A Study of corporate governance.the case of quoted companies in kenya

Abstract

Corporate governance, the system by which companies are controlled, directed and evaluated, has gained prominence throughout the world in the 1990s. According to the Commonwealth Association for Corporate Governance (CACG), this interest in corporate governance has been triggered by the globalization of economies and the financial and investment markets in the 1990s. Increasingly, investors are insisting on high standards of corporate governance in the companies in which they invest. Good corporate governance practices are now becoming a necessity in every country. In Kenya, the main concerns particularly in the late 1980s and the early 1990s were on governance of the public sector. However these concerns have shifted to corporate governance and in particular on how to ensure that the private sector corporations use resources effectively and efficiently.

This study, using primary data from the quoted companies in the Nairobi Stock Exchange (NSE), established that mechanisms of corporate governance are complex and different companies differ in their corporate governance arrangements. There are certain factors that influence the corporate governance arrangements in different companies. These include the ability of the shareholders to elect and control directors, the extent of their shareholding and the identity of these shareholders. The board of directors also plays a key role in corporate governance. This role is enhanced by the independence of the board and its ability to effectively monitor the management. The use of various board committees has also been cited as-one way of improving their role in corporate governance.