The relationship between corporate Governance practices and financial performance of Saccos in Murang’a county

Abstract

The study sought to find out the relationship between corporate governance practices and financial performance of saccos in Murang’a County. The objectives that guided the study were CEO duality, number of board committees, independence of supervisory committee and disclosure. The study had its target population as the Saccos in Murang’a County. They were all forty three in number. The census sampling method was used for sampling purposes. The sample size was all the Saccos in Murang’a County. The study employed the descriptive survey design. The data was collected by use of questionnaires, and secondary data analysis. The data was analyzed by use of S.P.S.S (Statistical Package for Social Sciences) and thereafter presented by use of statistical means which were tables and percentages. The study had the following findings. The study found out that all the Saccos in Murang’a County had a clear separation of authority with regard to executive function and only 11% of the CEO’s in the Saccos chaired the board of management. It equally found out that all the Saccos had systems of board committees in place and the committees exercised the functions allocated to them by the boards of management. The study was thus a confirmation of the Saccos satisfying the stipulated regulatory provisions requiring the putting in place of committees to enhance the functions of management and governance. The study confirmed the presence of supervisory committees in all the Saccos. The response shows that 53% of the respondents viewed the supervisory committees as highly independent while 47% of the respondents held the opinion that the supervisory committees were fairly independent. The study found out that all the Saccos practiced disclosures to levels allowable by the membership and constituents across board. The study recommended the clear separation and definition of functions between the chair of the board and the C.E.O. This will always create a conducive environment allowing for the exercise of executive authority and formulation of policy in Saccos. Saccos should thus be vi encouraged to always have a clear separation of powers, competitive recruitment of chiefexecutive officers and have able and competent boards of management for the exercise of policy formulation and executive function. The study further recommended that Saccos should always embrace and adopt the system of board committee in totality. This will ensure the exercise of the function of delegation and the allowance of tapping of talent and exploitation of previous experiences when the board members sit in the committee that they are versed with in terms of expertise and exposure. The study recommended that the independence of the supervisory committees should always be upheld. The supervisory committees should be put in place and given the mandate to fully discharge their cause and obligation for the firm’s good. The study finally recommended that Saccos should always uphold the standards and allowable levels and practices of disclosure within their ranks. Ministry of Cooperatives and the SASRA should always enforce the requirements for publishing of accounts, appointment of external auditors and the availing of information to the membership to safeguard shareholder interests and assure the saccos of growth.