THE RELATIONSHIP BETWEEN GOVERNANCE FRAME WORK AND THE

PERFORMANCE OF NSSF UGANDA

BY

ALEXANDER HELLY OPIRU

2019-M102-20069

A PROPOSAL PRESENTED TO THE HIGHER DEGRESS DEPARTMENT IN

PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF A
MASTER OF BUSINESS ADMINISTRATION DEGREE OF UGANDA MARTRYS
UNIVERSITY.

Supervisor

Prof Simeon Wanyama

Mr. Felix Idraku

Submitted

MARCH 2021
Table of Contents
CHAPTER ONE..........................................................................................................................................4
INTRODUCTION.......................................................................................................................................4
1.0 Introduction.......................................................................................................................................4
1.1 Background to the Study....................................................................................................................5
1.1.1 Historical Background................................................................................................................5
1.1.2 Theoretical Background..............................................................................................................7
1.1.3 Conceptual Background..............................................................................................................8
1.1.4 Contextual Background..............................................................................................................9
1.2 Statement of the Problem.................................................................................................................10
1.3 General Objectives of the Study......................................................................................................11
 1.3.1 Specific Research Objectives....................................................................................................11
1.4 Research Questions..........................................................................................................................11
1.5 Scope of the Study...........................................................................................................................11
1.5.1 Geographical Scope..................................................................................................................11
1.5.2 Subject Scope...........................................................................................................................11
1.5.3 Time Scope...............................................................................................................................11
1.7 Justification of the study..................................................................................................................12
1.8 Definition of Key terms...................................................................................................................12
Figure 1: Conceptual Framework..........................................................................................................12
1.9 Conclusion.......................................................................................................................................14
CHAPTER TWO.......................................................................................................................................14
LITERATURE REVIEW..........................................................................................................................14
2.0 Introduction.....................................................................................................................................14
2.1 Theoretical Review..........................................................................................................................15
2.2 Actual Literature..............................................................................................................................17
2.2.1 Board of directors independence and performance of NSSF........................................................17
2.2.2 Legal Framework and Performance of NSSF...............................................................................19
2.2.3 Accountability Systems and Performance of NSSF......................................................................21
2.4 Conclusion.......................................................................................................................................23
CHAPTER THREE...................................................................................................................................24
RESEARCH METHODOLOGY..............................................................................................................24
3.0 Introduction.....................................................................................................................................24
3.1 Research Design..............................................................................................................................24
3.2 Area of Study...................................................................................................................................24
3.3 Study Population.............................................................................................................................24
3.4 Sampling Procedures.......................................................................................................................24
3.4.1 Sampling size................................................................................................................................25
3.4.2 Sampling Techniques....................................................................................................................25
3.5 Data Sources....................................................................................................................................25
3.6 Data Collection Method and Instruments.........................................................................................26
3.6.1 Questionnaires..............................................................................................................................26
3.6.2 Interviews.....................................................................................................................................26
3.7 Quality Control................................................................................................................................26
3.7.1 Validity.........................................................................................................................................26
3.7.2 Reliability.....................................................................................................................................26
3.8 Measuring of Variables....................................................................................................................27
3.9 Data Processing and Analysis..........................................................................................................27
3.9.1. Qualitative Analysis.....................................................................................................................27
3.9.2 Quantitative Analysis....................................................................................................................27
3.10 Ethical Considerations...................................................................................................................27
3.11 Limitations.....................................................................................................................................28
3.11 Conclusion.....................................................................................................................................28
References.............................................................................................................................................28
 CHAPTER ONE
GENERAL INTRODUCTION
1.0 Introduction
This study is about examining the relationship between governance framework and performance
of National Social Securities Fund (NSSF) in Uganda. Irrespective of the type and nature of
organizations their performance is greatly dependent on the effectiveness of governance
mechanisms. Thus in this study, governance framework is the independent and performance of
NSSF is a dependent variable. Governance framework is thus studied in terms of mainly three int
governance mechanisms of accountability systems, legal framework, and board of director’s
independence. Performance of NSSF is thus measured in terms of impacts of the fund which are
sustainability, coverage, adequacy and security. Specifically this chapter covers the background
to the study, statement of the problem, general objectives of the study, research objectives,
research questions, and scope of the study, conceptual framework, and justification of the study,
significance of the study, operational definition of key terms and conclusion of the chapter.
1.1 Background to the Study
Under this section the researcher presents the historical background, theoretical background,
conceptual background and contextual background of the study.
1.1.1 Historical Background
Globally the history of pension fund performance is as old as Pension Fund itself. The 1 st formal
and documented fund similar to the modern pension fund is traced in the early 16 th century in
Great Britain, when Duke Ernest the Pious of Gotha decreed the creation of a fund which aimed
at supporting widows of the clergymen. In 1662, a similar fund was again created to support
widows of the duchy and this, the widows of the teachers were the beneficiaries (CEPAL,
2007).These two funds incentives are seen as the first examples of today’s pension funds. By the
late 18th century in United States of America the Board of Ministerial Relief, serving pastors in
dire financial need was initiated and a fund for that purpose initiated. In the 17 th and 18th
centuries, many European countries started to embrace the pension system inform of annuities
(Filgueira, & Manzi, 2017), mainly given as compensation for the loss of spouses, loss of limbs
or in return for acts of merit, this was either military service or civil service.

