THE OPEN UNIVERSITY OF KENYA

Programme title Postgraduate Diploma in Leadership and Accountability

Course title PLA 717: Corporate Governance

Learning Module number 4 of 11

Learning module title Principles of Corporate Governance

Module Developer Dr. Jane Chepngeno Sang

Module duration in hours 8 hours

Instructional Hour Equivalent 4 hours

(Divide duration by 2)

Reviewed by

Vision The innovative university for inclusive prosperity

Audience description Minimum university entrance for this course is learners

possessing a bachelor’s degree from an institution recognized
by Senate or any other qualifications that may be determined
by senate recognizing prior learning leading to equivalents of
the identified criteria, experience and skills of learners.

Applicants are expected to attach relevant documents as proof

of their eligibility.

Instructions to learners Welcome on board to an in-depth understanding of

Principles of corporate governance.

By following herein instructions, you can successfully progress

through the module in a timely manner and demonstrate your
understanding of the course material. You are encouraged to
make an effort to fully engage with the course material, whether
that means taking detailed notes, participating in online
discussions, or seeking out additional resources to supplement
your learning.

Complete assignments and quizzes as scheduled noting to

research well on the same. Each assignment and quiz is an
opportunity for you to demonstrate your understanding of the
module and mastery of the course.
 Seek help when needed on any topic or assignment in respect
to any module from university facilitator or at the university
available forums.

Once again welcome on board!

Learning module description This module will cover aspects of principles of Corporate
governance. Corporate Governance is concerned with the
establishment of an appropriate legal, economic and
institutional environment that would facilitate and allow
business enterprises to grow, thrive and survive as institutions
for maximizing shareholder value while being conscious of and
providing for the well-being of all other stakeholders and
society.

Good Corporate Governance requires that the State puts in

place and maintains an enabling environment in which efficient
and well-managed companies can thrive. It is therefore
expected that companies will continue to play their part in
encouraging dialogue between the public and private sectors in
promoting good public governance and an enabling business
environment.

The key topics in the module will be; Accountability, fairness,

transparency, independence and reputations.
Module objectives: The module will enable learning about;

1. Definition of principles of corporate governance.

2. Identification of the principles of corporate governance.
3. Corporate governance issues in leadership
4. Importance and benefits of corporate governance in
strategic leadership.

Module learning outcomes: By the end of the module, the learner should be able to;

1. Define principles of corporate governance in

leadership.
2. Describe key principle of corporate governance.
3. Employ principles of corporate governance for
efficiency
4. Formulate principles of corporate governance for
 effective internal controls.

Planned Learning Resources Video lectures, online textbooks, interactive simulations, online
discussion forums, practice questions, quizzes and tests, wikis,
webinars, YouTube videos

ACTIVITY 1: INTRODUCTION

VIDEO 1: Pre-recorded Good corporate governance dictates that the Board of Directors
lecture on Historical governs the corporation in a way that maximizes shareholder
background of corporate value and in the best interest of society. It is neither in the long-
governance. term interest of the enterprise or society to short-change
customers, exploit labour, pollute the environment nor engage
LEARNING OUTCOME 1: in corrupt practices.
Description of chronological
event of corporate governance
Accountability ensures that management is accountable to the
In a global perspectives board and the board is accountable to the shareholders.

Fairness means impartiality or lack of bias. It refers merely to

the way companies and their officers treat stakeholders with
some disabilities such as minority shareholders, employees,
foreign investors, as against the dominant players such as
majority shareholders. Fairness provide effective redress for
violations.

Transparency ensures that timely accurate disclosure of all

material matters, including the financial situation, performance,
ownership and corporate governance is made.

Financial statements are prepared in accordance with

international financial reporting standards (IFRS). The
company’s registry filings are up to date. High quality annual
reports are published and Web based disclosure is in place.

