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A good corporate culture plays a critical role in defining a conducive work environment. The blend of internal and external governance involves a blend of regulations, rules, and laws that help a company to attract better financial and human capital, efficiency, effectiveness, and objective stakeholder engagement.

Corporate governance is paramount to an organizations sustainable success. The integral aspects of corporate governance involve:

• Corporate accountability – accountability of resources revives investors’ confidence. Investing in policy making sets the firm to greater success by reducing corruption, bribery and conflict of interest among members.
• Increase shareholder engagement – increasing shareholder engagement across the globe is a challenge. This has necessitated the presence of a code of corporate governance.
• Market globalization – in the recent past, mergers, and acquisitions have significantly increased. Additionally, international capital market recognizes sound management, where company’s securities are listed for capital injection.
• Corporate objectives – corporate governance is an important instrument in achieving economic development. Matters of strategic management and corporate responsibility affect the internal and external objectives of a company’s operations and brand.

Corporates achieve the aforementioned aspects through the principles of transparency, integrity, accountability, and compliance with laws, regulations, and guidelines.

In conclusion, corporate governance is about setting good ethical conduct in institutions. This shapes codes of values and principles in facilitating individual and corporate optimizations in the ever changing business environment.

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Corporate governance tools ensure the following responsibilities are met:

• Setting the company’s strategic goals
• Providing the necessary leadership structure
• Supervising the management
• Reporting to shareholders on their stewardship

Theories of corporate governance are defined by the causes and effects of variables such as the configuration of the board of directors, the audit committee, the independence of managers, the role of top management, and their social relations beyond the legal framework. Effective corporate governance requires applying a combination of existing corporate governance theories rather than applying an individual theory.

Corporate governance encompasses every aspect of a business model. It addresses company goals across diverse industries by offering the foundation for achieving them. Internal control processes are tailored to create a conducive working environment as well as performance assessment and evaluation tools as elements of the management realm of corporate transparency.

An institution’s governance is structured to provide long-term corporate benefits. The structure is anchored on the following principles of governance:

1. Fairness – addresses the suppression of members within an institution. Shareholders should at all times receive equal treatment and consideration in receiving information during decision making.
2. Transparency – as part of a company’s business strategy, stakeholders should be kept up to date on the company’s current status, plans, and risks. This information should be accurate and timely. Essentially, corporate transparency enhances confidence in decision-making.
3. Accountability – the pillar of accountability refers to the obligation and responsibility to provide a substantial explanation of reasons for a series of actions. The board is tasked with being accountable for the following issues:

• • A clear understanding and assessment of the company’s financial performance.
  • The extent of risk the company is willing to take.
  • Having monitoring and improvement measures for internal control systems
  • Transparent financial reporting and risk management reporting to stakeholders.
  • Continuous communication with stakeholders on clear and understandable assessments of the company’s goals

4. Responsibility – board is required to exercise full authority in growing a company. A responsible team facilitates management monitoring. Responsibility should be structured to optimize synergy but also avoid overlap of responsibility.

Business pillars of governance ensure business resources are used optimally towards the strategic objectives. Corporate management is encouraged to implement the above pillars for effective management.

A company is run through different corporate relations; such relationships are categorized as theories of corporate governance.

1. The agency theory – explains the relationship between the principals and agents. The theory is characterized by a separation of ownership and control. The agent must make their best decisions for the principal and be held accountable for tasks and responsibilities.
2. The stewardship theory – the theory concentrates on preserving and maximizing shareholders’ capital. The theory emphasizes the importance of working independently in order to optimize shareholders retained profits.
3. The stakeholders’ theory – the theory encompasses firms that have broader management accountability due to a wider range of stakeholders. Stakeholder theory focuses on managerial decision-making where all interests have intrinsic value. All interest groups are treated equally.
4. The resource dependency theory – the theory ensures that resources are available and examines the functions of directors. The directors facilitate the availability of resources and improve organizational effectiveness, skills, and access to essential stakeholders. Directors leverage external connections in pooling resources relevant to capacity building.

The application of the pillars of good governance creates a conducive environment for corporate growth, while theories account for quality and efficiency in business operations. Companies must seek good corporate practices to achieve their long-term potential.

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Board committees draw their mandates from board charters and committee terms of reference. The guiding principle ensures accountability to the board while improving the board’s efficiency on trending agendas. The number of committees required is determined by the size of the organization. The committee plays an important role in leveraging the directors’ experience, skills, and talents in their respective fields.

