Influence of Boards in Promoting Corporate Governance Practices in State Owned Enterprises: The Case of Uchumi Supermarkets
Murua, Eva Wangui
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In the face of major scandals leading to the collapse of large corporations, especially State owned ones, with disastrous social and economic consequences, the need for good corporate governance practices is increasingly taking center stage. The significance of good corporate governance hit world headlines in 2002, when major corporate failures occurred in United States (U.S). In Kenya, the question of corporate governance came up in 1990s in the advent of similar corporate scandals and misdemeanors that saw the collapse of companies and parastatals among them, National Housing Corporation, Kenya Cooperative Creameries (KCC) and the Kenya National Assurance Often the influence of the Board and its significance is questioned. However when things go wrong in organizations, then attention shifts to them. Lately they have come under increasing scrutiny, both in the wake of a number of serious corporate frauds and failures. Considerable literature has been developed to describe how the Boards can better discharge their directorial responsibilities, however, most research on boards mainly centers on the question “what is the role of the Board?” and “the interaction between board composition and performance. Research on influence of boards in promoting corporate governance practices in State owned enterprises is however surprisingly thin. The findings of this study therefore are timely and instrumental in adding knowledge to the existing gap. The study was guided by three theories related to governance; the agency theory’s basis is to align the concern of an association’s proprietors and its administration. The stewardship theorists however maintain that they are trustworthy managers, while the stakeholder’s theory have interests and concerns insisting on their right to a form of return from the organization. The study adopted a descriptive research design and conducted its research at Uchumi Supermarkets, targeting its senior and middle level management, including its outlet - City Square Branch; and also CMA officials where both the questionnaire and interview research instruments were used for purposes of collecting data. The data was analyzed using numerical coding for the questions and SPSS computer software for the responses. Descriptive statistics were used to summarize the data while tables, graphs and pie charts were be used for presentation. The study achieved a response rate of 85% from sample respondents. That Board leadership has a significant influence in promoting corporate governance practices in State owned enterprises was confirmed as true. An area of concern that reflected a weakness on Board leadership however was, non-existent structures for motivation and reward, lack of two-way communication system for keeping everyone informed and up to date. The focus on Board level oversight was the variable with the least positive response at 46%. The respondents observed active and direct oversight activities were lacking despite having existing checks and balances in place. Organizational policies formulated by the Board aide in promoting corporate governance practices had the highest positive response of 89%,which should be properly communicated to the organizations’ stakeholders and implemented for adoption at all levels. The study highly recommends appointment of competent Boards, and suggests training, induction and up-skilling programs on board management. In addition, Boards of listed companies should undertake formal and rigorous annual evaluation of its own performance and should ensure governance audit is carried out at least annually to ascertain that the company is operating on sound governance practices. The study suggests that since corporate failure of State corporations has been on the rise both locally and globally, other studies should be conducted on factors that influence and promote corporate governance practices in State corporations.