Independence ensures that procedures and structures are in

place so as to minimize or avoid conflicts of interest.
The Board has independent non-executive Board members and
advisors, i.e. those “who are free in both reality and
appearance from a material relationship, which materially
affects or interferes with one’s capacity to act independently

Sustainability bear in mind that no generally accepted

definition exists. But most commonly used definition is from the
Brundtland’s Report from the World Commission on
Environment and Development 1987 which defines
sustainability as: “Development that meets the needs of the
present without compromising the ability of future generations
to meet their own needs”.

Openness is the willingness to give all stakeholders

information, except that which is commercially sensitive.

Information about current developments in the company’s

affairs must be provided timeously through newspapers, radio
and television, websites, etc

Reputation is being the character generally ascribed to a

company or organizational entity. It may be good or bad.

For a listed company, a good reputation is a key asset because

it helps to enhance the shareholder value. Companies with high
reputation have corresponding high share prices. A strong
share price makes the raising of extra capital for existing or new
investments easy. Damage to the reputation of a company is
quickly reflected by a drop in its share price.

Stakeholder interface is defined shareholder rights, It entails

recognition of the rights of all those with an interest in the entity
and its operations, e.g. employees, the community, suppliers,
customers, etc. Encourages cooperation between the company
and its stakeholders in creating wealth, jobs and economic
stability. Ensures that minority shareholder rights are formalized
and protected. Ensures that well organized shareholder
meetings are conducted. Ensures that policy on related party
transactions is in place. Ensures that policy on extra-ordinary
transactions involving the entity is in place.

Also ensures that clearly defined and explicit dividend policies

are in place.

Good Board Practices entails clear definition of roles and

authorities of stakeholders. That duties and responsibilities of
the directors are understood. That the Board is well structured
and has appropriate composition and mix of skills. Appropriate
board procedures are in place. Director remuneration in line
with best practice exists. Board self-evaluation and training is
conducted.

Business ethics is established values and principles the entity

uses are in place to inform and conduct its activities. That
business ethics permeates a company’s culture and drives its
strategy, business goals, policies and activities. The formulation
of the entity’s business ethics code.

Control Environment Entails Internal control procedures must

be in place. Risk management framework must be present.

Disaster recovery systems must be in place. Media

management techniques must be understood. Business
continuity procedures must be in place. Independent external
auditors must be appointed to audit the entity’s financial
statements. An independent audit committee must be
established. Internal audit function must be appreciated and the
internal auditor must be appointed. Management information
systems must be established. Compliance framework must be
established.

Board Commitment – ensures that: The Board discusses

corporate governance issues and creates a corporate
governance committee with a corporate governance champion.

A corporate governance improvement plan has been created

for the entity. Appropriate resources are committed to corporate
governance initiatives. Corporate governance policies and
procedures have been formalized and distributed to relevant
staff. A corporate governance code has been developed.

PRINCIPLES OF GOOD CORPORATE GOVERNANCE: A

SUMMARY

The following is a summary of the principles of good corporate

governance:

Authority and Duties of Members [or Shareholders]

Members or shareholders [as owners] of the corporation shall

jointly and severally protect, preserve and actively exercise the
supreme authority of the corporation in general meetings. They
have a duty, jointly and severally, to exercise that supreme
authority of the corporation to:

 Ensure that only competent and reliable persons, who

can add value, are elected or appointed to the Board of
Directors;
 Ensure that the Board is constantly held accountable
and responsible for the efficient and effective
governance of the corporation so as to achieve
corporate objectives, prosperity and sustainability.
 Change the composition of a Board that does not
perform to expectation or in accordance with the
mandate of the corporation.

Leadership:

Every corporation should be headed by an effective Board that

should exercise leadership, enterprise, integrity and judgment
in directing the corporation so as to achieve continuing
prosperity and to act in the best interest of the enterprise in a
manner based on transparency, accountability and
responsibility.

Appointments to the Board

Appointments to the Board should, through a managed and

effective process, ensure that a balanced mix of proficient
individuals is made and that each of those appointed is able to
add value and bring independent judgment to bear on the
decision-making process.

