Effects of Corporate Governance Practices on Organizational Performance: A case of Coffee Cooperative Societies in Machakos County

Abstract

The study focused on effects of corporate governance practices on organization performance. Specifically, the study examined the influence of board structure, composition and compensation on the performance of coffee cooperative societies in Machakos County. Using descriptive research design, closed ended questionnaires were administered to the 174 board executive directors and supervisory directors from 29 registered active coffee cooperative societies in Machakos County. Data collected was analyzed using descriptive and inferential techniques and the findings were expressed in means, standard deviations and percentages before being presented in form of tables and figures which were followed by comments and inferences. Overall, the study established that corporate governance positively and significantly influences firm performance. The study found out that board structure, board composition and board compensation had a strong influence on the performance of coffee cooperative societies in Machakos County. In terms of compensation, it was established that recent board members are unstable in contrast to stable longer-tenure members. Likewise, executives’ compensations are low and fewer, not based on merit although subject to increment, timely paid as well as no compensation arrears observed. Largely, the study recommends that the boards’ structure design should ensure consensus, checking of CEO/COB, bring more expertise and experience. Similarly, boards should appoint younger members for superior technical knowledge, more adaptability, receptivity and innovation. Further, CEO should be separate from board to avoid conflict of interest and weakening board independence besides increasing non-executives and women on boards. Capacity of inside directors should be enhanced; recent board members should be reduced in favour of maintaining stable longer-tenure members and board membership be anchored on merit. Board compensation should be standard; merit based, promptly paid and subject to increment.