Professional Documents
Culture Documents
Lecturer: Dr.Oloko
Group Assignment.
Group Members.
5. HDB224-0495/2021-MOHAMED KHALID
9. HDB223-0521/2021-KARIUKI PAULINE
Modern corporate governance refers to the framework of rules, practices and processes by which
corporations are directed, controlled and operated.lt encompasses various aspects of decision
making, accountability, transparency and stakeholder management within an organization.
Detailed Description.
1. Board of Directors.
Board plays a pivotal role in corporate governance providing oversight, strategic guidance and
monitoring management actions.lt is composed of a mix of independent directors and executive,
with independent directors ensuring objective decision making and accountability.
a) Board is responsible for providing strategic guidance and oversight to the company.lt includes
setting companies mission, vision and strategic objectives as well as monitoring management
performance in achieving this goals.
Board consists of a diverse group of individuals with varying backgrounds, expertise and
perspectives. They include independent directors, executives and representatives of major
shareholders.
Board elects a chairman who leads board meetings and ensure effective communication and
collaboration among members.
Committees.
Board often delegate specific responsibilities to committees to address key areas such as audit,
compensation nominating, governance and risk management. These committees conduct in-
depth reviews, make recommendations to the full board and provide specialized expertise in their
respective domains.
3. Shareholder Rights.
Protecting and respecting shareholder right is fundamental. Shareholders have the right to vote
on significant matters, elect directors and voice concerns through shareholder meetings.
Companies strive to enhance shareholder value while balancing the interests of other
stakeholders. Examples.
a) Voting rights-shareholders have the right to vote on significant corporate matters e.g. election
of directors, approval of mergers and acquisitions, amendment of corporate by laws, issuance of
new shares .Each share typically entitles the shareholder to one vote, although some companies
may have different voting structures.
b) Information Rights -shareholders have the right to access relevant information about the
company, including financial statements, proxy statements, annual reports and disclosure about
material events. This enables shareholders to make informed decisions and hold management
and board accountable for their actions.
4. Risk Management.
Effective risk management practices are essential for safeguarding corporate assets and ensuring
long-term sustainability. Boards oversee risk identification, assessment and mitigation strategies
to address various operational, financial, legal and reputational risks.
a) Identification -Risk management involves identifying and accessing potential risks that may
impact company's objectives, operations or financial performance. This include risks related to
market conditions, regulatory compliance, cyber security threats, supply chain disruptions and
natural disasters.
c) Monitoring and Reporting -Risk management is an ongoing process that requires continuous
monitoring and evaluation of risk exposure and mitigation measures. Boards and management
teams regularly review risk reports, key risk indicators and emerging threats to ensure that the
company risk management practices remain robust and adaptive to changing circumstances.
Boards strive for diversity in terms of skills, experience and backgrounds to enhance decision
making effectiveness and represent diverse stakeholder interests.lndependent directors bring
objectivity and oversight reducing potential for conflicts of interest. Example.
a) Independence -Board independence refers to the presence of directors who are free from any
conflicts of interest that may compromise their ability to make partial decisions in the best
interest of the company and its shareholders.lndependent directors bring objectivity external
perspective and oversight to board deliberations, enhancing corporate governance effectiveness.
b)Business benefits -Corporate Social Responsibility is not only a moral imperative but also a
strategic business imperative company that embrace corporate social responsibility practices
often enjoy benefits such as enhanced reputation, brand loyalty , employee engagement,
customer trust and access to capital. Corporate Social Responsibility initiatives can also mitigate
risks, drive innovation and improve long-term financial performance.
A strong emphasis on ethical behavior and a positive corporate culture are integral to modern
corporate governance. Companies establish codes of conduct, whistleblower policies and
mechanisms to promote integrity and compliance with legal and ethical standards.
8. Executive Compensation
Compensation practices are designed to align executive interests with shareholder value creation
while avoiding excessive risk taking. Compensation committees establish performance based
incentives, equity awards to link pay with company performance and long-term objectives.
9. Shareholder Engagement
Companies must adhere to a complex website of laws, regulations and industry standards.
Compliance functions ensure adherence to legal and regulatory requirements, mitigate
compliance risks and uphold corporate integrity.
With rise of technology driven disruptions, boards oversee technology governance strategies to
manage risks and capitalize on opportunities arising from digital transformation, cyber security
threats, data privacy concerns and emerging technologies.
Companies are increasingly expected to report on their environmental, social and governance
performance. Sustainability reporting frame works provide standardized metrics for disclosing
inniatives, impact assessments and long-term sustainability goals.
Ethics refers to principles of behavior that distinguish between good and bad, right and wrong.
Ethics reside within individuals and such are defined separately by each individual in his/her
own way. What may be ethical behavior to "X" maybe unethical to "Y".
a) Ethics are principles, values and beliefs that define what is right or wrong behavior.
b) Ethical behavior may differ from society to society such as birth control is mandatory in
communist societies but not in catholic societies.
c) Ethical standards are ideal of human conduct hence defining ethical standards is not an easy
task.
Business Ethics.
