1. Board and Strategic Leadership Seminar at The Sarova Panafric Hotel, Naırobı, July 9, 2015 CS Eric Opiyo

2. Governance Audits-Outline Introduction Justification for board evaluation Tools and Procedures for evaluating board of directors Challenges associated with Board evaluation

3. What is Corporate Governance? Abor (2007) defines corporate governance as the system by which companies are directed and controlled. It also refers to as the way in which corporations are handled by corporate boards and officers. Corporate governance has, in more recent years, become one of the most commonly used terms in the modern corporation. It is the system by which companies are directed and controlled. It involves regulatory and market mechanisms, and the roles and relationships between a company’s management, its board, its shareholders and other stakeholders, and the goals for which the corporation is governed.

4. Corporate Governance The way management and control are organized affects the company‘s performance and it’s long run competitiveness. It determines the conditions for access to capital markets and the degree of investors’ confidence (Brownbridge, 2007). It is based on four primary pillars of fairness, accountability, responsibility and transparency. Good corporate governance dictates that the Board of Directors governs the corporation in a way that maximizes shareholder value and in the best interest of society. It is neither in the long-term interest of the enterprise or society to short-change customers, exploit labour, pollute the environment or engage in corrupt practices.

5. Corporate Governance The area of corporate governance has drawn renewed interests especially for modern corporations, particularly in relation to accountability. This is especially so after the collapse of a number of large corporations during 2001- 2002, most of which involved accounting fraud. Most emerging markets have in the past been seen to strive to put in place frameworks to ensure a good measure of corporate governance in their operations. This is in realization that the firm’s sustainability is dependent on implementing good governance practices. Towards this end, most corporates have embraced governance audits.

6. Governance Audit Governance Audit is the process of checking compliance and conformity on the governance aspects of a company or firm.

7. Benefits of Governance audit Governance audit identifies problems at an early stage before irreplaceable harm befalls a company. It helps to ensure that a board receives the essential information needed to make a critical business decisions. Investing in a governance audit arms a board with a valuable tool to maximize its contribution to corporate success

8. CHAMPIONS OF GOVERNANCE (COG) AWARD This is an award held annually to recognize organizations and individuals who exhibit high standards of excellence in Governance practice. The Award is aimed at promoting practices in good governance in the following ways: Recognition of good governance practices in public sector and private sector entities. Recognition of innovation in organizations that support good governance practices. Encouraging organizations to focus on enhancement of good governance practices.

9. Board Governance Framework

10. COG –Evaluation Tools Main Champions of Governance Tool Chairman of the Year Tool COG CEO of the Year Tool Company Secretary of the Year Tool

11. Main COG Tool This Tool covers the following COG parameters: The Board of Directors, Ethical Leadership and Corporate Citizenship, Accountability, Risk Management and Internal Control. Transparency and disclosure, Shareholders rights and Obligations, Stakeholder relationship, Compliance with Laws and Regulations. Sustainability and Performance Management.

12. Chairman as Leader of the Board Primary role Provide overall leadership to the board Function Principal link between board and CEO/management team Responsible for board agenda and work plan Work with board committee chairmen Involved in selection and induction of new directors Counsel individual directors on their performance Participate in discussions with investors, key stakeholders

13. Chairman’s Tool Some of the key areas that the tool focusses on is whether: The chairman demonstrates effective leadership of the board? The chair manages relationships and communications with shareholders? The chair works with the CEO to develop an appropriate schedule of Board meetings? The chair has led the Board in all deliberations involving the CEO's employment? including hiring, contract negotiations, performance evaluations, and dismissal? The chair has been effective in delegating tasks amongst Board of Directors? The Chair has in place succession plans for the senior management level?

14. Chairman’s Tool The chair has regularly encouraged the Board members, and external consultants to evaluate the performance of the Chair, the Board members, the Board and the CEO? The chair has ensured that Board members receive adequate and appropriate capacity building, exchange visits and skills upgrade every year? The chair manages the board meeting well and enable board members to raise issues and concerns? The chair allow and encourage directors to participate fully in board discussions? The chair ensures that the company secretary being used appropriately and to maximum value?