It was indeed common for especially the innovators, tradesmen or even politicians to be given
annuities in the 18th century for their contributions to a nation. These were usually given directly
by royal treasuries top the beneficiaries. 1889 saw the legislation that was applicable to all
workers. Otto von Bismarck in Germany was behind the plan called “The Old Age and Disability
Bill”. This made Germany to be the first European country to have fully-fledged pensions
systems for its workers who were aged seventy (70) years and above (Gianasso, 2018). This was
followed by the “Old Age Pension Act 1908” of Great Britain that gave the pensioner 5 shillings
a week (Gianasso, 2018). The Pension schemes became popular in the United States
during World War II, when wage freezes prohibited outright increases in workers' pay,
(Gianasso, 2018).

In Africa, prior to the modern pension fund which is a replica of the western colonial master’s
responsibility for the old was a communal (Casey and Dostal, 2007). Every old person
irrespective of status was catered for by the family and community in whom they stayed. In
modern times, pension schemes on the continent is not a thing of the very past like it is the case
with the western world. For example, the Egyptian pension scheme is traced in Egypt which
dates back to 1975 with the passing of the Social Insurance Law No. 79 and has, over time, been
reformed in order to increase the level and extent of coverage. On the continent South Africa has
the largest pension fund with more than 1.2 million active members, in excess of 450 000
pensioners and beneficiaries, and assets worth more than R1. 61 trillion (Stewart and Yermo,
2009). Its origin still is traced to the colonial time and the apartheid era that ended in the late 19 th
century.

In East Africa region the history of pension Funds is not any different from the rest of African
states, as it was also established during the colonial and post-colonial era. Kenya one of the
biggest economy in the region (Impavido, Musalem and Tressel, 2003). The payment of pensions
and other allied benefits to Civil Servants in this country was started by the colonial Government
firstly for Europeans in 1927 and for Non-Europeans from 1932. The Pensions Act (Cap. 189),
of the laws of Kenya, came into operation in its present form 1st January, 1946 (Casey and
Dostal, 2007). In Tanzania, the NSSF was founded in 1997 as the successor to the defunct
National Provident Fund (NPF). The NSSF covers all other employers in the country and
participation for both employers and employees is compulsory Tanzania NSSF is both a pension
fund and a provident fund (Kakwani and Subbarao, 2005).
In Uganda, the National Social Security Fund (NSSF) was established by an Act of Parliament
(1985) to provide for its membership, payment of contributions to, and payment of benefits out
of the Fund. NSSF is a provident fund (pays out contributions in a lump sum). It covers all
employees in the private sector including Non-Governmental Organizations that are not covered
by the Government's pension scheme. It is a scheme instituted for the protection of employees
against the uncertainties of social and economic life. The National Social Security Fund (NSSF)
is a National Saving Scheme mandated by Government through the National Social Security
Fund Act, Cap 222 (Laws of Uganda) to provide social security services to employees in
Uganda, (Nssfug.org, 2018). Since its inception the performance of the fund has been one of the
many issues all over the media.

1.1.2 Theoretical Background

This study is informed by the institutional theory which traces its origin back to foundational
articles that discussed how organizational founding and change were driven. Since institutional
theory tries to examine ways in which “organizational structures, norms, practices, and patterns
of social relationships are connected to the broader social and cultural environment “and the
concept of governance framework also tries to look at internal mechanisms inform of structures
and rules, this has a connection to the the two variables (Greenwood & Hinings, 1996).
Institutional theorists assert that the institutional environment can strongly influence the
development of formal structures in an organization, often more profoundly than market
pressures. Innovative structures that improve technical efficiency in early-adopting organizations
are legitimized in the environment.

Governance framework for that case is one of the modern management innovations to induce
better organizational performance. The Institutional theory is built on the concept of legitimacy
as the primary organizational goal (Scott, 2005). Under Institutional theory, the environment is
conceptualized as the organizational field, which may include regulatory structures,
governmental agencies, norms, interest groups, public opinion, rules, and social values etc. the
Institutional theory also assumes that an organization conforms to its environment it operates.
However, there are some fundamental aspects of organizational internal environment and
activities not fully addressed by institutional theory that make the approach difficult to use it, to
fully understand organizations and their environment: the organization being dependent on
external resources and the organization’s ability to adapt to or even change its environment
(Scott,2005). From the NSSF performance perspective, internal structures improvement and
strengthening as agitated for by governance scholars provide a ripe ground for analysis of causes
and effects of loose structures within NSSF as an institution. This in turn can help in identifying
performance constraints within the institution. This thus makes institutional theory suitable for
informing this study.
1.1.3 Conceptual Background
There are mainly two concepts under study and these are governance framework and
performance of an organization/institution. There are many writers who have attempted to define
the concept of governance framework as our independent variable. According to Pande, Ansari,
Valeed Ahmad (2014) governance framework act as a supporting structure to entity management
and compliance.A governance framework provides the trunk from which the various branches of
compliant operations can grow. It is through governance that companies and other organizations
stay on the right side of regulators, in terms of filing requirements as well as aspects such as
company culture, remuneration methods and transparency of operations. According to
(Kaufmann et al., 2003) they explained the concept of governance framework as a mechanism
that provides senior management, as well as those at the operational level, to have a clear
understanding and oversight of each other's expectations, objectives, performance, risk appetite,
and reporting requirements. In this study therefore, the mechanisms considered are board of
director’s independence, the legal framework and accountability systems as highlighted in figure
1 the conceptual framework.

The second concept which is the dependent variable is the concept of organizational
performance. The concept organizational performance is a ubiquitous term which is nevertheless
loosely defined. According to Luo et al. (2012) defines organizational performance as the actual
output of a company measured against its intended output. It is a broad field that deals with what
an organization does and can accomplish when it interacts with its various constituencies. The
concept compares the goals and objectives of an organization with its actual performance in the
distinct areas. He further opines that organizational performance should be measured in
economic and operational terms: The economic performance looks at financial and market
outcomes which assess the profits, return on investment for shareholders, and other financial
metrics. The operational performance, on the other hand, focuses on the observable indices like
customer satisfaction and loyalty, the firm’s social capital, and competitive edge derived from
capabilities and resources. For Kaplan (1992) explained the concept to refers to how well one
does a piece of work or activity and the ability to bring about desired results in a satisfactory
manner is all that performance is about.

