Role Of Courts In Promotion Of Good Corporate Governance In Kenya: A Case Of Companies Listed In The Nairobi Securities Exchange.

Abstract

Corporate governance environment involves a complex amalgam of both legal and self regulation. In this regard, there has been a debate on whether courts enforce corporate governance laws mainly through interpreting the relevant legislation and through application of the common law where legislation does not exist. This study sought to determine the role played by the courts in promotion of good corporate governance in Kenya; with a focus on companies listed in the Nairobi Securities Exchange. The study specifically sought to establish the influence of enforcement role, deterrence role and guiding principles of the courts in promotion of good corporate governance in companies listed in the NSE in Kenya. The study adopted a descriptive research design. The target population were 66 senior legal officers in the companies listed in NSE in Kenya. Since the population is small, a census study was adopted whereby the entire population of 66 legal officers formed the sample size for the study. The study collected primary data using a questionnaire. A pilot test was conducted to test for validity and reliability of the data collection tool. The researcher personally administered the questionnaire to the respondents. Both descriptive and inferential statistics was adopted for analysis. The descriptive statistics included frequency distribution tables, mean and standard deviation. The regression model was adopted to establish the relationship between variables. Data was presented using tables, charts and graphs. The study found that the most of the companies listed in the NSE experienced various challenges in corporate governance. Most of the companies used internal mechanisms as a way of addressing the various challenges in corporate governance. The study also found out that courts enforcement measures enhance good corporate governance to a great extent in the listed companies in Kenya. Court deterrence measures and courts guiding principles also influenced good corporate governance in companies listed in the NSE to a great extent. The study concludes that the courts through enforcement measured can promote good corporate governance in the organizations. The study also concludes that courts have the capability to deter any misappropriations by the directors of companies. The courts can promote good corporate governance in companies by enhancing compliance of the laid down practices and also by ordering for the arrests of directors. The study recommends that courts should also be engaged in the enforcement of good governance in the organizations especially where internal mechanisms do not work effectively. The courts should also promote good corporate governance in companies by enhancing compliance of the laid down practice and deter directors from misappropriations in listed companies. The fines given in courts should be adequate to deter directors from misappropriating of company assets.