A case for statutory codification of directors’ duties in enhancing good corporate governance in Kenya: a case study of national bank of Kenya

Abstract

Directors are employed to manage the assets of the corporation on behalf of the shareholders who own it. However, more often, directors fail to discharge their duties with diligence and due care leading to mismanagement and collapse of many private and public companies. In Kenya, the major reason is the weak corporate governance regulatory framework and legal enforcement mechanism that fails to prescribe the precise duties of directors, to whom they are owed and major consequences for breach. Thus, companies in Kenya are unlikely to see the light of day in good governance unless the current laws are reviewed to reflect changing economic trends and to take into account the evolving duties of directors to company stakeholders. Accordingly, this researchstudydelves into the corporate governance fragility that characterized National Bank of Kenya (NBK) leading to its near-collapse in the 1980s and 1990s and recommends review of the Companies Act to incorporate a statutory statement on directors‟ duties for purposes of reducing corporate scandals and litigation and thus promoting good corporate governance practice in Kenya.The study explores a comparative analysis of the corporate law in United Kingdom and South Africa and accordingly makes recommendations on review of the Kenya‟s Companies Act.