To ensure continued improvement, committee members must be committed and passionate about research. As the committee’s ability to address emerging trends is affected by numerous factors, members must embrace a collaborative mindset in facilitating the best board decision. Boards leverage different types of committees, which are:

1. Standing Committee: The committee is key to the operational and policy-making processes of the board. It scrutinized the operations of the organization and set priorities to facilitate the board’s making informed decisions.
2. Task force or Ad hoc Committee: the committee is set up to address a board challenge on a case-by-case basis. Its mandate is limited to specific challenges, and it is dissolved soon after concluding its findings.
3. Advisory Committee: This type of committee is called upon for technical support. As a board advisor, a group of experts is engaged. Good governance practices recommend its composition be made up of former board members with a wealth of knowledge on the matter.
4. Steering Committee: The committee is critical when executing a strategic project. The committee ensures all stakeholders have room in the project and reports directly to the board.

Boards are obliged to determine the number of committees that ensure their optimal functioning. A clear term of reference facilitates additional committees without abdicating a board member’s responsibilities, which is acceptable in the organization’s best interest. Good governance practices recommend that committees be guided by these principles:

1. Establish committees on apparent issues that are complex and/or numerous to handle at the board level.
2. Do not supplant a director’s responsibility
3. Utilize board members’ expertise, time, and commitment
4. Committees meet regularly before board meetings
5. Ensure board members understand the various committee mandates; at least two directors and one staff member are members of each committee.
6. The chief executive should be an ex-official on the board and committees

Board committees act independently in fulfilling their mandate. Committees play a central role in ensuring the board realizes its mandate effectively and in a timely manner. In conclusion, the committee’s role makes the difference in successful board functions and organizational progress.

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Institutional investors influence corporate governance in a significant way through their voting rights. Financial muscle has facilitated the ability of institutions to hold a significant portion of a company`s shares. Shareholding powers are utilized in meetings towards shaping the corporate direction through the board’s advisory functions. By voting in favour of certain proposals or candidates, institutional investors can promote good corporate governance practices and hold the board and management to account.

The board is aligned in meeting shareholder objectives through experienced advisor services. Institutional investors engage in dialogue with company management and board members to influence corporate governance practices. Shareholder and board discussions evolve around the corporate accountability framework, board compensation, and sustainability initiatives. By engaging in constructive dialogue, institutional investors can encourage the adoption of policies and practices that improve corporate ethics and performance standards.

Additional, institutional investors have a role in controlling the environmental and social fabric. Investors have the power to divest from companies that engage in unethical or unsustainable practices. By withdrawing their investments, they can send a clear message about their intolerance for poor governance practices.

In conclusion, institutional investors play a role in upholding good governance practices. Their financial power creates an apex for ensuring they invest in sound corporate structures and sustainable organizations that create social impact.

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The Companies Act, 2015 allows companies to accept surrendered shares, in accordance with their Articles of Association, for failure by any shareholder to pay any outstanding sums regarding those shares. Once shares are surrendered, the company that issued them has a duty to cancel them.

Cancellation of those shares can lead to a reduction in the company’s share capital by the nominal value of those cancelled shares. Furthermore, if the company’s share capital is reduced below the authorised minimum for public limited companies (i.e., KES 6,750,0000), such a company must convert to a private limited company and then apply to the Registrar of Companies for the registration of its conversion.

In order to avoid the reduction of share capital, the Companies Act does not prevent the directors of a company from transferring the surrendered shares to new buyers.

The Companies (General) Regulations, 2015 provide a model Articles of Association that can be adopted by prospective public companies limited by shares. The articles state that a member of a company may surrender shares in a company in the following scenarios, namely:

1. Where a notice of the intended forfeiture of those shares has been issued by the company directors for failure to pay a specified amount regarding them;
2. Where the directors may forfeit those shares; or
3. Where the shares have already been forfeited.

The effect of surrendering shares, as per the model Articles of Association, is that all interests, claims, rights and liabilities regarding those shares are extinguished. The person surrendering those shares ceases to become a member of the company with respect to those shares and is also required to surrender the share certificates for the surrendered shares for cancellation.

However, that person still remains liable for any outstanding sums at the date of surrender including any interests that accrued before or after the date of surrender.

The Companies Act does not prevent members from voluntarily surrendering their fully paid up shares as the Act allows companies to acquire their own shares upon paying the full amount of consideration for those shares. In short, a member can voluntarily surrender their shares to the company upon receiving the capital he invested into the company as consideration.

Any surrender of shares that would lead to the reduction of a company’s share capital will first need the passing of a special resolution by company members. The company will also have to comply with all the requirements that pertain to the reduction of share capital as seen in PART XV of the Companies Act.

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