Influence of Board Composition on Performance of Sugar Companies in Western Kenya

Abstract

Kenya's sugar manufacturing companies have had disappointing financial results with high debts over the last decade. In Western Kenya, in particular, most companies either work below capacity or have factories fully closed down. Together with the problems of collapse, placement under statutory management and fraud in some of the firms, these issues raise the question as to whether good corporate governance practices and values are adhered to, whether the governance foundations are clearly defined and followed, and whether the governance facilitating frameworks' functions and responsibilities are clear. The relationship between different board composition features on firm output in different industries, including the sugar industry, was investigated by several previous studies performed. The findings and conclusions drawn from the different studies show inconsistencies where some of the results formed positive relationships while others discovered negative relationships. None of the researches focused on how the success of companies would be substantially influenced by board structure features of board size, board gender ratio, board age diversity, and board independence. Researcher wanted to fill the void through scrutinizing the output of the sugar organizations in Western Kenya as impacted by the four board structure variables. Descriptive design was followed in the report. The research was limited to only Western Kenya's sugar firms, whose number stood at 11 as of 31 December 2019. Given that the number of sugar firms in Western Kenya was only 11. Five respondents were chosen by purposeful sampling to represent each of the 11 sugar factories. These were the board chair, board secretary (CEO), the two board members (female and gent) and the finance manager. The five members were viewed ideal of offer the necessary opinions needed Thus, for the analysis, a sample size of 55 respondents was considered. Using questionnaires with open and close ends to capture primary data. Research questions that have been used. For validity, data collection tools were shared with the supervisor and the research experts with a view to obtaining their opinion. Alpha coefficient values used varied from 0 to 1, being the Cronbach. Descriptive together with inferential statistics were applied for data interpretation. Discoveries proved board size, board gender ratio, board age diversity, and board independence triggered performance of sugar companies in western Kenya. In order of perceived importance board gender ratio was ranked first, second was board independence, third was board age diversity and lastly was board size. It is highly recommended that when constituting a board, the merits and demerits of small and large sizes ought to be put into consideration. there is need to focus on the educational levels, skills and experiences of the nominees whether male or female. Put into consideration their previous experience, the number and types of relevant connections. Since the research focused on only 11 sugar companies, located in Western Kenya, same kind of research can be conducted in other locations all over the world to make comparisons and improve the literature. A similar study could also be undertaken in different industries.