Corporate governance and organizational performance of large parastatals in Kenya: a case of the Kenya Bureau of Standards

Abstract

In the past, private sector placed a premium on corporate governance. However, at all levels, it is rapidly being seen as the most significant factor in determining the success of organizations in the public sector as well. However, gaps existed as organizations try to increase performance through better corporate governance. The purpose of this research was to determine how the concept influences performance of large parastatals in Kenya, with a focus on Kenya Bureau of Standards (KEBS). The study's specific objectives were to determine the effect of director independence on KEBS' performance, the impact of board accountability on KEBS' performance, and the impact of board composition on KEBS' organizational performance. Resource dependency, agency, virtue ethics, and stewardship theories were used to support the propositions of the study. Descriptive research design was adopted and the target population was KEBS top management and board of directors. The population for this study was the top management employees and board of directors of KEBS. There were 42 top management employees and 8 Board of Directors at KEBS. The study conducted a census survey of all top management and Board of Directors. Census survey was appropriate because the population of top management and Board of Directors was small. The decision to conduct a census survey for a small population of 42 top management members and 8 Board of Directors was justified by the need for accuracy, representativeness, and comprehensiveness. Thus the study sample size was 50 participants. Data was collected by use of questionnaires. Validity was confirmed through literature and expert reviews as well as proposal presentation to panel of experts. Reliability was checked by conducting a pilot study and subjecting data to Cronbach’s alpha test. Data was analyzed using descriptive and inferential analysis with the aid of Statistical Package for Social Sciences (SPSS) tool of analysis. Descriptive analysis was conducted using frequency, percentage, means, and standard deviation. To assess the nature of the relationship between the variables, inferential statistics was employed where Pearson's Correlation was used to determine the correlation of the variables while a multiple regression model aided in predicting the relationship. Tables were used for data presentation of descriptive data analysis. The study results indicated that there was a positive and statistically significant influence of Board of Director independence, accountability, composition and fairness on performance of KEBS. Apart from this board characteristic, other factors ( B0) contributed 10.181 units for every one unit of performance. Director Independence contributed .449 units, Board Accountability .213 units, Board Composition .728 units and Board Fairness .194 units per every increase in a unit of performance. The study concluded that there was a positive and statistically significant influence of Board of Director independence, accountability, composition and fairness on performance of KEBS. The study recommends enhancing Board of Director independence and diversity, increasing stakeholder participation for accountability, strengthening ethical practices and fairness, and implementing improved corporate governance policies for parastatals in Kenya, including borrowing from effective systems in other jurisdictions.