This archive report was first published on 16 July 2019.
Published on July 16, 2019, a time when corporate governance was a pressing concern globally. The article highlights the importance of good corporate governance in organisations and the economy at large.
Weak internal controls and questionable ethical conducts have eroded organisations' reputation, risk management, and accounting practices. Many countries, including Kenya, have succumbed to these issues. Governance Institutes have developed codes and standards to promote good governance, enhancing shareholder value and protecting organisations' interests.
The Board of Directors plays a vital role in corporate governance. They must consider various parameters when constituting a board, including board composition, size, leadership structure, board activity, diversity, and accounting measures of performance. The directors are expected to be accountable and explore the performance implications of compliance with governance norms.
Research has shown that boards of US-listed companies are relatively larger, with a majority of independent directors, and have a combined board leadership structure and more gender diversity compared to Kenyan boards. Good corporate governance is essential for organisations to maintain their edge and sustainability in a dynamic business environment.
It generates external trust from investors, creditors, public, and stakeholders, who are considered as the social capital and strategic asset for organisations. To foster good corporate governance, organisations should ensure continuous assessment is done. The role played by Chief Executive Officers raises many unanswered governance questions regarding the roles and responsibilities of executives and board members.
Corporate frauds have become a global phenomenon, with the motivation factor being to make money and become rich. The prevention of graft is critical, and strict adherence to high ethical standards is necessary to achieve desired development objectives and enhance the functioning of the new social, political, and economic processes.
A careful study of large corporations and business houses attributes their slow growth to criminality perpetuated by traders, businessmen, and industrialists. Engaging in fraudulent activities to make money will spiral down some of these organisations. Scholars have traced warning signs of corporate governance collapse, from Adam Smith in 1776 to Tricker in 2009, all agreeing that good corporate governance is conceived to prevent fraudulent practices.
