PAN AFRICAN CONSULTATIVE FORUM

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• PAN AFRICAN CONSULTATIVE FORUM
• DAKAR, SENEGAL.
• Status of Corporate Governance
• in Kenya Lessons from the APRM exercise
• Presented by Centre for
  Corporate Governance
• Nairobi, Kenya.

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• 1.Methodological Approach
• The methodological edifice was designed as a
  bottom-up process with the aim of hinging the
  APRM on the participation of Kenyans in an open,
  all-inclusive and transparent manner.
• The pre-field methodology comprised education,
  sensitization, awareness creation and creation of
  ownership among the mass of Kenyans realigning,
  harmonizing and coordinating methodological
  approaches among technical review teams
  identification of stakeholders recasting the
  questionnaire into a survey instrument and
  gathering information and data.
• 1.1 Instruments
• Four principal research instruments were
  developed and used, namely a Desk Research
  Instrument, an Expert Panel Instrument, a
  National Sample Survey Instrument, Focus Group
  Discussions with enhanced validation of the
  findings through Provincial rollout discussion,
  meetings workshops with separate syndicate
  groups to cater for young women, young men,
  women and men.

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• 1.1.1 Desk Research Instrument
• The desk research contained structured
  questions focusing on issues relevant to good
  corporate governance and aimed at facilitating
  the collection and extraction of factual and
  reliable information. It was designed to collect
  secondary data and information and to undertake
  qualitative analysis of those issues.
• 1.1.2 Expert Panel Instrument
• The expert panel instrument was designed to
  capture information from a cross-section of
  leading experts in the thematic area. Questions
  were formulated in a manner to elicit opinions
  and perceptions. Most qualitative responses took
  the form of yes/no, scoring or ranking on a scale
  of 1 to 5.
• Expert respondents were carefully identified by
  the Lead Technical Agency, the thematic Convener
  and members of the Thematic Groups drawn from
  academia, faith led organisations and civil
  society, the media, the government, the private
  sector and the business community, and the
  politicians, among others.

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• 1.3.3 Focus Group Discussions Instrument
• Based on the preliminary desk research
  reports , the Thematic Group identified the set
  of core issues to be discussed with respect to
  corporate governance in the Focus Group
  Discussions.
• The Lead Technical Agency and the Convener
  developed guidelines and check lists for the
  discussions. Selection of participants to the
  FGDs took into account inclusiveness and ease of
  implementation. Participants were identified from
  all sectors using selection criteria of age,
  gender, level of education, being active in
  public affairs, regional representation,
  socio-economic groups, civil society,
  politicians, development partners, private
  business, religious faiths, different sectors,
  rural versus urban, areas and so on.

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• 1.3.4 National Sample Survey Instrument
• The National Sample Survey instrument was
  designed to capture perceptions of the general
  population on issues of governance in the four
  thematic areas. The instrument sought perceptions
  on the state of governance.
• In addition to the Focus Group discussions
  deliberate efforts were made to ensure that all
  the issues were discussed separately with
  representatives from all the Provinces and
  districts of Kenya while taking into account
  gender and age concerns as follows
• Female youths aged 14 25 years
• Female adults aged 26 65 years
• Male youths aged 14- 25 years and
• Male adults age 26 65 years.

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• What were the findings?
• Unfortunately, until the country review
  report is discussed and adopted by NEPAD Heads of
  State and delivered to the President of Kenya, we
  are not at liberty to discuss or reveal the
  specific findings. We shall therefore only
  discuss those generic issues that raise matters
  of interest and concern to the implementation of
  corporate governance in Africa.

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• In Kenya, like in many other African states, the
• governance of business was an issue that
• occupied the minds since independence.
• At the time, the major issues of concern were to
• see what more needed to be done to make the
• modern forces of economic power accountable to
• mankind, facilitate effective participation by
  the
• citizens, remove foreign domination of the
• commanding heights of the economy and ensure
• social accountability and responsibility of the
• business sector.
• In Kenya this concern is clearly articulated in
  the
• Sessional Paper No 10 of 1966 on African
  Socialism
• launched and the study on Who Controls Industry
• in Kenya published in 1968.

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• In the 5-year National Development Plan
  1993-8 the government made the point that while
  the twin challenges of the nations development
  were elimination of poverty and unemployment, it
  made the point that the Private Sector was to be
  the Engine of Growth and that the role of
  Government was to create an enabling and
  conducive environment in which business
  enterprises could grow and thrive. This emphasis
  eventually led to a number of initiatives that
  sought to promote the private sector including on
  aspects of good corporate governance in the
  country in both the private and public sectors.
• Those on corporate governance include the
  adoption of international accounting, auditing
  and reporting standards, the setting up of a
  Centre for Corporate Governance, the Institute of
  Directors, the Kenya Shareholders Association and
  the Kenya Anti-Corruption Commission among
  others.
• In addition, the establishment of schemes
  like the Company of the Year Awards (COYA) and
  the Financial Reporting (FiRe) Awards has
  increased awareness and created a spirit of
  competitiveness among participating
  organizations.
• Regular training courses and workshops on
  corporate governance have further increased the
  demand for good corporate governance.

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• In the last five year period, more than 1300
  directors have gone through the 5-day
  certification training course, an additional 600
  through the 3-day director induction training
  programme and many others through the 2-day
  introductory and 1-day overview training courses
  in corporate governance. The directors have been
  drawn from the public, the private and
  cooperative sectors.
• In addition the country has developed through
  participative processes generic and sector
  specific corporate governance codes of best
  practice, covering all companies generally, state
  owned enterprises, cooperatives, banks, reporting
  and disclosure and on the role, duties and
  obligations of shareholders and members
• These and other activities are improving the
  standards of good corporate governance in the
  country.

