Every so often, we get served the consequences of poor corporate governance. It is usually a jaw-dropping moment that leaves many wondering, “How could that have happened?” or “Why didn’t anyone catch that sooner?” When such events occur, they are often spectacular, leading to significant stakeholder value being eroded or lost—sometimes with no hope of recovery.
These stories, especially the notorious ones, dominate our airwaves for a while. You would imagine that with the accompanying shock and ire, we would pick our lessons, do things much better, and avoid such catastrophic events. But no, a new story always emerges, providing yet another case study of what failed corporate governance looks like.
Without even going global to notorious cases like the Enron scandal at the turn of the millennium, closer to home we have witnessed a series of spectacular failures in corporate governance, that have left behind trails of pain, betrayal, and, in many instances, lost capital and savings.
We are all too familiar with the collapse of major retail chains that had become household names, and the series of banks that crumbled under the weight of poor governance.
This leads to the question: Is it possible to do better? Or, like death and taxes, are the consequences of poor corporate governance inevitable? I believe we can—and must—do better.
Achieving success in corporate governance requires a concerted effort from multiple players, including robust regulatory oversight, a strong legislative framework with clear compliance and sanction mechanisms, and, most importantly, the internalisation and implementation of sound governance principles.
Over time, regulators such as the Capital Markets Authority, the Central Bank of Kenya, and the Competition Authority of Kenya, among others, have worked hard to punish lapses in corporate governance and protect the public and the economy.
Yet, despite their efforts, interventions often arrive too late—commendable but insufficient to prevent the damage. To its credit also, Kenya’s legislative framework has evolved positively, creating a more robust compliance landscape.
However, the more critical work lies at the board, management, and shareholder levels. This is where real change must happen.
Legislation cannot anticipate every possible scenario, and regulators cannot cover every base without risking overcomplication that stifles progress.
I like to compare good corporate governance practices to a healthy diet and workout routine. It is often inconvenient, unexciting, and monotonous.
The consequences of one or two cheat days may not be immediately apparent, but over time, the effects compound—slowly but surely—until the results become unmistakable. No amount of public relations can hide the outcomes of bad practices, and quick fixes rarely help.
They can accelerate the decline.
Similarly, corporations must take the discipline of good corporate governance seriously. It is a gradual, day-by-day process that ultimately bears fruit—or delivers consequences. You might get away with one misstep, maybe even two, but eventually, consistent poor decisions become a habit, and the fallout becomes obvious.
The principles of good corporate governance, namely, accountability, independence, transparency, participation, responsibility, predictability, and impartiality, must form the ethos of how corporates conduct their business, and how they engage with their stakeholders.
More importantly, it is imperative for corporates to develop a framework and policies that enable practical implementation of the principles of good corporate governance, including enhancing the independence of the board, participation of shareholders and other stakeholders, clear decision-making structures, risk mitigation structures, clear reporting and escalation structures, board and management evaluation, and ethical and above-board input of professional advisors, including auditors, lawyers and company secretaries.
Much like a health and fitness journey, it is always better to start now, regardless of where your company currently stands. Even better if you can embed strong corporate governance practices as a core value from the outset.
The misconceived notion that a corporate, however successful, is beyond the discipline of good corporate governance has always produced predictable consequences. Do not add to the statistic. Good governance is not just a safeguard—it is the cornerstone of sustainable success.
The writer is the Managing Partner at Mukiti Advocates LLP–[email protected]
