The Future of Corporate Governance is Good Relationship with Stakeholders

By Beatrice Meso

 There is no person who is an island, not even corporate persons. As the Ubuntu philosophy asserts, ‘a person is a person through other people.’ We all depend on relationships to be who we are. Even corporate entities need a relationship, not just with their shareholders, but also their stakeholders to achieve the objectives for which they were incorporated and are in business. In simple terms, this is the essence of relational thinking or at least the point where it connects with corporate governance.

The importance of stakeholders, not just the shareholders, to the business and welfare of every company, is not in debate anymore. No longer can any company focus on the narrow interests of their shareholders and pay no attention to the impact on stakeholders including staff, suppliers, customers and the wider society.

In as much as the company needs the involvement of the stakeholders to thrive in its business, it has to consider their best interests in its governance. It is no longer enough for company directors to guarantee a good financial return for its shareholders, they are expected to account for the impact their actions and the company have on stakeholders.

This is the only way to guard against a decline in corporate ethical standards, opaque reporting to conceal actual company performance, sudden collapse of corporate titans and financial crises. When a big tree falls, the birds nesting on it lose their abode. So it is with a leading corporate entity, their thrift or fall is bound to have a bearing on the immediate community. Therefore, stakeholders have legitimate interest on the governance of companies they are associated with at different levels.

Take Kenya Power for example, as a company whose mission is powering people for better lives, what we do and how we do it affects virtually every Kenyan, not just the Government (which has a controlling stake at 50.1% of shareholding) and the private shareholders (owning 49.9%) of the company. Kenya Power owns and operates most of the electricity transmission and distribution system in the country and sells electricity to over 6.2 million customers (as at July 15, 2017).

Needless to say, how Kenya Power as a company undertakes its key mandate to plan for sufficient electricity generation and transmission capacity to meet demand; building and maintaining the power distribution and transmission network and retailing of electricity to its customers affects not only the shareholders but everyone in Kenya.

Indeed, Kenya’s Board of Directors is alive to this fact and endeavours to consistently meet its customers and other stakeholder’s requirements and expectations. Its why the Kenya Power Board has been chosen as one of the Model Boards to highlight the upcoming Mervyn King Governance Summit organized by Institute of Certified Public Secretaries of Kenya (ICPSK) and HESABIKA Trust.

Justice Mervyn King, SC is arguably the world’s leading authority and voice on corporate governance being the author of the King Reports will be conducting the Governance Summit scheduled to kick off today. The former Justice of the Supreme Court of South Africa is widely considered the international gold standard for corporate governance and corporate reporting with The King Reports on Corporate Governance being cited as “the most effective summary of the best international practices in corporate governance”.

The Governance Summit which is expected to be attended by the local and international audience of about 500 delegates from both the private and public sectors cannot have come at a better time. Recently, the legal and regulatory framework in Kenya has recognized the important role of Governance Audit as a way of providing assurance to stakeholders that the organization has embraced good governance practices in order to achieve its strategic objectives.

For instance, the Companies Act, 2015 makes it mandatory for all Quoted Companies to annually assess the extent to which they observe corporate governance policies and strategies. The Code of Corporate Governance Practices for Issuers of Securities to the Public 2015 requires the Board to subject the company to an Annual Governance Audit.

In addition, Mwongozo, the Code of Governance for State Corporations in Kenya, also requires State Corporations to carry out an Annual Governance Audit. Likewise, ICPSK Code of Corporate Governance for Private Organizations in Kenya also calls for Annual Governance Audits by competent and accredited Company Secretaries.

The Governance Summit is therefore critical to ignite discussions, explore case studies and share experiences from around the world with global governance experts, practitioners and executives from Leading Corporates. Even more important is the Theme of the Summit: Relational Thinking and Corporate Governance.

Relational thinking is certainly an African contribution to Corporate Governance because in Africa relationship rules. And maybe it is time companies and boards started thinking hard how and which relationships to prioritize in cultivating good corporate governance and attending the Governance Summit is a good starting point.

Meso is the General Manager Corporate Affairs and Company Secretary, Kenya Power, Vice Chairperson of the Council Institute of Certified Public Secretaries of Kenya (ICPSK) and Board Director of Stima Sacco and several other entities.