No longer can companies focus on interests of shareholders, ignoring impact on others

Kenya Power employee Photo: Courtesy

No person is an island, not even corporate persons. As the Ubuntu philosophy asserts, ‘a person is a person through other people.’

We all depend on relationships to be who we are. Even corporate entities need relationships, not just with their shareholders, but also with their stakeholders to achieve the objectives for which they were incorporated and are in business. In simple terms, this is the essence of relational thinking or at least the point where it connects with corporate governance.

The importance of stakeholders, not just the shareholders, to the business and welfare of every company is no longer in debate. No longer can any company focus on the narrow interests of their shareholders, ignoring their impact on others including staff, suppliers, customers and the wider society.

In as much as the company needs the involvement of its stakeholders to thrive in its business, it has to consider their best interests in its governance. It is no longer enough for company directors to guarantee a good financial return for their shareholders, they are expected to account for the impact their actions and the company has on all its stakeholders.

When a big tree falls, the birds nesting on its many branches lose their abode. So, it is with leading corporate entities. Their thrift or failure, is bound to have a bearing on the immediate community. Therefore, stakeholders have a legitimate interest in the governance of companies that provide them with products and services.

Take Kenya Power for example, as a company whose mission is powering people for better lives, what we do and how we do it, affects virtually every Kenyan not just the government (which has a controlling stake at 50.1 per cent of shareholding) and other shareholders – institutional and individual (owning 49.9 per cent) of the company.

Kenya Power owns and operates most of the electricity transmission and distribution system and sells electricity to over 6.2 million customers.

How Kenya Power as a company undertakes its key mandate to plan for sufficient electricity generation and transmission capacity to meet demand; building and maintaining the power distribution and transmission network and retailing of electricity to its customers affects not only the shareholders but everyone in Kenya.

Kenya Power’s Board of Directors is alive to this fact and endeavours to consistently meet its customers and other stakeholder's requirements and expectations. This is why the Kenya Power Board has been chosen as one of the Model Boards to highlight during the upcoming Mervyn King Governance Summit organised by Institute of Certified Public Secretaries of Kenya (ICPSK) and HESABIKA Trust.

Justice Mervyn King, the key speaker of the Governance Summit, which shall be held next week is arguably the world’s leading authority and voice on corporate governance. He is the author of the King Reports on Corporate Governance.

The governance Summit which is expected to be attended by local and international audience of about 250 delegates from both the private and public sectors cannot have come at a better time. Recently, the legal and regulatory framework in Kenya has recognised the important role of governance audits.

For instance, the Companies Act, 2015 makes it mandatory for all quoted companies to annually assess the extent to which they observe corporate governance policies and strategies. The Code of Corporate Governance Practices for Issuers of Securities to the Public 2015 requires the Board to subject the company to an annual governance audit.

Additionally, Mwongozo, the Code of Governance for State Corporations in Kenya, also requires State Corporations to carry out an annual governance audit. Likewise, the ICPSK Code of Corporate Governance for Private Organisations in Kenya also calls for annual governance audits.

The Summit will explore the concept of relational thinking. Relational thinking is certainly the African contribution to corporate governance because in Africa, relationships rule. And maybe it is time, companies and boards started thinking hard, how and which relationships to prioritise in cultivating good corporate governance. Attending the Governance Summit is a good starting point.

-Beatrice Meso is the General Manager Corporate Affairs and Company Secretary, Kenya Power & Lighting Company Limited, Vice Chairperson of the Council Institute of Certified Public Secretaries of Kenya (ICPSK) and Board Director of Stima Sacco and several other entities.