Strategy and Values

The Board of Directors should determine the purpose and

values of the corporation, determine the strategy to achieve that
purpose and implement its values in order to ensure that the
corporation survives and thrives and that procedures and
values that protect the assets and reputation of the corporation
are put in place.

Structure and Organization

The Board should ensure that a proper management structure

[organization, systems and people] is in place and make sure
that the structure functions to maintain corporate integrity,
reputation and responsibility.

Corporate Performance, Viability and Financial

Sustainability

The Board should monitor and evaluate the implementation of

strategies, policies and management performance criteria and
the plans of the corporation. In addition, the Board should
constantly review the viability and financial sustainability of the
enterprise and must do so at least once every year.

Corporate Compliance the Board should ensure that the

corporation complies with all relevant laws, regulations,
governance practices, accounting and auditing standards.

Corporate Communication

The Board should ensure that the corporation communicates

with all its stakeholders effectively.
Accountability to Members

The Board should serve the legitimate interests of all members

and account to them fully.

Responsibility to Stakeholders

The Board should identify the corporation’s internal and

external stakeholders; agree on a policy or policies determining
how the corporation should relate to, and with them, in creating
wealth, jobs and the sustainability of a financially sound
corporation while ensuring that the rights of stakeholders
[whether established by law or custom] are respected,
recognized and protected.

Balance of Powers

The Board should ensure that no one person or group of

persons has unfettered power and that there is an appropriate
balance of power on the Board so that it can exercise objective
and independent judgment.

Internal Control Procedures

The Board should regularly review systems, processes and

procedures to ensure the effectiveness of its internal systems of
control so that its decision-making capability and the accuracy
of its reporting and financial results are maintained at the
highest level at all times.

Assessment of Performance of the Board of Directors

The Board should regularly assess its performance and

effectiveness as a whole and that of individual members,
including the Chief Executive Officer. A summary of the major
findings together with a statement confirming that the Board
has carried out a self-assessment exercise should be made to
the annual general meeting.
Induction, Development and Strengthening of Skills of
Board Members

The Board should recognize the need for new members to be

inducted into their roles and for all Board members to develop
and strengthen their governance skills in light of technological
developments, changing corporate environment and other
variables. The Board should accordingly organize for the
systematic induction and continuous development of its
members.

Appointment and Development of Executive Management

The Board should appoint the Chief Executive Officer and

participate in the appointment of all senior management, ensure
motivation and protection of intellectual capital crucial to the
corporation, ensure that there is appropriate and adequate
training for management and other employees and put in place
a succession plan for senior management.

Adoption of Technology and Skills

The Board must recognize that to survive and thrive it has to

ensure that the technology, skills and systems used in the
corporation are adequate to run the corporation and that the
corporation constantly reviews and adopts the same in order to
remain competitive.

Management of Corporate Risk

The Board must identify key risk areas and key performance
indicators of the corporation’s business and constantly monitor
these factors.

Corporate Culture

The Board should define, promote and protect the corporate

ethos, ethics and beliefs on which the corporation premises its
policies, actions and behaviour in its relationships with all who
deal with it.

Social and Environmental Responsibility

The Board should recognize that it is in the enlightened self-

interest of the corporation to operate within the mandate
entrusted to it by society and shoulder its social responsibility.
For this reason, a corporation does not fulfill its social
responsibility by short-changing beneficiaries or customers,
exploiting its labour, polluting the environment, failing to
conserve resources, neglecting the needs of the local
community, evading taxation or engaging in other anti-social
practices.

