Good corporate governance is a system by which an organization is directed, controlled and held accountable by its shareholders and stakeholders.
In this case, good corporate governance goes beyond compliance with basic legal requirements and instead provides a framework on the establishment of a culture of business integrity, accountability and standardized, best business practices.
The Sacco governance structures consist of Annual General Meeting, Board members, supervisory committee, Audit committee, other Board committees, managers and the staff.
Although governance remains a collective responsibility by all organs of the organization’s structures, it is a different case in Savings and Credit Cooperative Societies (Saccos).
Here the responsibility of good corporate governance is entrusted with the Board of Directors.
The boards are accountable to the shareholders, whom they must engage and report to, the operations of their cooperative regularly.
Corporate governance, leadership and ethics are critical challenges facing the cooperative movement in Kenya, but also across the world.
However, lack of good corporate governance and competent leadership translates to conflict of interest among officials and vicious cycle of leadership wrangles.
In such situations, officials use their positions of power and plot to extend their term of office as a conduit to swindle members’ funds and enrich themselves, hence failing on the accountability or fiduciary duty entrusted to them by the members.
Good corporate governance is paramount because it reflects on the cooperative movement institutions’ principles and values.
Leadership is a critical issue in the cooperative’s success, organizational and management development.
This is due to the cooperative’s quest to deserve visionary, competent, dynamic and professional leadership, owing to the nature of their business operations, structures, ownership, purpose, principles and values for which they are founded.
It is important that Saccos ensure they have in place good corporate governance structures that will enhance effective and efficient operations to cultivate a culture of transparency, accountability, good reputation, profitability and growth.
For these institutions to achieve the objective, they should have a clear understanding of the various governance structures, composition, roles, relationships and responsibilities.
They should be awake to the rationale behind separation of powers, duties and responsibilities.
The Board of Directors acts as the principal governance organ, charged with reporting to members on the operations and progress of their institution.
The directors are elected by members during an Annual General Meeting, during which they constitute committees which include but are not limited to credit/loans, supervisory and audit committees.
The board of directors play a major role in the daily running of the Sacco business operations on behalf of the members.
Owing to their special position in the country’s economy, Saccos act as financial custodians and trustees for members’ deposits and creditors and their corporate governance is critical.
It is imperative to note that the future business growth and sustainability is gauged against their good corporate governance practices.
Their checks and balances of good governance ensures members’ interests are protected.
It is also worth mentioning that good governance is an indicator of the Sacco going beyond the Regulator’s minimum compliance requirements.
It translates to taking a leadership role by putting in place and maintaining best practices that reflect a strong business ethics and ensuring consistent communication among the society’s governance organs.
The good governance practices are crucial in ensuring Saccos are managed by competent personnel at all levels.
It also ensures the promotion of corporate self-discipline within the Sacco’s governance and management structures, enabling the Board and management to make impartial business decisions in the best interest of their members.
However, weak cooperative leadership and governance structures antagonize employees and members, leading to low productivity, high costs of business operations, apathy, low morale, inefficiency and resistance to change within the organization.