In the context of pension fund institutions, performance therefore comprises of the actual output
or results of an organization as measured against its intended goals and objectives (World Bank,
2012). The World Bank report on assessment of the pension fund provides sustainability,
coverage, adequacy and security as measures of pension fund performance. Therefore this view
emphasizes the fact that every organization is set for a given purpose and goal and that its
performance should be measured in that regard. For example NSSF Uganda was set up with a
given objective well stipulated in the law that establishes it to provide social security to people
working in private sector and all those outside the ambit of the government pension scheme. This
study therefore adopts the World Bank definition of pension fund performance and measures as
reflected in the conceptual framework figure 1.

1.1.4 Contextual Background

This study is conducted at National Social Security Funds (NSSF) an institution established by
the laws of Uganda. The National Social Security Fund (NSSF) is mandated by the National
Social Security Fund Act, Cap 222 (Laws of Uganda) to provide social security to all employees
in Uganda. The core objective of this fund is to protect formal employees against uncertainties of
social and economic life. The National Social Security Fund (NSSF) focus is on private sector
workers and companies with more than five employees. There also exist a few voluntary
occupational schemes. The National Social Security Fund is a mandatory pure defined
contribution provident fund, which pays lump sums at retirement. The contribution rate to NSSF
is 15% shared at 5% and 10% between the employee and employer respectively. The core
mandate of the Board of Trustees of NSSF is to ensure the collection of contributions efficiently,
invest contributions prudently and pay benefits promptly. Besides that, in Uganda where the
estimated labor force is about 19million,only about 1.6 million representing 7.8% are covered by
National Social Security Fund (NSSF Annual Report 2018), while about 0.5million representing
2.6% are covered by the government pension scheme. Uganda’s current population is estimated
at 44,269,594 (The state of Uganda Population Report, 2019).
The rest of the adult population not covered within these two schemes do not therefore have any
form of social security or retirement savings to guard against the adverse effects of retirement.
Although there have been considerable efforts to ensure that the performance of the fund is
improved for example through strengthening the internal governance mechanisms, many
working people remain excluded. Coverage of NSSF services has remained significantly low,
with only 3 percent of the Ugandan population having access to formal social security (NSSF
Annual Report, 2018). The majority of people in the informal sector, peasants, self-employed
and the unemployed do not have any retirement savings arrangement. All this point to deficiency
in maximizing the proportion of working age group undertaking retirement savings and those
entitled to a pension while in retirement.
The range of benefits provided to saver is also very limited. Innovation in the products space has
been very limited or nearly absent owing to legal constraints. For example, NSSF has no mid-
term access or work-life benefits. Therefore, members must wait until old age to qualify for
benefit unless rendered unemployed due circumstances such as infirmity or opts for voluntary
early retirement (Barya, 2011). Workers who save with NSSF have no short or midterm benefits
that can help them cope with occupational challenges in the course of gainful employment, prior
to retirement. However, this seemingly impressive performance notwithstanding, NSSF has
significant gaps in key performance parameters of interest to members and stakeholders.
1.2 Statement of the Problem
There is a general consensus between management scholars and practioners that good
governance framework improve the performance of organizations. It is against this that many
organizations encourage and emphasize governance practices like board of director’s
independence,sound legal framework and ensuring that there are proper accountability systems.
By contrast, National Social Security Fund (NSSF) where such ideals have been deliberately
pursued, the performance of this institution has remained below the expectation of its key
stakeholders, as many working Ugandans continue to be excluded from NSSF coverage and
many unanswered questions in regards to NSSF as an institution regarding efficiency,
sustainability, adequacy and security continue to linger in the public domain. As evidence to this,
Uganda, a country with an estimated population of 44,269,594 according to the state of Uganda
Population Report, (2019) and an estimated labor force of 19 million, only about 1.6 million
representing 7.8% are covered by National Social Security Fund and the Government of Uganda
pension scheme (NSSF Annual Report, 2018). The effect of the above is that many retired and
non-working Ugandans face adverse effects of retirement and unemployment as they are lack
social security cushion against old age and infirmity. It is not clear whether such a state of
performance in NSSF is as a result of inadequate corporate governance practices. Therefore this
study seeks to determine whether there exists a relationship between governance framework and
the performance of NSSF Uganda.
1.3 General Objectives of the Study
The main objective of the study is to investigate the relationship between governance framework
and the performance of NSSF Uganda
1.3.1 Specific Research Objectives
i) To examine the relationship between board of directors independence and performance of
NSSF
ii) To examine the relationship between legal framework and performance of NSSF
iii) To examine the relationship between accountability systems and performance of NSSF
1.4 Research Questions
i) What is the relationship between board independence and performance of NSSF?
ii) What is the relationship between legal framework and performance of NSSF?
iii) What is the relationship between accountability systems and performance of NSSF?
1.5 Scope of the Study
1.5.1 Geographical Scope
The study will be carried out within Kampala (NSSF head offices). This is because the selected
National Social Security Fund (N.S.S.F) headquarters is the center for all major strategic and
operational decisions.
1.5.2 Subject Scope
The study will focus on the relationship between the three main governance framework (board of
director’s independence, legal framework and accountability systems) and the performance of
NSSF Uganda
1.5.3 Time Scope
The study will look at five financial years back that is 2015 to 2019
1.6 Significance of the study
The study may be significant to management of National Social Security Fund who may use the
findings in improving their management decisions so as to improve the performance of the fund.
As at the end of the study some loopholes will be highlighted for maximum benefit to the
masses.

