TABLE OF CONTENTS
DECLARATION ..................................................................................................................................... i
APPROVAL ............................................................................................................................................ ii
DEDICATION ...................................................................................................................................... iii
ACKNOWLEDGEMENT ..................................................................................................................... iv
TABLE OF CONTENTS ........................................................................................................................ v
ABSTRACT ........................................................................................................................................... ix
CHAPTER ONE ................................................................................................................................... 1
INTRODUCTION .................................................................................................................................. 1
I. I Introduction ....................................................................................................................................... 1
1.2 Background of the study ................................................................................................................... 1
1.4 Objective ........................................................................................................................................... 3
1.5 Justification of the survey ................................................................................................................. 3
1.6 Conceptual Frainework ..................................................................................................................... 4
CHAPTER TWO .................................................................................................................................. 6
LITERATURE REVIEW ........................................................................................................................ 6
2.2 Corporate Failure .............................................................................................................................. 8
2.3 Overview of Development in Corporate Governance ..................................................................... 14
2.3.1 Global Initiatives on Corporate Governance ................................................................................ 14
2.3.2 Corporate Governance in the Common Wealth ........................................................................... 14
2.3.3 Corporate Governance in Africa .................................................................................................. 15
2.3.4 Corporate Governance in East Africa .......................................................................................... 15
2.3.5 Corporate Governance in I(enya .................................................................................................. 15
2.4. Theories of Corporate Governance ................................................................................................ 16
2.4.1 The silnple Finance Model ........................................................................................................... 16
2.4.2 The Stewardship Model ............................................................................................................... 18
V
2.4.3 'The Stake holders Model. ............................................................................................................ 19
2.4.4 The Political Model ...................................................................................................................... 20
2.4.5. E1nerging Political Issue ............................................................................................................. 21
2.5 Models of corporate governance ..................................................................................................... 22
2.5.1 Anglo-A1nerican Model ............................................................................................................... 22
2.5.2 Non- Anglo-American Model ...................................................................................................... 24
2.6 Principles of Corporate Governance ............................................................................................... 25
2.6.1 Authority and duties of members/shareholders ............................................................................ 25
2.6.2 Leadership .................................................................................................................................... 25
2.6.3 Appoint1nents to the Board .......................................................................................................... 26
2.6.4 Strategy values ............................................................................................................................. 26
2.6.5 Corporate Performance, Viability and Financial Sustainability ................................................... 26
2.6.6 Corporate co1npliance .................................................................................................................. 26
2.6.7 Corporate Communication and accountability to members ......................................................... 27
2.6.8 Responsibility to stakeholders ...................................................................................................... 27
2.6.9 Balance of Power ......................................................................................................................... 27
2.6.10 Internal control procedures ........................................................................................................ 27
2.6.11 Assessment of Performance of the Board of Directors .............................................................. 27
2.6.12 Induction, Development and Strengthening of Skill of Board Members ................................... 27
2.6.13 Appointment and development of executive management ........................................................ 28
2.6.14 Adoption of Technology and skills ............................................................................................ 28
2.6.15 Manage1nent Corporate risk ....................................................................................................... 28
2.6.16 corporate culture ......................................................................................................................... 28
2.6.17 Social and Environmental Responsibility .................................................................................. 28
CHAPTER THREE ............................................................................................................................ 29
METHODOLOGY ................................................................................................................................ 29
3.1 Introduction ..................................................................................................................................... 29
3.2 Research Design .............................................................................................................................. 29
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3 .3 Population and Sampling Design .................................................................................................... 29
3.3.1 Population .................................................................................................................................... 29
3.3.2 Sampling Design and Sample Size .............................................................................................. 29
3.3.2. l Sampling Frame ........................................................................................................................ 29
3.3.2.2 Sampling Technique and Sample Size ...................................................................................... 30
3.4 Data Collection Methods ................................................................................................................. 30
3.5 Research Procedures ....................................................................................................................... 30
3.6 Data Analysis Methods ................................................................................................................... 30
CHPTER FOUR .................................................................................................................................. 31
DATA FINDINGS AND ANLYSIS .................................................................................................... 31
4.1 Introduction ..................................................................................................................................... 31
4.2 General profile of the Respondents ................................................................................................. 31
4.2.1 Sex ................................................................................................................................................ 31
4.2.2 Bank ofRespondents .................................................................................................................... 31
4.2.3 Age of Respondents ..................................................................................................................... 32
4.2.4 E1nploy1nent ................................................................................................................................. 32
4.2.5 Education ..................................................................................................................................... 33
4.3 Screening ......................................................................................................................................... 33
4.4 expectations ..................................................................................................................................... 34
4.5 Actual perfonnance ......................................................................................................................... 37
4.6 Comparison of the expected and the actual performance of the board .......................................... .40
4. 7 Appointment to the Board of Directors .......................................................................................... .40
4.8 Interest of shareholders ................................................................................................................... 40
CHAPTER FIVE ................................................................................................................................. 42
CONCLUSIONS, LIMITATIONS OF THE STUDY AND RECOMMENDATIONS ....................... 42
5.1 Conclusion ...................................................................................................................................... 42
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5.2 Recommendations ........................................................................................................................... 42
5.3 Limitations of the study .................................................................................................................. 43
BIBLIOGRAPHY ............................................................................................................................... 44
TIME PLAN ......................................................................................................................................... 46
BUDGET .............................................................................................................................................. 47
APPENDICES ..................................................................................................................................... 48
APPENDIX I: QUESTIONNAIRE ...................................................................................................... 48
ABSTRACT This survey was conducted between the months of February and May 2009. It is set to examine the extent of the application of Corporate Governance practices in the banking sector in Kenya The survey was founded on the premises that Corporate Governance is a vital ingredient in maintenance of a dynamic balance between the need for order and equality in society. Corporate Governance is an integral part of the banking sector, considering the role played by the banking and financial institutions. The survey also sought to establish if there is a relationship between the actual Corporate Governance practiced in the banking sector and what the stakeholders expect. The design used in this research was a survey of the descriptive kind. This design was used to acquire a lot of information through description and was useful for identifying variables. Primary data in this survey was collected using semi-structured questionnaires and was administered by face to face interviews. The quota size of the study was respondents drawn from commercial banks in Kenya. Analysis and results are shown through the use of percentages, mean scores. Standard deviations and tables are then used to present the data. Most of Corporate Governance practices are undertaken and implemented by the Board of Directors and the top management. The level of involvement of the lower management and subordinates is very low thus raising various issues such as; How qualified is the Board of Directors?, How informed are the shareholders on matters of Corporate Governance?, and lastly how do you determine the extent of the application of Corporate Governance practices in the banking sector. This survey shows that it is important for the Board of Directors and the top management to be highly qualified as this improves their performance and effectiveness thus improving the firm's performance. The survey also shows that banks should improve their application of Corporate Governance practices so as to bridge the gap between what is actually practiced in terms of Corporate Governance and what the stakeholders of the bank expect to happen.