15. CEO as Leader of the Company Primary role Lead the management team, reporting to the board Function Work closely with board chairman Responsible for performance of management team Formulate corporate strategy, annual business plan and budget Responsible for corporate and financial objectives Formulate major corporate policies Ensure continuous improvement in services and products Manage relations with investors, major customers, regulators Responsible for company’s long-term sustainability

16. CEO’s Tool Commitment to vision, strategy, excellence, innovation, sustainability Internal democracy (internal customers satisfaction) Integrity and leadership Relationship between CEO and governance –code of conduct /ethics and monitoring it and ensuring compliance at organization level Interpersonal relations with chair of board Reporting/reports to the board, frequency, accuracy strategic board papers Risk management

17. CEO’s Tool Driving the agenda of environment, social responsibility and community sustainable co-existence Personal life as a model of moral and ethical uprightness Developed/develops others to be champions of governance Financial prudence and ROI Peer recognition as leader of governance

18. Corporate Secretary-role Resolves organizational matters for board meetings Key link between company and non-executive directors Works closely with Chairman and CEO on board agenda Arranges the annual shareholders meeting and other special meetings Ensures compliance with the board procedures Takes the minutes of board meetings and Supervises and co-ordinates board papers & presentations Oversees, conducts induction trainings for newly elected directors Explains the procedural requirements of laws, the charter, and by–laws of the company

19. Corporate Secretary Tool The Company secretary tool focusses on five main areas namely: Tasks and responsibilities Beliefs, values And vision Work dynamics Intra-departmental shared roles Life outside the office

20. Chairman’s tool Some of the key areas that the tool focusses on is whether: The chairman demonstrates effective leadership of the board? The chair manages relationships and communications with shareholders? The chair works with the CEO to develop an appropriate schedule of Board meetings? The chair has led the Board in all deliberations involving the CEO's employment? including hiring, contract negotiations, performance evaluations, and dismissal? The chair has been effective in delegating tasks amongst Board of Directors? The Chair has in place succession plans for the senior management level?

21. Chairman’s tool The chair has regularly encouraged the Board members, and external consultants to evaluate the performance of the Chair, the Board members, the Board and the CEO? The chair has ensured that Board members receive adequate and appropriate capacity building, exchange visits and skills upgrade every year? The chair manages the board meeting well and enable board members to raise issues and concerns? The chair allow and encourage directors to participate fully in board discussions? The chair ensures that the company secretary being used appropriately and to maximum value?

22. Audit Checklist T he Constitution Strategic Plan Vision 2030 Service Charter Board Charter Leadership and Integrity Act & Company’s Act Risk Management Framework Corporate Governance Guidelines Code of Ethics Minute book Policies Code of corporate governance Memorandum of association and Articles of association

23. Audit Checklist Other Appropriate Instruments and Documents Performance Contract Job description; Contract of employment Annual Budget Financial Report Procurement Plans State Corporation Act Public Procurement and Disposal Act Relevant Legal Instruments Communication Strategy; Succession policy; HR Policy; Procurement policy; Staff Establishment Certificate of incorporation Audit Plan

24. Potential Risks

25. Awards The Awarding the BEST, 1st and 2nd Runners up positions as follows: Statutory Bodies Award Local Authorities Award Co-operative Sector Award Pension Schemes Finance and investments Sector Award Insurance Sector Agricultural Sector Award Commercial and Services Sector Award Industrial and Allied Sector Award Small and Medium Enterprises Award Company Secretary of the Year Award COG CEO Award COG Chairman Award Best Governed Company overall Award

26. Conclusion Overall, it cannot be stressed enough that it is essential that the purpose of governance audits is to help the board do what it wants i.e. checking compliance and conformity on the governance aspects of a company. It is underscored that all corporates incorporate governance audits as an indispensable activity in their budgets and plans for great results and growth.

27. Thank you