Purpose of business ethics is to guide the efforts of managers in discharging their duties to the
satisfaction of various stakeholders such as employees, owners, customers, suppliers and general
public.
Managerial ethics are those principles that guide the conduct and thinking of managers with
respect to what is good or bad, right or wrong (Barry).lt is not always easy to divide managerial
actions into clear cut compartments of ethical and unethical behavior because of certain
complicating factors.
Business ethics implies ethical ideas to business behavior. Ethical behavior not only improves
profitability but also fosters business relations and employee productivity. Unethical practices
create problems to businessman business units
Business ethics is an art and science for maintaining harmonious relationship with society, its
various groups and institutions as well as recognizing the moral responsibility for the tightness
and wrongness of business conduct. (Wheeler).
1. Business ethics are based on social values, as generally accepted norms of good or bad, right
or wrong.
3. Business ethics may determine the ways and means for better and optimum business
performance.
4. Business Ethics provides basics guidelines and parameters towards most appropriate
perfections in business scenario.
5. Business ethics is concerned basically the study of human behavior and conducts.
6. Business Ethics is a philosophy to determine the standard and norms to make mutual
interactions and behavior between individuals and groups in organization.
7. Business Ethics offers to establish the norms and directional approaches for making an
appropriate code of conduct in business.
8. Business Ethics are based on the concepts, thoughts and standards as contributed as well as
generated by Indians ethos.
9. Business Ethics basically inspire the values, standards and norms of professionalism in
business for the well-being of customers.
10. Business ethics shows the better perspective ways and means for most excellences in
customization.
11. lts aims to emphasize more on social responsibility of business towards society .
For large business, it is important to hire talent to assist existing personnel with regards to
integrity, understanding, responsibility and cultural norms of the country.
2. Ethics Committee
Committees can rise concerns of ethical nature, prepare or update code of conduct and resolve
ethical dilemma in organization. They formulate ethical policies and develop ethical standards.
a) Ethics committee at the board level -committee would be changed to oversee development and
corporation of ethics management programs.
Helps employees in making enquires, getting advice if needed and reporting all the wrong done
in the organizations.
d) Set up means of enquiries such as hotlines, suggestion boxes and email facilities.
Any written ethical code will not work unless supported and followed by a proper training
program .Some companies have an in-house training department while others may opt for an
outsource expert.
Corporate training program is established which deals in assisting employees understand ethical
issues that are likely to arise in their workplace. When employees are recruited, training is done
to help them to familiarize with companies ethical codes of behavior.
6. A Disciplinary System.
7. Establishing an Ombudsperson
8. Monitoring
1. For a decision to be ethical, it should possess characteristics such as right, equitable, good and
proper.
c) The value system of people depend upon their background and childhood experiences.
3. Ethical decisions should express some obligations to others .lf a decision merely results in
benefits only to oneself, then that's not an ethical decision. The very concept of being ethical
means that it results in some good for the larger society and not just for oneself.
1. Principle of conscience -based on inner feeling of persons to analyze the sense of right or
wrong hence businessmen can determine different roles and behaviors at their levels.
2. Principle of Wish less Work-lt emphasizes that there is no need to perform all the task to be
self-centered .We should be devoted to our efforts to do the work for others.
3. Principle of E-spirit-businessmen should give due attention to make best possible services and
try to develop feelings of devotion and truthfulness in service.
4. Principle of publicity -all activities and performance as conducting in business houses should
be well informed to every person of organization who are directly or indirectly attached with
business. It aims to remove misunderstanding among people.
5. Principle of Purity-every businessmen should follow politeness, truthfulness and tolerance for
developing the feelings of mental peace.
6. Principle of Humanity-it is needful that every business man should follow human values,
human decorum and human aspects within their policies programs and different working areas .lt
determines path to humanity.
7. Principle of Universal Values-every businessmen should conduct and perform the task and
different business activities to be based on universal assumptions and overall accepted norms and
principles by society.
8. Principle of commitment -every businessmen should be able to fulfil their commitments and
assurances as given to other person’s. Should be based on honesty and responsiveness.
9. Principle of Rationality-every businessmen should analyze and evaluate good or bad, right or
wrong ethical or unethical aspects within their business transaction and day to day working of
business houses. Must follow rationale attitude.
10. Principle of transparency -all business activities and transactions should be well informed
with justified manners with their different stakeholders and society.
11.Principle of Satisfaction -every businessman are required to create and develop their role and
behavior to establish pleasure and happiness with other person's and society at large .Customers
should be satisfied with their products and services.
1) Teleological Theory.
“Teleo” means end. According to teleological theories the tightness of an action is determined
solely by its consequences rather than by any features of action itself.Actions that result in
greatest possible balance of goods or evil are considered ethical. Hence the theory is based on the
concepts of goodness.
b) They provide an objective and precise method for moral decision making.
c) Economists assume that people seek to maximize their utility based on the theory of
utilitarianism.
Limitations.
