| dc.description.abstract | Corporate governance is a subject that has come to the fore because of the recognition that it
helps to protects the companies' reputation and enhances their effectiveness and efficiency
thereby increasing value to the shareholders and other stakeholders. Another issue that has
made corporate governance a very important issue in business today is t he need to avoid
significant losses that are incurred by the shareholders and other stakeholders after the
company has failed. Corporate failures have caused significant losses across world with
examples like Enron, Worldcom in the US and United Insurance Company, Strategis Health,
Uchumi to mention a few local companies which failed in 2005 and 2006. This is therefore
an area t hat requires research to create a body of knowledge that will be used to protect
stakeholders' rights and benefit of the country's continued economic prosperity.
Corporate governance dilemma arises from the fact that it involves power sharing among the
various stakeholders and requires companies to take the broader outside view of the firm.
However, most organisations, especially those in the insurance underwriting sector, take an
inside view of the firm. Most of the corporate governance issues are complex and with
apparent conflict between shareholders, directors, management and professionals.
The broad objectives of the study were to investigate corporate governance structures and
practices in the insurance underwriting sector in Kenya. The study firstly, sought to identify
the existing corporate governance structures in the sector. Secondly, to benchmark the
existing corporate governance structures a gainst the b est practice a s recommended by the
Centre for Corporate Governance and identify existing gaps. The last objective was to
establish the factors that influence effective operation of the corporate governance structures.
To facilitate the study, 42 companies in the insurance underwriting sector were surveyed.
A self administered questionnaire was delivered to senior management of the companies and
30 of them responded to the survey. The information was analysed using percentages,
frequency tables, bar charts and pie charts to develop data sets and for analysis.
The results show that 83.3% of the respondent companies have taken steps to develop the
required structures and adopted best practice corporate governance practices. However, there
is need to reform and enforce the regulatory framework in the sector to enhance effective
operation of the corporate governance practices in the sector. This is because shareholding in
the sector is very concentrated and therefore the need to introduce rule based corporate
governance which requires establishment and enforcement of effective regulations to protect
the stakeholders. It is important to encourage the players in the sector to consolidate and list
in the Nairobi Stock Exchange as this will introduce and promote reputational agents and
capital markets regulations which enhance market control and discipline over poor
performing managers. There is also need to introduce rules relating to maximum direct and
indirect shareholding by anyone individual shareholder, in order to dismantle the pyramid
ownership structures that allow insiders to control and, who at times, siphon off assets to the
detriment of other stakeholders | en |
