Corporate governance practices: A case study of the Kenya Union Of Savings and Credit Co-operatives Limited

Abstract

Over the last two decades there has been an increasing desire to make organizations more visibly accountable, transparent and responsible not only to the owners but also to the other stakeholders and the community in general. Corporate governance is about promoting corporate fairness, transparency and accountability. The focus has been on strengthening the boards so that they can be in a position to direct the affairs of the corporation as a distinct body separate and independent of the management. In the SACCO sub sector, the issue of corporate governance is increasingly becoming a matter of concern. This has arisen due to the huge amounts of funds and diversified financial products that have been introduced, which calls for boards to be transparent and accountable on the use of such resources. The regulation of the SACCOs has not ensured the highest standard of governance. This study was conducted with the objective of establishing the current governance practices within the Kenya Union of Savings and Credit Cooperatives Ltd (KUSCCO).KUSCCO is the umbrella body for all SACCOs in the country and is charged with the responsibility of providing products and services and ensuring proper internal management of SACCOs. This is a case study that has tried to establish the prevailing governance practices in KUSCCO. The pillars and principles of corporate governance as postulated by the private sector initiative for the corporate governance (1999) were explored in the study. The study found out that whereas there is an independent governance body separate from management, in practice this body does involve itself in management. This arose because some board members did not clearly distinguish between what are board and what are management roles and responsibilities. The study also found out that the legal framework in terms of holding the board accountable and ensuring transparency was weak and that members were not quite aware of the systems and procedures required to hold the board accountable. It was also established that the level of member participation was rather low. The board, it was established has endeavored to put into practice good corporate governance. However there are still several areas that need attention. These include the criteria for board election, evaluation of performance for the board members, the CEO and the organization in general, human resource practices, assessment and mitigation of risks and the policies and procedures in general. Arising from the above findings, several recommendations have been put forward. In terms of the board minimum academic and professional criteria should be set and a system be put in place to ensure that there is a balanced mix in the board skills. Criteria should also be developed to evaluate the performance of the board collectively and individually, the CE.O, and the organizational performance in general. It is further recommended that the human resource be thoroughly evaluated in order to attract and retain the right caliber of staff. This should be coupled with a proper structure, systems and procedures that ensure proper internal controls in order to minimize the operating risk. It is also recommended that the union's internal audit be strengthened and that the union gives the CE.O power to operate professionally without political influence. For further research it is suggested that replicative studies could be carried out after a few years to determine what practices may have changed, or studies to determine the relationship between corporate governance and organizational performance. Cross sectional studies could also be carried out to compare corporate governance practices among the national cooperative organizations in Kenya.