A Survey of Corporate Governance Practices in Selected Commercial Banks in Kenya

Abstract

The purpose of this study was to assess the corporate governance practices in selected commercial banks in Kenya with focus on the role and functions of the board of directors and its committees, structure, independence as well as information disclosure and transparency. The study combined both quantitative and qualitative approaches and was carried out in 7 banks. A total of 21 questionnaires were administered to the company secretaries and managers with a response rate of 57.1%. Three in-depth interviews were conducted. In addition, annual reports content analysis was carried out to strengthen responses to questionnaires. The findings indicated that board members serve on boards of other corporations. Second, some independent directors and board members do not have appropriate skills to carry out their responsibilities. Another finding was that different individuals hold the positions of the Chief Executive Officer and board chairman. Finally, the audit committee exists in most banks except the disciplinary committee. Accordingly, the following recommendations were put forward. First, remuneration of directors should be competitive to attract and retain them. This way, they will remain productively loyal and committed to the corporations. In addition, banks should encourage the independence of directors. Second, clear job description and required skills should be defined. There is also need to limit the size of the board and ensure that periodic performance system of directors is in place. Lastly, banks should keep different individuals in the positions of CEO and chairperson in order to render transparency and accountability between management and board. Main committees such as audit, nomination, and remuneration committees should be established in the banks.