Corporate Governance Practices And Their Effect On Organization Performance: The Case For Nairobi City County, Kenya

ABSTRACT

Corporate governance is considered an important requirement for operations for any organization as it enhances out effectiveness of Boards, transparency and disclosure, accountability, risk management, internal controls, ethical leadership and good corporate citizenship. Nairobi City County is one of the devolved governments being county number 47 in Kenya. The county is charged with the role of bringing services to the people through the devolved functions. The demand for better services from the county government has increased over the last four years due to the growing population of the county and awareness by the citizens. Consequentially, the study identified objectives in order to analyze the effect of corporate governance practices adopted by the Nairobi City County to ensure its organizational performance in service delivery. The objectives were to determine Corporate Governance practices adopted by Nairobi County, to find out the relationship between corporate governance practices and performance of the county government and to examine the challenges of corporate governance practices in the county. This study was guided by four theories, the famous Agency Theory, Stewardship Theory, Resource Dependency Theory and the Public Participation Theory. The study used a population of 50 comprising of managers and other key personnel identified from the finance and planning department in the office of the governor cutting across the 18 sub counties. Stratified random sampling technique was used to ensure objectivity and reduce biases in the study. Therefore 60 percent of the study population was sampled in the finance and planning department and employed census for the top management who were 15 in number. Data was collected from the sample group using questionnaires and for census group data was collected through interviews which enabled information provided to answer the research questions. Secondary data was also used to gather information necessary in the analysis of the data and improve the quality of the outcome. The collected data was analyzed using the univariate (descriptive) analysis technique so as to answer the research questions. Key findings were that there is a significant relationship between corporate governance and performance. Capabilities have no independent statistical significant influence on performance. This could be attributed to weak manifestations of capabilities in Kenyan county government. It further concludes that although a positive relationship existed between corporate governance and performance, the explanatory power of these models were weak. It is highly likely that there are other factors other than those conceptualized in this study which influence organizational performance.