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• Kenya has signed, ratified, adopted and
  complied with a number of internationally
  accepted standards and codes as indicated below.
• As at February 2005 there were
• - 115,544 companies registered under the
  Companies Act, with about 5000 of them registered
  as public companies out of which only 48
  companies are quoted on the Nairobi Stock
  Exchange. 2760 of the registered companies are
  foreign owned.
• - There are 120 State-Owned Enterprises
  estimated to have contributed about 3 of GDP
  in 2004.
• - There are more than 412,408 businesses
  registered under the Registration of Business
  Names Act.
• - There are more 10,297 cooperative societies
  including over 4166 primary producer
  cooperatives in the agricultural sector over
  4200 Savings and Credit Cooperatives and others
  in various sectors housing, handicrafts, and
  so on.
• - There are more than 1.3 million Micro Small
  enterprises employing over 5.1 million people.

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• Kenya has put in place a number of measures aimed
  at encouraging commercial enterprise in the
  country. The country could still do more to
  improve infrastructure , provide more financial
  services ,make rules more flexible and ensure
  the fair , equitable and uniform application of
  the law fairly (79) as a means of improving the
  investment climate.
• In public and private companies in Kenya, the
  unitary board is predominant. In the co-operative
  movement, the management committees are being
  transformed into Boards of directors by statute.
  The only two clear cases where the role of the
  Chairman of the Board and the CEO are combined
  are in Electricity Regulatory Board and the
  Central Bank of Kenya

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• A number of challenges still exist and have to be
  addressed if the country is to ensure the
  application and implementation of the highest
  standards of corporate governance. Among these
  are, the acceptance by society of the role of the
  private sector as the engine of growth and
  consequently the re-orientation of societal
  values which would result in popular
  participation and engagement of society in
  holding business enterprises accountable for
  efficiency and effectiveness, competitiveness and
  innovativeness and shifting away from believing
  that the government will provide everything.
  There is need to excite and incite all business
  enterprises and their leaders to understand,
  apply and implement the principles and practices
  of good governance. There is also need to ensure
  that regulatory supervisory authorities have the
  capacity to police and enforce strict adherence
  to the principles.

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• What are the primary or critical issues that
  Kenyans felt
• should be addressed in corporate governance?
• - Alleviation of Poverty and unemployment?
• Corruption ?
• Continued Rape and plunder of national resources
  for the benefit of others?
• Dominance of the economic resources by the few
  who
• enjoy support from the political elite?
• Small and non-viable indigenous enterprises that
  lack
• competitiveness access to capital and
  technology?
• - Dominance by State Owned enterprises?
• Institutional capacity to promote, supervise an
  otherwise police compliance.
• Review of the policy, legal and regulatory
  framework
• Fair, efficient and speedy mechanisms for the
  resolution of commercial disputes

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• Key questions were asked as follows
• 1.Whose voice are we hearing through the codes of
  best practice? Is it the voice of the people of
  Kenya indicating how they want businesses to be
  run and governed, or is it the voice of the
  foreign businesses or governments seeking to
  protect and entrench foreign domination of the
  economy or to justify it retention of ill gotten
  wealth?
• 2. Are we hearing the voice of the emerging
  indigenous business people of Kenya or is it the
  voice of foreign investors and those who have
  benefited from abuse of power suggesting that
  with packaging minimum change, things can stay
  as they were and the majority of the
• people deceived to accept to stay just as they
  have always been - poor?

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• 3. Does the good corporate governance promote
  the concept of African Social Accountability?
  This implies that those who are entrusted and who
  control economic resources policies must be
  answerable and responsible to society, and that
  they must give a full account of power and the
  extent of the level efficiency and effectiveness
  of their activities to the community as a whole,
  and not only to a section of interests?
• 4. Does the Corporate Governance promote
  meaningful participation and engagement for the
  majority of the people in the development
  process? Do workers, producers, consumers feel
  ownership of the economy, or that those who own
  and control the economic power are doing their
  best for them and that they, the people, are
  involved in the decision making process and not
  only at the receiving end of other peoples
  decisions over which they can exercise no
  influence or control?

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• 5.Can the codes of best practice be applied
  generally to the majority of business enterprises
  in Kenya? or are they an attempt to reproduce the
• capital market led Anglo-American module that
• primarily just address the interests of
  limited shareholders?
• In other words, does corporate governance
  strengthen the engagement and participation of
  the majority of the people of in the development
  process, or does merely promote a feeling of
  participation while maximizing on the
  manipulative elements and dominance of the few
  that is prevalent in the modern capitalistic
  economy?

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• 6.Is corporate governance as currently promoted
  seeking to create a privileged class of business
  investments, or does will it facilitate the
  development and sustainability of the vast
  majority of business enterprises in Kenya?.
• 7. Do the principles have meaning or relevance in
  the context of Kenya?
• 8. Has adoption and implementation of the
  practices and principles had an impact on
  corporate and economic performance in any other
  African countries? Can this be demonstrated
  quantatively?

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• Given the fragmentation of the African economic
  market, by language, legal regimes, history and
  culture, would adoption of corporate governance
  guidelines founded in our legal and colonial
  background create disadvantages for Kenya
  businesses?
• Is it possible to have harmonised standards of
  Corporate Governance in Africa or de we expect
  uniformity?

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• In light of the colonial history of the country,
  it emerged that the people of Kenya feel that
  they must implement corporate governance
  principles and practices which they have
  developed, accepted and owned and not impositions
  from outside .
• In the past, decisions were taken about us,
  without us, against us and in the interests of
  others. We are asking that decisions about us
  should be taken together with us, in our interest
  and for our benefit. President Olusegun
  Obasanjo, Kampala Forum 1991