The study may provide empirical evidence on how corporate governance practices are related to
organizational performance.

It may also help future researchers as a guide in conducting their research in the field of
corporate governance as this may be used as reference work in related field of study.

The study may also provide viable information to managers and decision makers in national
social security fund (NSSF) on how to mitigate the fund performance challenges.

The research is as well important to the researcher since it is a partial requirement for fulfillment
of the degree of Masters in Business Administration at Uganda martyrs University.

1.7 Justification of the study

Performance of NSSF is quite a very important aspect as it concerns the livelihood of the old and
the who eventually become unemployed. These become a burden to society in case there
livelihood is not well catered for through social security cushion. Thus anything concerning the
livelihood of retired people and unemployed is not a simple matter but a matter of society
importance as whole. Therefore there is a need to carry out this study so as to improve the
performance of the fund interms of delivering to the expectation of its key constituent-the
members.
1.8 Definition of Key terms
Organizational performance
In this study organizational performance is defined as the actual output or results from the inputs
by management and is to be measured according to goals and set performance objectives.

Governance Framework
In this study, the term governance framework is defined as internal mechanisms instituted to
ensure that their institution is run well to meet its objectives. The internal mechanisms made with
the objective of increasing the efficiency and effectiveness of the organization in meeting its
intended goals and objectives.

Figure 1: Conceptual Framework

Independent Variable (IV) Dependent Variable (DV)

NSSF Performance

Sustainability
Governance framework
Directors Independence
Transparency processes Coverage
Adequacy and

Legal Framework
Security
Accountability systems

Accountability systems


Figure 1: The conceptual framework showing the relationship between the governance framework and
the performance of NSSF Uganda

Source (Developed From the Review of the Literature From Different Scholars and Writers on
the Study Variables).
Description of the figure
From the above are two variables that is the independent variable and the dependent variable.
Governance framework is the independent variable operationalized in terms of mainly three
perspectives within the organization intended to improve efficiency and effectiveness of an
organization and these are director’s independence, legal framework, and accountability systems.
Performance is dependent variable which is studied in terms of sustainability, coverage,
adequacy and security.
1.9 Conclusion
The section explored key factors related to the study variable, pointing to relationship between
the governance framework and performance of NSSF Uganda, to be addressed further by
subsequent technical sections.
 CHAPTER TWO
LITERATURE REVIEW

2.0 Introduction
This chapter covers both theoretical and empirical literature on the relationship between the
governance Framework and the performance of NSSF in Uganda. The themes covered are the
relationship between board of director’s independence and performance of NSSF, the
relationship between legal framework and performance of NSSF and the relationship between
accountability systems and performance of NSSF.
2.1 Theoretical Review
Like earlier highlighted in the theoretical background that the study is informed by the
institutional theory, under here a discussion of the theory and its limitations is done. Scott (2005)
indicated that an institution is “a social structure that is made up of a collection of individuals or
organizations within which collectives exercise action or orientations in a constrained
environment that will continuously be altered over time”. Institutions mainly have two
dimensions. The rational perspective sees institutions as instruments to understand the tasks, for
which, they were created. Major institutional theorists were Meyer & Rowan, DiMaggio &
Powell. They asserted that the environment in any institution highly influences the formal
structure development even more than market pressures. For example, Olson (1965) and
Williamson (1975) defined institutions as efficient solutions to predefined problems. Under this
institutions are thus defined as the social/routine programs or rules. Institutional theory seeks to
explain the processes and reasons for organizational behavior as well as the effect of
organizational behavior patterns within a broader, interorganizational context (Kristen, 2016).
This philosophy of institutionalism has been used to explain why certain organizational
structures and ideals endure, and to study the internal and external influences on organizational
patterns. The theory further provides explanation of why organizational structures and practices
become entrenched, and also how and why change occurs gradually.

Researchers like Jennings (1994) offered to describe some of the factors he referred to as
institutional pressures which drive change in many institutions. The first factor or pressure which
causes changes in the way institutions are run is creation of new laws motivated by the desire to
improve or address the performance constraints. She further indicates that in most cases these
rules come with a coercive enforcement pressures which stimulate organizational change either
directly or indirectly via institutional dependencies. For example, say the coverage of an
institutional mandate is enlarged new demands are created therefore sometimes there is need to
review or create rules to accommodate new demands. Another example provided is when new
listing rules are introduced setting new standards for the composition of company board
membership, the rate and extent of actual change in listed company board composition can
depend just as much on indirect pressures from stock exchange authorities as on the actual
institutional penalties applied for non-compliance.

The other factor is about the pressure to cope with drastic changes in economic or political
environment which creates a sense of high uncertainty which for that case calls for change. As
new standards or practices become more widely accepted and adopted, they become gradually
more legitimized in the environment. Ultimately, these standards and/or practices reach a level of
legitimization where failure to adopt them is seen as irrational. For example, a rule that women
employees must resign upon marriage was once common in certain professions, but would now
be seen as discriminatory and archaic, as would a dress code forbidding women employees to
wear trousers (Jennings, 1994). Therefore some of the practices within institutions are driven by
circumstances either internal or external. This therefore forms the basis of distinguishing
practices within institutions as either entrenched institutional practice or standard and
institutional myths (Meyer and Rowan, 1977).