2. Deontological Theories.
According to deontological theories certain actions are right not due to some benefits to self or
others but due to their basic nature or rules underlying them such as Bribery by its nature is
wrong irrespective of its consequences. Similarly, Golden Rule "Do unto others as you want
them to do unto you appeals human dignity and respect for others.
W.D Ross, the 20th century British philosopher has given the following moral rules;
Thus deontological theories refers to the argument that consequences determine what we ought
to do. Actions are right or wrong cause of their consequences but because of our duty or
obligation.
Advantages.
Weaknesses.
a) They fail to provide precise criteria to understand our moral obligations and to resolve moral
conflicts.
b) Ross gave no order of priority among his rules and when these rules are in conflict there is no
guide.
5. Threatening Situations -to meet predetermined targets, many bank managers sanction loans to
individuals with practically no credit worthiness.
6. Values and morals-people who are material possessors in life may not have strong ethical
standards.
Ethical dilemmas.
Is a situation where one is in conflict between moral imperatives.ls also called ethical paradox or
moral dilemma?
g) It is a no right or wrong.
Question Two.
a) Explain its nature of business -purpose and goals in reference to profit maximization
versus corporate social responsibility. (10mks).
Nature of Business.
Kenya commercial bank is one of the largest and most reputable banks in Kenya offering a wide
range of financial products and services to individuals, businesses and government entities.
Its services include savings and current accounts, loans, mortgages, investments, trade Finance
and mobile banking solutions. Additionally, Kenya Commercial Bank operates in several East
African countries, providing banking services to diverse customer base.
Purpose.
The primary purpose of Kenya commercial bank is to foster financial inclusion, promote
economic growth and empower individuals and businesses to achieve their financial goals. It
aims to provide accessible, affordable and innovative banking solutions tailored to the needs of
its customers. Kenya commercial bank also plays a crucial role in driving financial sector
development and contributing to the overall stability of the economy.
Goals.
1. Profit maximization -as a commercial bank, profit maximization is a fundamental goal for
Kenya commercial bank. By maximizing profits, the bank aims to enhance shareholder value,
ensure financial sustainability and reinvest in its operation to support growth and expansion.
Profitability allows Kenya commercial bank to remain competitive in the markets, attracts
investment and maintain a strong capital base to withstand economic uncertainties.
a) Financial inclusion -KCB strives to promote financial inclusion by providing banking services
to underserved and marginalized communities. It offers products such as mobile banking and
microfinance solutions to reach customers in remote areas who may have limited access to
traditional banking services.
c) Educational and skill development -the bank supports education initiatives and skills
development programs aimed at empowering youth and enhancing employability.KCB may
sponsor scholarships, vocational training and entrepreneurship programs to nurture talent and
drive economic empowerment.
Kenya commercial bank recognizes importance of balancing Profit maximization with corporate
social responsibility to create long-term value for its shareholders. While profitability is crucial
for the banks success and growth, it understands that sustainable business practices and social
impact are equally essential.
By integrating CSR into business strategies, Kenya commercial bank enhances its brand
reputation, builds trust with customers and communities and fosters a positive work culture.
Moreover, its CSR initiatives contribute to economic development, social welfare and
environmental sustainability, aligning with the banks broader goal of promoting inclusive growth
and prosperity in Kenya and beyond.ln conclusion, Kenya commercial bank commitment to
profit maximization and CSR underscores its role as a responsible corporate citizen and a driver
of positive change in the communities it serves. Through a strategic balance of financial
performance and social impacts, Kenya Commercial Bank aims to achieve sustainable growth
while making a meaningful difference in the society.
b) Describe ethical considerations that the bank can put in place in everyday Business.
(10mks).
Kenya commercial bank should prioritize the fair treatment of customers by ensuring that all
individuals and businesses are treated with respect, integrity and fairness. This involves avoiding
discriminatory practices, providing unbiased financial advice and resolving customer complaints
promptly and fairly.
Kenya commercial bank should adhere to responsible lending practices to prevent over
indebtedness and protect customers from financial harm. This includes conducting a thorough
credit assessment Accessing borrower’s ability to pay loans and offering sustainable loan
products tailored to customers’ needs and financial circumstances.
Kenya commercial bank should prioritize the protection of customer data and privacy by
implementing robust data security measures and complying with data protection regulations.
This involves safeguarding sensitive customer information, obtaining consent for data collection
and processing and preventing unauthorized access or misuse of personal data.
Kenya comment bank should comply with Anti Money Laundering and Counter terrorists
financing regulators to prevent the bank from being used for illicit activities such as Anti Money
Laundering and terrorist financing. This includes implementing robust Know Your Customer
procedures, monitoring transactions for suspicious activity and reporting suspicious transactions
to relevant authorities.
7. Corporate Governance
Kenya commercial bank should maintain strong corporate governance practices to ensure
effective oversight and management of banks operations. This includes establishing independent
board oversight, promoting diversity and inclusion in leadership positions and maintaining high
ethical standards among employees and management.
Kenya commercial bank should actively engage with communities it serves and contribute
positively to social and economic development. This involves supporting community
development initiatives, investing in education and skills development programs and
participating in activities that benefit the society.