Effect of Corporate Governance Practices on Performance of National Government Affirmative Action Funds in Kenya

Abstract

Good corporate governance practices are essential for improvement of performance in public entities. The study was instigated by the continuous poor performance of public entities. It’s in common knowledge that the services offered by most of these public entities do not commensurate with the tax-payers burden. The evidence of this status is documented in National Government reports by various entities. Reported corporate accounting and financial scandals in public sector have been on rise as reported by Governance institutions such as Ethics and Anti-Corruption Commission, Controller of Budgets and Office of the Auditor General. These scandals often involved Heads of Institutions, CEOs, Directors, Board Members and Heads of Departments- acting unethically in pursuit of financial gains. All these are indicators of poor corporate governance practices. The status of these performance leads to scholarly question that makes the researcher enquire on whether there exists a relationship between the corporate governance practices and performance of the National Government Affirmative Action Funds in Kenya. The relationship between the Corporate governance practices and performance of the Affirmative Action Funds in Kenya has not been explored. This study therefore addressed effect of corporate governance practices on performance of National Government Affirmative Action Funds in Kenya. In the study, descriptive survey design was used. The variables used were derived from corporate governance mechanisms such as institutional leadership, Directors and Executive Compensation, institutional structure, CEO’s Duality, control mechanisms and institutional culture. The study sought to develop models of corporate governance that were considered to have effect on the performance of National Government Affirmative Action Funds. The study population was Women Enterprise Fund, National Government Social Affirmative Fund, Uwezo Fund, National Government Constituencies Development Fund, Youth Enterprise Development Fund, and the National Development Fund for Persons with Disability. The study used census research method since there were only six affirmative action funds in which all the senior management staff were targeted. Structured and unstructured questionnaires were used to collect data from the population. Descriptive statistics was used to analyze the results of the research. The study found out that institutional leadership, directors and executive compensation, institutional structure, CEO’s duality have a positive and significant relationship with performance of National Government Affirmative Action Funds in Kenya. The study further concluded that control mechanism significantly moderates the effect of institutional leadership, executive compensation, institutional structure and CEOs duality on the performance of affirmative funds. Based on the study findings, the study recommended that institutional leaders to adopt a culture that allows them to influence other staff into achieving organizational goals and objectives and that necessity to transfer leadership capabilities into the strategic assets of institutions. Boards were recommended to nominate a compensation committee whose main role is to decide and review CEOs compensation package and to base the compensation not on the performance of the institution but on their mandate. Further, the study recommended institutions to adopt a policy that does not allow CEO to have both executive powers as well as being the chairperson of the board. The management was recommended to come up with a board composition policy that states the number of board members, gender constituent, expertise and other diversities such as religion, race and nationality. The study f recommended institutional managers to adopt control mechanisms that are not biased on institutional leadership, CEOs compensations, CEOs mandate and the structure on the institution. Finally, according to the study findings and conclusions drawn, the study has recommended for a number of key areas for further studies. The study recommended further research on the influence of various institutional leadership style on performance of affirmative action funds.