Some of the prominent assumptions of the theory are that, the environment is conceptualized as
the organizational field, which may include regulatory structures, governmental agencies, norms,
interest groups, public opinion, rules, and social values etc. The Institutional theory also assumes
that an organization conforms to its environment it operates. However, there are some
fundamental aspects of organizational environments and activities not fully addressed by
institutional theory that make the approach difficult to use it, to fully understand organizations
and their environment: the organization being dependent on external resources and the
organization’s ability to adapt to or even change its environment (Scott, 2005). The concepts of
the institutional theory approach provide useful guidelines for analyzing legal framework and the
relationships with the performance of NSSF because it provides the basis for responsibility
rested on such institutional structures to provide social security to its constituents. The traditional
forms of social security as existed in the medieval times have since shifted to the formal social
security intuitions such as the NSSF.
Limitations of the Theory
Just like any other theory, the institutional theory is not an exclusion of the limitations or
criticisms. Different authors have come out to identify the loopholes within the theory and the
soundest ones include the following.
Under institutional theory little attention is paid to human role in institutional changes. Yet
human beings are very crucial in the change process. Besides that, sensible employees in
institutions give a good direction. Although institutionalism has succeeded in becoming the
dominant theory to study macro-organizational phenomena, there is a danger that the theory has
been stretched far beyond its core purpose to understand how organizational structures and
processes acquire meaning and continuity beyond their technical goals. That alone makes the use
of this theory in understanding environmental pressures very important, yet it is not easy for
everyone to identify the pressures especially in institutions of public nature. So what is missing
in current efforts within institutional theory to understand why and how organizations attend to
their institutional environments? Possibly, although I’m not entirely convinced that the construct
of power is missing, but perhaps it is not present in the form or given the importance that Stewart
thinks it deserves. More significant by its absence, in my opinion, is the notion of meaning or
Scott (1994) terms the ideational aspects of organizations. Besides that, if the theory is more
effective in making management understand their pressure factors why then many organization
underperform because of some constraint.

2.2 Actual Literature

2.2.1 Board of directors independence and performance of NSSF
In the context of leading an institution, not only are its leaders expected to establish tone at the
top of the organization for high ethical standards and embody commitment to the service of
communities and membership, but board members must fulfill the essential role of establishing a
safe and sound governance framework and providing active oversight to their organization.
While it is not the board of directors’ role to run day-to-day operations of an institution, the
board does: Appoint the chief executive officer (CEO), Establish strategic direction for the
financial institution, Develop compensation packages that align the CEO’s goals to that strategy;
and establish policies and the control framework within which management operates.
In carrying out its governance and oversight roles, the board of directors serves as an
indispensible check and balance without which our public institutions could not operate in a safe
and sound manner. However without their independence those roles are compromised thus
causing high risk of organization complacency. This makes management to override established
legal framework which impairs the smooth operation of organizations.
The boards are obligated to deliver a strong message to others in the institution about the
importance of integrity, compliance with the law, and overall good business ethics. Leaders
should demonstrate their commitment through their individual conduct and their response to
control failures, so when the board members side with internal management then the oversight
role is distorted. according to Deloitte’s 2018 Audit Committee Resource Guide risk oversight is
a primary board responsibility, and in the evolving business and risk landscape directors need to
develop and continuously improve practices to establish a well-defined and effective oversight
function,.

The board of directors in some firms is composed of shareholders, or people with interests in the
company. An independent board of directors is comprised of people who totally have no material
interests in the company other than their directorship (Fan, Wei & Xu, 2011). Boards of
directors are one of the primary and dominant internal governance framework mechanisms and
play a key role in the monitoring of management and aligning the interests of shareholders with
management (Brennan, 2006). Boards are responsible for care and diligence, including ensuring
that financial controls are effective. Boards may give management strategic guidelines and may
even act to review and ratify management proposals (Jonsson, 2005). Boards also spot problems
early and can exercise a whistle-blower function (Salmon, 1993). However, there is a
considerable debate in the literature concerning the extent to which corporate boards are able to
monitor management. This can only be achieved if there is an independence of the board. A
corporate board's ability to monitor management has attracted attention following the collapse of
the Maxwell Publishing Group, BCCI and Poly Peck in the United Kingdom (Romzek, LeRoux,
Johnston, Kempf, & Piatak, 2014). Also influential in reviving this question was the wave of
mega corporate collapses that broke out in early 2000s, including those of Enron, WorldCom and
HIH insurance (Mizruchi, 2004; Braun & Sharma, 2007). It is alleged that the boards’ inabilities
to monitor management within these corporations was due to insufficient monitoring stemming
from the consolidation of power by the management and its general hold over board members,
preventing them from providing independent advice (Rose, 2005). Thus, boardroom reform
attracted significant attention, particularly the idea of board independence (representation by
outside independent directors).

A number of global governance codes of best practices, such as the Cadbury Committee Report
of 1992, the Higgs Report of 2003 and the Smith Report of the same year in the United
Kingdom; the 2000 NACD Blue Ribbon Commission Report and the 2002 Sarbanes-Oxley Act
in the United States; the Toronto Stock Exchange Corporate Governance Guidelines of 1994 in
Canada; and Australia's1995 Bosch Report, the Australian Stock Exchange's (ASX) Principles of
Good Governance and Best Practice Recommendations and CLERP 9, advocated for boardroom
reform in favor of independent board members.

