Analysis of corporate governance practices adopted by kisumu Teachers Sacco society limited, Kenya

Abstract

Kenyan SACCOs have been growing at a rate of 25% per year. For instance, in the year 2012, the SACCOs industry's total assets grew by 17.8% to Ksh.292.9 billionin 2012 from Ksh.2487 billion in 2011 contributing 45% GDP. Besides, corporate performance literatures show that corporate governance practices are important in driving firm performance. Previous studies focus on the relationshi p between corporate governance mechanisms and performance among listed firms failing to analyze corporate adoption governance practices and performance of SACCO societies in Kenya. Therefore, the extent of board composition, inclusion of independent nonexecutive board members, and extent of board leadership of KITE SACCO society are unknown. Therefore, the purpose of this study is to analyze corporate governance practices and performance of Kl'Tf SACCO society, Kisurnu City, Kenya. The specific objectives ot the study were iu assess the extent of board cornposuion; establish the extent 0(' Inclusion of nonexecutive directors in the board and determine the extent of board leadership of KITE SACCO Society The study was anchored on agency theory. It adopted descriptive research design. The target population of the study was all the SACCO's 19 employees. Primary data and secondary data were obtained through semi-structured questionnaire and desk review methods respectively Validity and reliability of the instrument was checked using expert reviewers and test-retest methods on 2 respondents who were excluded from the final sample (a > 0.701) implying internal consistency. Data was analyzed using descriptive statistics such as mean and standard deviation while data presentation was done using tables and charts. The study revealed that; board composition had a mean of 4.000 and a standard deviation of 1.2274 implying that board composition was practiced to a very high extent; inclusion of independent non-executive board membership had a mean of 2000 and (1 standard deviation of 1.201 in'plyir.g that it was practiced to a low extent and board leadership had a mean of 4.000 and a standard deviation of 1.546 imolvinz that this was practiced to a h100h extent. The study concludes that: board .• .,. ••..• 1 " composition is practiced to a high extent; inclusion of independent non-executive directors is embraced to very small extent and board leadership is practiced to high extent. The recommendations of the study are that; KITE SACCO should intensify board composition; management of KTTE SACCO should improve on the extent of adoption of inclusion of independent non-executive directorship and the Society should intensify adoption of board leadership governance mechanism. The research findings may be significant to SACCO Societies' policy makers in designing appropriate corporate governance mechanisms. In addition, the research will provide new empirical evidence on the corporate governance practices and form a basis for future research in the area