sugar industry in
Kenya with particular reference to Mumias Sugar Company which began as a state-owned entity in
1973 and privatized in 2002.
The study revealed that the minority shareholders who collectively hold the majority shareholder
are not satisfactorily protected by the existing legal and regulatory basis to make a significant
contribution to the control and the decision-making process of the company. The composition of
the board of directors has also hurt the performance of the industry due to lack of diversity,
improper board size and lack of board independence influenced by political patronage.
Additionally, the research examined the effect of internal control disclosure mechanism in the
sugar industry vis a vis the sufficiency of the legal framework. To strengthen the study, the
researcher analysed the Indian sugar industry to import some lessons for the Kenyan sugar industry.
The study relied on the agency theory, the stakeholder’s theory and resource dependency to
advance this thesis. The three theories were necessitated by the shift of business from the focus of
profit maximization for the shareholder to the current focus on a wide range of investors for
instance customers, suppliers, employees, and the local community in which the corporations
operate, while the resource dependency was necessary since the sugar industry relies on external
resources to operate. To achieve the objective of the study, both doctrinal and non-doctrinal
research methodologies and supplemented with interviews of both shareholders and stakeholders.
This study recommended inter alia a need for privatization of the sugar industry with the
government holding minority shares if any, a dispersed ownership structure in publicly listed
companies, a board composition with the proper size, diversity and independence and, transparent
internal control and disclosure mechanisms. Furthermore, the study recommended a robust legal
and regulatory framework that anchors an efficient corporate governance system that can revitalize
and sustain the sugar industry in Kenya. | en_US |