Business Systems in Kenya
Business Systems in Kenya
Business systems do not operate in a vacuum, they operate in an environment of institutions. A theory of business system is derived from this, which acknowledges that business systems differ from country to country because of different historical development of institutions. Four elements are important within an institutional environment:
· Financial institutions
· Social structure
· Market structure
· Technological and innovation systems.
FRAGMENTED BUSINESS SYSTEMS IN KENYA
PUBLIC SECTOR
In general there are three sorts of business sectors in Kenya. Firstly the parastatals, characterized by their monopolistic production. Their management is highly indigenised, appointments of top managers however are often politically motivated. Parastatals is a term applied, especially in Africa, to an organization established by a government but which, through its constitution and budgetary arrangements, enjoys a great degree of operational freedom and insulation from direct political interference. The memorandum and articles of association are the founding documents of the company.
The articles of association define the powers and functions of the different organs. A fairly standard provision in every company's articles is that the business of the firm be managed by the directors and gives the directors the right to exercise all powers.
The exceptions are those that are required by the Companies Act or articles to be exercised by the company in a general meeting. Shareholders in a general meeting can therefore not deprive directors of such powers.
The finance management act prohibits the board of a parastatal from taking certain decisions that directors ordinarily are empowered to take. For instance, a public entity and its accounting authority (the board) is prohibited from participating in a "significant" partnership, trust, unincorporated joint venture or a similar arrangement. It cannot acquire or dispose of a significant asset or, more problematically, make a significant change in the nature or extent of any interest in a partnership, trust or unincorporated joint venture unless it has the prior approval of the minister concerned.
The shareholders' compact also seeks to give shareholders more rights than they would usually have in a private sector firm. While the framework admits boards should have total accountability for all corporate activities, it still states functions such as making decisions on acquisitions, disposals and so on and appointing senior management are functions that are "best performed by the shareholders". The role of the board is reduced to being a participant in such processes.
PRIVATE SECTOR
Secondly the private sector, which is dominated by non-indigenous traders, such as...