Past studies have also documented a negative relationship between board independence and firm
performance in an emerging market, for example in Bangladesh (De Zoysa, Lodh & Rudkin,
2012). Due to the conflicting results on board independence and firm performance, Dalton and
Daily (1999) view these results as vexing, contradictory, mixed” and “inconsistent”. The mixed
evidence on board independence and firm performance may be attributed to limited
methodological procedures or a lack of methodological rigor as well as model miss-
specifications in the sense of the omission of variables that affect firm performance (Bathala &
Rao, 1995), differences in institutional factors and managerial behaviors in the market (Fan, Wei
& Xu, 2011). This study aims at overcoming all these short comings in the context of NSSF
which is a pension fund for a country.
Fan, Wei & Xu, (2011) in there study suggested that for the board of directors to be effective,
they must take steps, both in their structures and in their nominating procedures without any
interference in order to ensure that internal management are unable to exercise undue control
over the board’s activities and decisions. An independent majority on the board is more likely to
consider the best interests of shareowners first. One of the benefits of an independent board is
that it fosters independent decision-making which can mitigate conflicts of interest that may
arise.
2.2.2 Legal Framework and Performance of NSSF
The success of the social security organizations in the world hugely depends on the crucial role
of governance frameworks towards its clients (ICAN, 2009). Governance frameworks determine
how a business should be run effectively. Their major objective is to ensure that products
produced and services rendered to customers are in accordance with customer expectations,
delivers what was promised, have consistent quality and price fairly (Anderson, Fornell &
Mazvancheryl, 2004).
One the key facets to evaluate the performance of Social Security Institutions is the range of
benefits on offer to qualifying members. With regard to pension products, The NSSF has been
significantly limited in provision of various product range and flexibility in accessing benefits. In
the current regulatory environment, NSSF offers only basic mandatory benefits such as age,
survivors’, invalidity and minimum healthcare insurance which are mainly accessible after
retirement, death, loss of employment and permanent migration to another country (Brian
Sserunjogi and Ezra Munyambonera, 2017).The need for legal reforms that will facilitate product
innovation and enhance the range of social security benefits available to members cannot
therefore be overstated. Aoun,(2004) pointed out that Public Social security institutions ought to
provide quality service to create and retain satisfied customer involves substantial organizational
commitments that are associated with strategic controls from the board instead of short term
financial controls. For instance, the National Social Security Fund in Kenya, through its Strategic
Plan (2010-2013) aims to apply management policies that will lead to improved processing and
paying of benefits to the members and improved service delivery.

The Parliament of Uganda News page reported client dissatisfaction about the current NSSF
Ugandan Act legal framework which states that, NSSF Act provides that a member of the Fund
shall be entitled to age benefit if he or she attains the age of 50 years and has retired from regular
employment or if he or she attains the age of 55 years.
In Tanzania, poor governance frameworks where the main reasons for delay of benefit payments
brings escalating client dissatisfaction to most social security schemes members in many
countries around the world and Tanzania in particular. Several challenges face most of the
members of social security schemes in Tanzania including delay of pension or retirement
benefits payments and small pension. As a result, the retirees experience dissatisfaction, which
makes it hard to attract new client’s life (URT, 2010).
When an organization has a great governance framework structure offering customer service
good, new clients are attracted and existing ones are retained easily. The associated benefits from
loyal customers include the likelihood to positive word-of-mouth promotion and recommending
of the service provider to other potential customers (Myftaraj & Nexhipi 2014), which serve as a
catalyst for sustainable growth and profit in the form of increased revenue and decreased costs.
For instance this recognition of benefits from longer customer tenure by social security
institutions is what largely informed the evolution from transactional orientation to customer
orientation, which focuses on building long-term relationship with customers or clients in the
services industry (Hafiz et al. 2015). Public social security institutions have also been registered
achievements for instance the use of information and communication technology and public
awareness campaigns play a very big role in improving social delivery, which leads to customer
knowledge about the benefits of the fund, and how they can access it (NSSF Uganda Annual
Report, 2018).
Sound legal framework is an important tool to help organizations create attractive investment
environments (Farazmand, 2004). Legal framework sets out governance as a means of
addressing individual issues like executive pay or board succession, and it can provide an array
of benefits for organizational growth and performance. While some areas of the social security
institutions may be lagging behind others, the global movement to implement sound governance
framework is well on its way, and each year brings new improvements in governance strategy,
analysis, and reporting (Farazmand, 2004). Social security is used as a tool used to administer
and control employment. It is used in organizations to achieve and maintain certain levels of
work output (Grindle, 2004). Armstrong (2010) asserts that retirement benefit as a social
security assists workers to readjust themselves appropriately into the society after retiring from
work. It constitutes an important tool in the hands of management for enhancing workers morale,
which may lead to efficiency and increased productivity of workers in particular, and the
organization as a whole.
Jarrel and Morin (2001) noted that a good governance framework monitors and safeguards the
interests of public social security institutions. They said actors include staff, managers,
shareholders, suppliers, the board of administration and the clients depending on the type of
organization in question. Good practices of governance are those whereby the environment in
which the public institution operates is fair, processes are transparent and it is held responsible
for their actions. On the other hand weak governance practices on the other hand usually leads to
waste, mismanagement and higher levels of corruptions in those organizations, which limits the
growth of the organization.
2.2.3 Accountability Systems and Performance of NSSF
Accountability in conduct provides the basis for the social structure by recognizing individuals
as agents of their own actions and, therefore, subjecting them to evaluation (Lerner & Tetlock,
1999). The mutual obligation between an organization and its employees implies that whereas
the latter should perform well and accomplish organizational goals, the former should evaluate
their performance. Therefore, performance evaluation refers to accountability as a means of
organizational control (Eisenhardt, 1985). HRM systems allow organizations, including raters, to
evaluate employees formally based on their performance. Therefore, it is rational to insert
accountability mechanisms in the organization’s performance evaluation system (Ferris et al.,
1995). Scholars in different academic fields (Dubnick & Frederickson, 2011) have
conceptualized accountability in different ways. In social psychology, accountability is defined
as the “implicit or explicit expectation that one may be called on to justify one’s beliefs, feelings,
and actions to others” (Lerner & Tetlock, 1999). In the management literature, it refers to “the
extent to which a person’s behaviors are observed and evaluated by others, with important
rewards and punishments contingent upon those evaluations” (Ferris, Mitchell, Canavan, Frink,
& Hopper, 1995).
These definitions focus on accountability at the individual level. However, the definition of
accountability that is accepted often in the public administration field, as well as adopted in this
study, is “the means by which public agencies and their workers manage the diverse expectations
generated within and outside the organization” (Romzek & Dubnick, 1987). Agencies should
establish various accountability instruments to respond to expectations from legal entities,
citizens, top executives, or organizational members. Therefore, this perspective is concerned
with accountability at the organizational, rather than individual, level.
Dubnick and Frederickson (2011) divided accountability into the pre- and post-factum varieties.
Pre-factum accountability works as a preventive factor to shape behavior, whereas the post
factum type occurs after the fact. In some cases, however, it is difficult to clearly distinguish one
from the other. Sanctions, for example, may be used to punish misconduct; however, they can
also be preventative. Indeed, post factum responses are based on pre factum accountability, as
bad performance can be prevented by establishing punishments. Therefore, both types together
can be understood as an institutional mechanism for inducing employees to behave and perform
appropriately, for instance, by monitoring them (Dubnick & Frederickson, 2011; Hall et al.,
2003; Olsen, 2015; Yang, 2012). Such accountability, which was established to manage the
diverse expectations and obligations generated both inside and outside public organizations, can
influence individuals, groups, and organizations considerably (Dubnick & Frederickson, 2011;
Hong, 2016).
Some studies have focused specifically on the roles of the accountability mechanism, which is
defined as “the institutional structures or arrangements that hold bureaucrats accountable for
their roles in the policymaking process” (Hong, 2016). This mechanism is manifested in diverse
contexts, such as in the relationship between the public and its officials, elected or otherwise or
private contractors (Romzek, LeRoux, Johnston, Kempf, & Piatak, 2014). Accountability is
manifested in the relationship between an organization and the individuals therein, as well.
Romzek and Dubnick (1987) sorted public accountability contexts into political accountability
for mechanisms outside public organizations and bureaucratic accountability for those inside.
Phenomena concerning accountability appear both inside and outside public organizations,
including government departments, private companies, and social relationships, as long as an
accountability forum exists, as well, as an actor who is accountable for its expectations (Bovens,
2005). Hence, the term “accountability” is visualized as being “chameleon-like” (Sinclair, 1995)
and “ever-expanding” (Mulgan, 2000).
Prior research has also identified a number of ways in which accountability may improve the
performance of public organizations. Accountability could increase individual performance in
context-specific tasks, for example, duties in a nonprofit organization (Kim & Lee, 2010) or
performance appraisal accuracy (Moynihan & Ingraham, 2003). It can also improve
organizational effectiveness in aspects such as rational budgetary decisions or policy
implementation, for example, in performance-based budgeting (Gilmour & Lewis, 2006), school
funding policy (Rabovsky, 2012), or contracting out (Amirkhanyan, 2011). Conversely,
individual and organizational performance may be negatively affected by “too much”
accountability.
2.4 Conclusion
The Literature reviewed above tackled the different angles on the different governance
framework mechanisms and how they relate to organizational performance of Social Security
fund, NSSF in Uganda. The framework components used are board of director independence,
legal framework and internal accountability systems. Those mechanisms are presumed to have a
relationship with the performance of the institution and themselves possess elements of
institutions. The literature review has labored to highlight the gaps in the literature which shall be
compared with the r findings from other subsequent investigations to be conducted.

