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State Influence in Corporate Governance

Institutional culture is often split between rule and principle-based approaches. Good corporate governance is primed by the type of institutional conformations, potentials, and emerging industrial elements. It’s through this framework that the company’s management philosophy, what its goals are, and how it interacts with its stakeholders are determined.

The government play a crucial role in corporate governance through regulatory and supervisory functions. Government agencies such as the Registrars of Companies, the Capital Market Authority, the Insurance Regulatory Authority, and most importantly, the Office of the Attorney General are responsible for creating and enforcing laws and regulations that govern the behaviours of companies and their executives. These laws and regulations aim to promote transparency, accountability, and ethical behaviour in corporate governance.

One way in which the state is influencing corporate governance is through the establishment of corporate governance codes and guidelines. Mwongozo; The Code of Governance for State Corporations provides a framework for parastatals to follow in their governance practices. They set out best practices for board composition, stakeholders rights, and risk management.

Additionally, the state influences corporate governance through oversight of corporate activities. The government has the power to investigate and penalize companies that violate laws and regulations. This helps to deter misconduct and promote compliance with set corporate standards. The government encourages shareholder activism by providing a legal framework for shareholder rights.

However, the role of the state in corporate governance is not without challenges. State intervention in corporate governance can lead to excessive bureaucracy and interfere with efficient functioning. To strike a balance, a more proactive approach should be employed in promoting ethical behaviour and sustainability.

The role of the government in corporate governance is an important factor in promoting transparency, accountability, and ethical behaviour in corporate practice. The government’s regulatory and supervisory functions help to ensure that companies operate in a responsible manner and comply with set standards. However, the oversight should be balanced to avoid bureaucracy and interference with the efficient functioning of market forces.