Analyzing Corporate Governance Practices (Term Paper Sample)

Analyzing Corporate Governance Practices Student’s Name Course Professor Date Assignment One: Analyzing Corporate Governance Practices Introduction A company's corporate governance procedures are crucial for maximizing shareholder value and long-term commercial performance. With its corporate office located in Embakasi in Nairobi, Kenya Airways is a publicly listed airline. Known for connecting travelers with their destinations, Kenya Airways provides scheduled passenger aircraft services to 75 sites throughout more than 50 countries on three continents, namely Africa, Europe, and Asia (Flykenya, 2017). Kenya Airways is aiming to become a market leader in the area with its dedication to providing top-notch safety and customer service. Kenya Airways is a 3-star airline accredited for the quality and onboard products and employee services (Skytrax, 2023). With a fleet of over 39 aircraft, a network of sales partners, and strategic alliances, Kenya Airways continues to play a crucial position in connecting Africa and the rest of the world. Internal controls that are well-defined, a board of directors, executive compensation, shareholder rights, and transparency policies all affect how the company operates. This paper examines the effectiveness of Kenya Airway’s corporate governance practices in promoting transparency, accountability, and shareholder value. The analysis will include an evaluation of the board of directors, executive compensation, shareholder rights, internal controls, and disclosure practices. Specific suggestions for improvement will be made after identifying the corporate governance's strengths and shortcomings for Kenya Airways. The performance, reputation, and stakeholder relationships of Kenya Airways will be evaluated in connection to the possible effects of good corporate governance. Evaluation of The Governance Practices Board Composition The Kenya Airways board of directors is composed of 11 members and is chaired by the Chief Executive Officer (CEO) (Kenya Airways, 2023). The members represent a range of areas of expertise, including aviation, finance, legal, and administration. With 8 male and 3 female directors, the board is likewise evenly distributed in terms of gender and diversity. As a consequence, the board is diverse in terms of experience, gender, and ethnicity, and its members come from a range of professional backgrounds, including those in administration, law, finance, and aviation. Additionally, as stated in Kenya Airways Board Diversity Policy (2023), Kenya Airways Limited is aware of the significance of establishing and maintaining a board that benefits from diversity in, among other things, academic and professional backgrounds, technical and industry knowledge, gender, backgrounds, experiences, nationality, age, ethnicity, and perspectives to add value to the company and to reflect the diversity of the company's stakeholders. Kenya Airways actively seeks board members with industry experience, technological know-how, and global perspectives to stay abreast of global trends and best practices. Additionally, the board sees to it that everyone is aware of the organization's business plan and long-term objectives. This tactic effectively promotes accountability and good judgment while ensuring that all organization stakeholders are fairly represented. Executive Compensation Kenya Airways has a strong executive compensation strategy in place that is strongly related to results over the long term and performance. A yearly incentive plan for the CEO's salary incorporates short- and long-term objectives. For instance, Allan Kilavuka, the company's CEO since February 2020, received a salary and non-cash perks of 41.55 million in 2020 (Ruto, 2021). Additionally, the business has implemented a share ownership policy requiring senior executives to own stock in the company. The board of directors has also enacted a "clawback" policy that permits top executives to reclaim rewards in cases when the company's performance falls short of expectations. This regulation works as a powerful lever to promote accountability and make sure executive pay is in line with business success. Shareholder Rights Kenya Airways is a public-private partnership where the Kenyan government (48.9%) holds the largest stake (Kenya Airways Limited (KQ.ke), 2022). Kenya Airways promotes shareholder involvement and rights through a thoughtful strategy. The business aggressively seeks new shareholders and contacts them. By offering a thorough set of policies outlining shareholders' rights and obligations, it recognizes the importance of shareholder engagement. These rules provide a roadmap for shareholders, ensuring that they are aware of their responsibilities within the business. Kenya Airways also promotes open dialogue and transparency with shareholders through frequent interaction. For instance, in 2019, Kenya Airways met with the African Airlines Association (AFRAA) for CEO dialogues (African Airlines Association, 2023). To generate transformational ideas for AFRAA's actions, which are built on five pillars, close involvement with member airlines and a platform for conversation are goals of the CEO Dialogues program (African Airlines Association, 2023). The corporation regularly solicits shareholder feedback and invites them to express any issues, viewpoints, or recommendations. Shareholders may actively engage in the decision-making process thanks to this two-way communication channel, which encourages inclusion and responsibility. Kenya Airways releases an annual report to keep stockholders updated on the company's performance. This report provides a thorough assessment of the year's accomplishments, difficulties, and strategic direction for the organization. The business also publishes a financial report that provides a thorough analysis of the company's performance and financial health. These reports are useful sources of information and are easily available to shareholders on the corporate website. A culture of honesty and accountability is promoted through Kenya Airways' commitment to shareholder rights and participation. The company encourages discussion, provides clear policies, and publishes comprehensive information to provide shareholders with the opportunity to actively participate in the decision-making process. The relationship between the company and its shareholders is strengthened by this approach, which also supports a governance structure that is responsive to the interests and concerns of its stakeholders. Internal Controls Kenya Airways exhibits a strong system of internal controls that is made up of many unique systems and processes and is intended to reduce risks and stop fraud. To ensure financial integrity and transparency in its business activities, the company places a great focus on adhering to strict accounting rules and practices. These guidelines guarantee the precise recording, reporting, and dissemination of financial data. Kenya Airways has put in place efficient internal audit and risk management systems to further improve its internal controls. These systems are essential for determining how effective internal control mechanisms are, spotting any weaknesses, and guaranteeing adherence to all applicable rules and regulations. The business may proactively address any flaws and take remedial action by regularly performing audits and risk assessments. Kenya Airways has implemented a "segregation of duties" strategy to reduce the possibility of fraud and collusion. This tactic ensures that important tasks and obligations are shared across several individuals or organizations, reducing the likelihood of illegal behavior and raising general levels of accountability. By separating important activities like authorization, custody, and record-keeping, the company creates a checks-and-balances framework that helps to secure assets and protect shareholder interests. Kenya Airways has put in place these extensive internal control systems to encourage responsibility, safeguard shareholders from possible losses, and foster trust in the business's financial operations and reporting. Disclosure and Transparency Transparency and information sharing are priorities for Kenya Airways. The organization has taken steps to guarantee the prompt and correct publication of its financial accounts. On its website and through public pronouncements, it also offers yearly updates on its operations and financial standing. The business is also dedicated to the idea of "One Channel" communications, which makes sure that all corporate announcements, regardless of channel, are timely and consistent. By using these procedures, shareholders are guaranteed access to the most recent information and the ability to make wise judgments. Strengths and Weaknesses Strengths Kenya Airways exhibits sound corporate governance practices that encourage responsibility, openness, and shareholder benefit. One of the corporation's great assets is the board of directors, which is diverse and well-balanced in terms of gender. This composition allows for more comprehensive decision-making and a better representation of stakeholder interests since it ensures a varied range of perspectives and experiences. A clear executive compensation plan that is based on performance has also been implemented by Kenya Airways. By connecting executive remuneration to important performance indicators and long-term accomplishments, the firm creates a balance between rewarding performance and protecting shareholder value. This ties the interests of executives with those of shareholders. Kenya Airways employs a proactive approach to shareholder engagement, finding new investors and encouraging their active participation in company affairs. This highlights the value of shareholder rights and gives them channels through which to express their opinions, participate in the decision-making process, and hold management respo...