CHAPTER THREE
RESEARCH METHODOLOGY

3.0 Introduction
This chapter presents the research design, the study population, the sample size, the sampling
procedures, sources of data, data collection instruments, reliability and validity of instruments. It
also addresses data processing, data analysis and the limitations of the study.
3.1 Research Design
According to Ariola et al. (2006), research design is a detailed outline of how an investigation
will take place. A research design includes how data is to be collected, what instruments will be
employed, how the instruments will be used and the intended means for analyzing data collected.
Under study the researcher adopts the case study design which focuses on NSSF Uganda. The
justification for the case study is that it allows focus on the specific elements relating to
performance of the organization. It is also best suited for in-depth enlisting of responses from
key resource personnel targeted for the study.
3.2 Area of Study
The area of study will be the Head office of the National Social Security Fund in Kampala. This
is because the headquarters has adequate population of key resource persons that are involved in
decision process related to the performance of the organization
3.3 Study Population
According to De Vos et al. (2003) population entails the entire population that the researcher is
interested in for the relevant study. For this study the population will be both the NSSF staff and
the contributors to the fund in Kampala. The NSSF staff is 500 according to NSSF staff count
report and the target population of contributors will be 500 also because of time and resource
constraints.
3.4 Sampling Procedures
According to De Vos et, al., (2003), sampling procedures refers to a large body of scientific
methodologies in which a sample of a larger matrix of data or of a larger area is used to arrive at
conclusions about the whole. It covers the sample size to be used in the study as well as the
techniques applied to arrive at the sample that was used in the study.

