Corporate Governance and Access to Finance - ESBG

While the members of the Board may be re-appointed once their 3-yearterm is over, management tends to be very stable. As a result, and incontrast with normal private institutions, the Board may tend to focus inshorter term issues and management in the long term. However bothmanagement and the Board are involved in the strategic planning sessionwhere the strategic direction is set.The Government of Kenya has adopted as a policy, the application ofPerformance Contracts in the management and monitoring of the PublicService. This is a management tool to foster accountability to the publicfor targeted results. A performance contract is a mutually agreeddocument between the government and the public company thatspecifies the responsibilities, commitments and obligations of bothparties to the agreement. It lists the key result areas, the level ofperformance expected towards achievement of agreed targets, and howthis performance will be measured. All public institutions are ranked byexcellence in performance by using a compound score. The betterperforming earn special recognition, through trophies and other tokenawards while the worse performers, though publicly shamed, areencouraged to improve. The Board also evaluates performance of theManaging Director and its own performance on an annual basis.In the specific case of the KPOSB, a 3-year strategic plan, stating longterm goals, is prepared. The yearly review of this plan leads to an annualAction Plan that includes the short term objectives. The performancecontract is signed between the government and the Board, and thefulfilment of the targets is evaluated by the government on an annualbasis, though reports are submitted on quarterly as well as annual basis.When targets are not met, clarifications and corrective actions/measuresare provided. If they are not satisfactory, the Managing Director issanctioned with possible termination of service.The Board, not the government, appoints and fires first and second levelmanagers, whose performance is evaluated according to the mentionedPerformance Contract which is cascaded from the Board to all managersand subsequently to all staff members. This improves service delivery tothe public by ensuring that senior managers are accountable for results,and in turn they hold those below them accountable. Moreover, all staffis evaluated according to a Scorecard every 6 months (based on theobjectives of the area, derived from the Annual Plan), after which theyget a written review of their performance. Yearly salary increments arerelated to this performance.124