Recognition and Utilization of Professional

Skills and Competencies the Board should recognize and

encourage professional development and, both collectively and
individually, have the right to consult the corporation’s
professional advisers and, where necessary, seek independent
professional advice at the corporation’s expense in the
furtherance of their duties as directors. [This is in addition to
and not a substitute to their personal duty to acquire
competence, training and information that would help them
make informed, independent and astute decisions on issues
relevant to the corporation.] Recognition and Protection of
Members’ Rights and Obligations Members of the corporation
have a right to receive any information that would materially
affect their membership, to participate in any meeting of
members and to participate in the election of directors and be
facilitated to fully participate in all other resolutions of interest to
them as members.

The attention of the Boards of Directors is increasingly being

drawn to the need to ensure that:

 The governance framework takes account of gender

and children’s rights and the special needs of disabled
and/or handicapped citizens.
 The corporation promotes the interests, rights and
welfare of host communities.
 The corporation protects and preserves the
 environment.

ACTIVITY 2: READING Read the following texts/ journal and attempt the questions
which follow:
READING MATERIAL 1

1. Chttps://www.oecd.org/daf/ca/Corporate-Governance-
(
Principles-ENG.pdf
2. Addink, H. (2019). Good governance: Concept and
context. Oxford University Press.
3. Pomeranz, E. F., & Stedman, R. C. (2020). Measuring
good governance: piloting an instrument for evaluating
good governance principles. Journal of Environmental
Policy & Planning, 22(3), 428-440.

VIDEO 2 (You Tube, please Click on this link to watch a video with the history of Corporate
include link) governance by Consult Kano.

Video Link: https://youtu.be/RFFpv49gWxU

NOTE: The video is not under the CC license.

ACTIVITY 3: Comprehension Questions are based on the lecture and reading material.
questions:
1. Explain in your own words the principle of corporate
governance

2. Differentiate fairness from transparency.

3.Explain implementation of good governance.

4.State characteristics of good governance.

LEARNING OUTCOME 2: Click Links to access video that happen;

Conceptual knowledge
 https://youtu.be/RFFpv49gWxU

ACTIVITY 4: you-tube Videos Poor governance by Ezra Mecisamerite

on governance.

https://youtu.be/V0zemSfMWSQ

by BrownDogconsulti

CASE 1: 1.Demonstrate how CEO duality causes poor governance.

2. There can be hunger that looks devastating in a country.

Discuss what could have goon wrong in a government to
overlook such menace.

ACTIVITY 5: READING 1. Video link: https://youtu.be/fsSIoGaF-8A by Ambrose

MATERIAL Business
2. Okeyo, W. (2017). Student unrest in public universities
in Kenya: The nexus between principles of governance
and student leadership.
3. Setyahadi, R. R., & Narsa, I. (2020). Corporate
governance and sustainability in Indonesia. The Journal
of Asian Finance, Economics and Business, 7(12), 885-
894.

ACTIVITY 6: ONLINE Chat on the following:

DISCUSSION
1. Why do Board fail to govern institution?
2. Is there relation between principle of governance and
effective leadership?
3. Does principle of governance adherence lead to
sustainability of organization? Explain your answer.

LEARNING OUTCOME 3: Show video which displays practical use of knowledge acquired
PRACTICAL SKILLS

VIDEO 3:
https://youtu.be/2P3kLlUxBPE
 Dan Croiter

.
Leadership principle at Microsoft. Analyze the content noting to
of governance. Demonstrate its applicability or leader
adherence of principle p

Demonstrate how current module is inspiring you and making

you take a step backward to thrive in your career.
ACTIVITY 7: Learner practice
sessions

Learner practices the learnt

skills. Learner to be given task
to demonstrate mastery of the
skill.

ASSESSMENT OF Learner records practiced skill and uploads video on E-Portfolio

PRACTICAL SKILL:
OR

Learner engages in original creative /design activity to

demonstrate practical application of knowledge.

Assessment of tasks described.