3.4.1 Sampling size

A sample is a portion of the population whose results can be generated to the entire population
(Amin, 2005). This is the number of individuals who will be included in the sample. The
researcher will use Solvin’s formula of n=N/1+Ne^2, where n=sample size, N=total population,
e=error to come up with a sample of 222 staff and 222 contributors will be determined.
1+ (500)*(0.05)2
n=222 staff
The sample size is 222 staff
3.4.2 Sampling Techniques
Sampling is the process of choosing a target population to be used in the study of a given
phenomenon (Amin, 2005). To select the sample size, the researcher will use stratified sampling
and purposive sampling techniques. Stratified sampling is a probability sampling technique that
involves dividing the population into groups or strata (Lucey, 2002). The population will be
divided by putting into consideration its homogeneity and heterogeneity. This technique will be
employed by the researcher in selecting the employees of NSSF from different departments. The
reason for adopting this technique is because it puts into consideration the similarities and
differences that exists between a given populations. For selection of contributors a purposive
sampling technique will be used to pick out a few respondents because of their special
knowledge on the study subject under investigation. The sample size is illustrated in the table 2
on the following page.
Table 1: Sample size
Category of respondents Target population Sample
NSSF Staff 500 222
Contributors 500 222
Totals 1000 444
Source: (generated by the researcher)

3.5 Data Sources

The main data source will primary data derived through interviews with respondents. However,
the study will also employ use of secondary data such as Annual reports and media reports from
sector analysts.
3.6 Data Collection Method and Instruments
This study will use both qualitative and quantitative data which will be collected using
questionnaires and interview guides.
3.6.1 Questionnaires
The researcher will design and administer the semi-structured questionnaires because the
targeted respondents are many in number and they are literate. This method is selected due to the
fact that it is time saving, many respondents will be covered within a short time and sensitive
questions could be confidentially answered since a respondent’s name is not required. Besides
that a questionnaire method gives time to the respondent to think and analyze the questions asked
before giving an appropriate answer.
3.6.2 Interviews
Pre-designed structured face- to –face interview will be administered on key informants who are
deemed to generate very important data for the study. Face- to- face interview will be used in
collecting data especially from key informants who included managers in NSSF.

3.7 Quality Control

This refers to systems and processes that will be adopted to ensure quality and accuracy of the
data that will be collected during the study. Steps to be taken involve appropriate sample
management system to ensure proper case processing. There will also be proper monitoring of
interview behavior of the respondents for any non-verbal hints to ascertain the authenticity of the
responses. This study will also undertake cross-referencing of responses for fact checking where
secondary data is available to back up some positions.
3.7.1 Validity
In order to ensure the validity of the data collection instruments, the researcher after designing
the instruments, will present them to the supervisor for comments so that possible amendments
are made on them. In addition, errors that could have been left out unidentified will be detected
and removed through pre-testing of instruments by undergoing a pilot study. Specifically, 10%
of the questionnaires will be selected randomly and pre-tested to a few respondents, in order to
evaluate data collected, and then any possible amendments will be done accordingly.
3.7.2 Reliability
According to Norrman (2008), reliability is the extent to which measurement procedures
generate the same results on repeated measurement occasions. Reliability of the instruments
under this study will be ensured using alpha cronbach coefficient where according to Cronbach,
a coefficient of above 0.7 for individual test variables is considered reliable. The study will adopt
this threshold to test validity as well
3.8 Measuring of Variables
A variable is a concept that can take on different values. Research variable is a person; place,
thing or phenomenon the researcher is trying to measure. This study will apply the use of the
ordinal measurement scale in order to give respondents the opportunity to specify their stand on
a given issue under consideration.
3.9 Data Processing and Analysis
This is the process of extracting information from data. Data is evaluated using analytical and
logical reasoning to examine each component of the data provided. After data collection it will
be edited, coded, and input in SPSS for analysis. This study will undertake both qualitative and
quantitative analysis of the data obtained from respondents and secondary sources.
3.9.1. Qualitative Analysis
This refers to analysis of non-numeric information such as interview transcripts, notes video and
audio recordings, images and text documents. This study will undertake content analysis to
classify verbal or behavioral data to classify, summarize and tabulate the data.
3.9.2 Quantitative Analysis
This is the process through which numerical or statistical data is turned into meaningful data
through application statistics tools like regression analysis to establish the effect of on variable to
the other, and use correlation to establish the relationship between variables. The manipulation
will be done using Statistical Package for Social Sciences (SPSS).
3.10 Ethical Considerations
This refers to an accumulation of values and principles that address questions of what is good or
bad in human affairs. The researcher will ensure at most confidentiality of
respondents/participants where by anonymity will be emphasized in that participants who will
take part in filling the questionnaire will not be required to put their names to avoid revealing
their identity. The participation in the study will be voluntary. During the process of collecting
data and in the design of the data collection instruments caution will be done to avoid impairing
the emotions of the respondents.THis study will observe and adhere to required ethical standards
for Researchers. Specifically the researcher will seek formal permission from NSSF to conduct
the study. Measures to ensure confidentiality like ensuring that all information and documents
reviewed as part of the process will be held in the strictest confidence and for the purpose for
which it is obtained.
3.11 Limitations
i) Some data concerning the study are expected to be hard to get. For example some articles
were not easily accessed in the process of drafting this proposal. However the researcher will
solve this through visiting University centers like Makerere, Uganda Christian University for
the necessary information required.
ii) Non-response of some target respondents some of the anticipated respondents are expected
not to cooperate during the process. This would be because of fear but the researcher will try
as much as possible to ensure that they cooperate through explaining to them the purpose of
the study and how the information they will provide will be confidentially protected.
iii) Time constraints. Since this study has a deadline the research activities will be constrained
by the same as some activities of the study are time bound. However the researcher will
solve this problem through working tirelessly and meeting programs that supervisors would
schedule for meetings and supervision.
3.11 Conclusion
The chapter presented the design of the research, study population, area of study, sample size and
selection, techniques that will be used in sampling, data collection methods, management and
analysis, validity and reliability of data, ethical considerations, problems anticipated to be
encountered during research and how the researcher plans to overcome them.

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