Why rot pervades our institutions

Corporate governance in most of our institutions--public and private is wanting.

Corporate scandals are no longer news in our media.

Nothing illustrates this better than the Kacc report regarding the buying of cemetery land by the City Council of Nairobi.

The land which was valued at Sh24 million was sold for nearly Sh300 million. This is the hallmark of greediness.

The last time I checked, people respected the dead.

Today, it is rare for a week to elapse without the media highlighting a scandal involving gigantic amounts of cash –tax payers’ sweat.

What happened to our psyche; our morals and integrity?

Why do our oversight bodies react only after the crimes have been committed?

The best solution is, obviously, arresting the crime before the tax-payers incur losses.

This rot is partly a product of incoherent corporate governance and weak risk management structures.

As a society, we need a thorough ideological self-analysis.

Contrary to some insinuations and innuendos, corporate scandals are domiciled in Africa.

The only difference, between us and the West, is how perpetrators of these heinous acts are handled.

I will illustrate this by a real story of former Enron chief executive Jeffrey Skilling.

The US government alleged Skilling and Enron founder Kenneth Lay hid company losses and hyped the stock’s value while selling their own shares for private gain.

They thus violated their duty under a 1988 federal law to provide “honest services” to clients.

Today, Skilling is serving 24-year in jail! Our government is known for employing knee-jerk solutions to resolve the twin problem of management and corruption in public institutions.

Corporate governance simply refers to the set of internal policies, rules and procedures that an institution follows to ensure that it operates in a fair, equitable and appropriate manner for its benefit as well as that of its management and shareholders.

Some of the basic tenets of effective corporate governance include a working code of conduct that binds all the staff, avoidance of conflict of interest, working audit committees, effective boards of directors among others.

You can re-evaluate your institutions around their standards and principles.

From commercial banks, stock market, public institutions the issues of corporate governance are grave.

This is why we must laud the Capital Market Authority’s decision to blacklist dishonest employees who worked in cohorts with some rogue stock brokers.

Corporate governance

Last year the central bank of Nigeria made a historic shake up in the banking sector.

A conspicuous change introduced was retiring of bank chief executives who have served for more than 10 years.

The governor of the Central Bank of Nigeria was incensed by many banking outfits which were essentially, one-man shows. 

The central bank felt that when an institution does not have a sound corporate governance framework, the reliance on the judgment or the views of one person or a small group of persons becomes a very fundamental risk exposure for the bank’s survival.

It would be very interesting to see the findings of such an audit on Kenyan banks.

What lessons can businesses learn from these challenges in corporate governance?

Is your organisation the one-man show run by a know-it-all boss?

To succeed you need to understand some simple rules.

First, the board of directors owe their institutions a solemn duty to select and oversee competent and ethical management team to run its affairs.

Second, the management appointed must learn to operate effectively under the realms of ethical and professional standards.

Third, the management under the oversight of the board and its audit and risk management committee should provide factual financial data which represents the true and fair position of the institution at any given moment in time.

One philosopher once quipped, “Ethical standards are evolutionary and must change over time. A professional’s ethical standards reflect the social, legal, economic, political and cultural norms of a society at a given time. As norms and values and circumstances change, ethics rules must change as well.”

Kihuro is a Risk Management Practitioner at Panafrican Housing Financial institution, Shelter Afrique, headquartered in Nairobi jkihuro@yahoo.com