Effect Of Corporate Governance On Performance Of Tea Factories Managed By Kenya Tea Development Agency

Abstract

In the recent past, many organizations in Kenya have experienced the performance and management challenges as a result of ineffective corporate governance practices. Organizations which fail to practice good corporate governance eventually fail to win public confidence which may lead to an eventual collapse. The general objective of this study was to investigate the effect of corporate governance practices on the performance of Tea Factory Companies in Kenya which are managed by KTDA. The general research question was: what is the effect of Corporate Governance practices on the performance of KTDA managed Tea Factory Companies in Kenya? A survey of twenty companies in Kenya out of the possible 54 tea factory companies under the management of the Kenya Tea Development Agency Limited (Managing Agent) was undertaken. In order to answer the intended research questions, the study focused on disclosure of information, stakeholder participation and the composition of the factory boards. Through stratified sampling, factories were grouped into three categories; according to performance in the term's end year bonus payout that is the highest performing, middle and the lowest performing companies. The first best performing and the last ten worst performing factories in three consecutive years were selected. The target population was 432 being 324 directors, 54 managers and 54 accountants. The sample constituted of twenty directors, twenty managers and twenty accountants. The main data collection instrument was a semi structured questionnaire. Secondary data was gathered through a documentary review of the financial reports years ending June 2010, June 2011 and June 2012, a period covering the financial years of the Tea Factories Companies. The descriptive statistical approach was adopted. Response frequency, percentages, mean, standard deviation and variance were computed and findings presented through use of tables, figures and bar charts. Finding indicated that explanation of the reports during the AGM as well as the books of accounts, enhanced understanding and acceptance of financial reports of the tea factories to the shareholders to a very large extent. Additionally, the study concluded that Tea Factory Companies consider the board of directors as a crucial organ in determining the effectiveness of corporate governance, hence enhanced Tea Factory Company’s performance. Finally, the study concluded that that management acknowledges the shareholders during Factory Company meetings, level of stakeholders’ participation is effective, stakeholders are comfortable with their involvement in performance improvement of the Tea Factory Companies and that all the stakeholders are involved in the annual report compilation and that decision making process involves the participation of all stakeholders. The overall implication is that; corporate governance practices have a significant influence on the performance of KTDA managed Tea Factory Companies in Kenya.