Corporate Governance: a Tool for Sustainability in Family-owned Enterprises in Kenya

Abstract

This research project examines the utility of corporate governance as a tool for sustainability in family-owned enterprises. It outlines and discusses in detail how the key principles and best practices of corporate governance can be leveraged to guarantee lengthy lifespans in family-owned enterprises in Kenya, which are instrumental to the economy. To this end, it also looks into the roles of various institutions responsible for monitoring and enforcing compliance with proper governance systems such as the courts, Registrar of Companies, the Institute for Family Business and the Association of Family Business Enterprises amongst others. The project is based in Kenya and it focuses on the post-independence period with a keen interest on the years between 2007 and 2022 where significant changes in the law happened such as the enactment of the current Companies Act. Although some family-owned enterprises have a great record of success in Kenya, the recent wave of collapses among companies such as Nakumatt, Tuskys and the Akamba Bus Company call for an investigation as to how the life expectancy of family businesses can be increased beyond the 2nd and 3rd generations. This research project argues that the entrenching of practices and principles of corporate governance can be a vital tool for sustainability in these companies. The relevant principles include accountability, fairness, transparency, and responsibility. This project employs doctrinal research methodology to unearth critical answers to legal questions surrounding the sustainability of family-owned businesses. Additionally, it utilises the case study methodology and reviews some of the best practices to identify the common pitfalls that executives should avoid when running family enterprises especially from a corporate governance perspective. The implications of this research project are broad as it adds to the existing local literature and shapes the discussion on corporate governance within family-owned enterprises in a positive direction. The project draws key principles and best practices from jurisdictions such as United Kingdom and South Africa which are potentially beneficial in improving corporate governance situations in Kenya if applied contextually. Lastly, the project is likely to contribute positively towards diversified ownership, management and control in the running of family-owned enterprises.