LEARNING OUTCOME 4: Entrenched Leaders and the Abuse of Term Limits

KEY/TRANSFERABLE In April 2015, Burundian President Pierre Nkurunziza became
SKILLS the latest African leader to attempt to extend his tenure beyond
the constitutionally-mandated limit, setting off violent protests
across the country. With a number of countries preparing for
elections in the coming year, there are fears that other
Provide reading material
countries will face similar unrest as entrenched leaders seek to
which emphasizes
circumvent or disregard term limits. Rwandan President Paul
reinforcement of topic learnt.
Kagame and Congolese President Joseph Kabila have already
How to communicate or share
shown signs they are considering ways to extend their terms.
acquired knowledge
Recently, the Economic Community of West African States
(ECOWAS) considered a declaration that would limit
presidential terms to two, but the declaration was tabled due to
pressure from Togo and The Gambia.
 Recommendation: The AU should consider passing a
declaration similar to the one debated by ECOWAS that would
set clear expectations for respecting term limits. AU leaders
should also publically condemn any attempts to change,
circumvent or violate established term limits, just as they do
when military coups take place in the region.

ACTIVITY 8 Share an audio on mastery of the module?

Learner to engage in

communication, collaboration, https://youtu.be/3RmKW87_KAo?t=44

problem solving, research,
leadership activities.
Examples, preparation of a club Matters website example share yours too…
poster to communicate new
knowledge acquired, written
essay, debate, audio
recording …etc. Share a video on how principles of governance are adhere ro in
your place of work.

QUIZZ: 1. Which of the following is not one of the underlying

principles of the corporate governance combined
code of practice?
a) Accountability
b) Openness
c) Acceptability
d) Integrity

2. Which of the following characteristics is not of excellent

governance?
a) Accountability,
b) Transparency
c) Rule of Law
d) Red Tapism

3. The State is everywhere; it hardly leaves a void.” This

declaration defines the terms
a) Welfare State
b) Communist State
c) Democratic State
d) Police State
 4. What is the difference between a code of ethics and a
code of conduct?
a) A code of ethics sets guidelines for ethical behavior,
while a code of conduct sets guidelines for legal
compliance
b) A code of ethics applies to the board of directors,
while a code of conduct applies to all employees
c) A code of conduct is more detailed and specific than
a code of ethics
d) A code of conduct is legally binding, while a code of
ethics is not

TAKE HOME MESSAGE Learner to state the take home message from their learning
experience.

Reference list 1. Solomon, J. (2020). Corporate governance and

accountability. John Wiley & Sons.
2. Leblanc, R. (2020). The Handbook of Board
Governance: An Introduction and Overview. The

Guide for Public, Private and Not‐for‐Profit Board

Handbook of Board Governance: A Comprehensive

Members, 1-25.
3. Bloomfield, S. (2020). Absolute Essentials of Corporate
Governance. Routledge.
4. Mastrodascio, M. (2021). Corporate Governance
Models: A Critical Assessment. Routledge.
5. OECD (2015), G20/OECD Principles of Corporate
Governance, OECD Publishing, Paris.
6. Cheema, M. U., Munir, R., & Su, S. (2021). Corporate
governance and whistleblowing: corporate culture and
employee behaviour. Routledge.
7. Verbin, I. (2020). Corporate responsibility in the digital
age. Routledge.
8. Joecks, J., Pull, K., & Scharfenkamp, K. (2023). Women
directors, board attendance, and corporate financial
performance. Corporate Governance: An International
Review.
9. Larcker, David F and Brian Tayan (2016). Corporate
Governance Matters: A Closer Look at Organisational
Choices and Their Consequences, Second Edition, New
Jersey: Pearson Education.
10. Leblanc, R. (2016). Director independence,
 competency, and behavior. The Handbook of Board

Private and Not‐for‐Profit Board Members, 159-192.

Governance: A Comprehensive Guide for Public,

11. Tabassum, N., & Singh, S. (2020). Corporate

Governance and Organisational Performance: The
Impact of Board Structure. Springer Nature.
12. Zhao, A. T., & Xiao, S.(2023). A matter of time: The
influence of underperformance duration on corporate
misconduct. Corporate Governance: An International
Review.