Influence of Corporate Governance on the Performance of Public Organizations in Kenya (a Case of Kenya Ports Authority)

Abstract

Corporate governance is a combination of corporate policies and best practices adopted by the corporate bodies to achieve their objectives in relation to their stakeholders (Mallin, 2007). It has been increasingly recognized in public organizations that appropriate corporate governance arrangements are a key element in corporate success (Meredith & Robyn, 2005). They form the basis of a robust, credible and responsive framework necessary to deliver the required accountability and bottom line performance consistent with an organization’s objectives. Corporate governance in Kenya has been an important topic because of corporate scandals such as the recent complaints on the composition of the board members in the state corporations against the tribal lines basis. Mismanagement, bureaucracy, wastage, pilferage incompetence and irresponsibility by directors and employees are pointed out in the sessional paper 4 of Government of Kenya as the main problems that have made State Corporations (SC’s) fail to achieve their objectives (Reuters, 2004). Kenya’s entities have had a history of poor governance system with about 70% of the scandals attributed to weak corporate governance practices, lack of internal controls, and weaknesses in regulatory and supervisory systems as well as conflict of interest. Albeit a lot of literatures have drawn much emphasis on the relationship between corporate governance and ownership and on the relationships little is known about the influence of the corporate governance on performance of public organization. The factors considered include; Board composition, Management compensation, Governance structure and Board size. Kenya Ports Authority (KPA) is the case study in this study. The sample size was 251 respondents of KPA’s employees. The study used primary data collected using questionnaires which were given to the respondents at their places of work. Out of the four variables studied it was found that the board composition had a greater influence on the performance of public organizations. The study recommends, among others, that the government should therefore enforce the measures it has laid down on corporate governance to ensure public organizations are following them so that the recommended governance structures are followed.

Keywords: Corporate governance, State Corporation, Board