Mwongozo

Republic of Kenya
MWONGOZO
The Code of Governance for State Corporations
Issued jointly by:
Public Service Commission (PSC)
State Corporations Advisory Committee (SCAC)
January, 2015
i
His Excellency Hon. Uhuru Kenyatta, C.G.H.,
President and Commander - in - Chief of the
Defence Forces of the Republic of Kenya
ii
FOREWORD
T he imperative for Kenya to apply all of her resources to address the national development
challenges is as important today as it was at independence. Today, we face increasing
demands from our growing population, particularly from young people. There is a clear need
to create employment and other opportunities for our people to lead decent and meaningful
lives and for our country to trade and effectively tap the emerging resource boom. Mwongozo
is my call to all public institutions to operate effectively and efficiently in order to assist our
nation to realize our shared goals.
At Independence, we established State Corporations to implement government policies and
execute programmes for economic and social development of our country. The Government
at that time assumed a greater role in the development of critical sectors of our economy to
enhance the participation of citizens in economic activities. However, it became clear over the
years, and with new challenges, that State Corporations have not operated at expected levels
due to weak governance structures as well as other external factors.
By adopting a transformational mindset in the way business is conducted, Government expects
the entities it owns to promote and accelerate economic growth and development, and to drive
the social and economic transformation in Kenya. These State Corporations need to support
our efforts by building the institutional and technical capacity of the state in facilitating and
promoting national development; improving the delivery of public services to meet the basic
needs of citizens; supporting the creation of employment opportunities in diverse sectors across
the entire country and supporting the nation’s regional integration initiatives and international
partnerships.
As a major milestone, the Constitution of Kenya, 2010 has taken significant steps to address
the question of leadership, governance and management of public resources. The success of
State Corporations is premised on the Government’s role in ensuring that public institutions
are effectively led and managed. To achieve these ends, we have developed Mwongozo, a
Code of Governance for State Corporations aligned to the Constitution, that I am proud to
issue. We need to implement Mwongozo in order to increase efficiency and accountability in
the use and deployment of scarce public resources. Mwongozo allocates responsibilities for
supervision, implementation and enforcement to different institutions while respecting the role
of complementary agencies.
My Government is committed to the full implementation of all the provisions of Mwongozo
and will accord the process all the support required to ensure that State Corporations deliver
the expected outcomes that we all desire. I therefore call upon all of us in the public sector to
adhere to Mwongozo. My issuance of Mwongozo should not be seen as an end in itself but as the
first step towards propelling our governance ethos to the international arena. My Government
is particularly eager to ensure that Kenya accedes to the Convention of the Organization for
Economic Cooperation and Development (OECD) in the near future for purposes of entrenching
corporate governance. In this regard, I will shortly be issuing Mwongozo as Regulations under
section 30 of the State Corporations Act, Cap 446.
His Excellency Hon. Uhuru Kenyatta, C.G.H.,

President and Commander-in-Chief of the
Defence Forces of the Republic of Kenya
December 2014.
iii
Joseph K. Kinyua, CBS
Chief of Staff and Head of Public Service
Prof. Margaret Kobia, PhD, CBS

Chairperson, Public Service Commission
iv
PREFACE
P arastatal reforms currently taking place in Kenya are a deliberate Government response
to the need for more effective utilization of public resources in the face of rising societal
needs. These reforms are targeted at achieving improvements in public service delivery as part
of the wider public reforms. To address the challenges of governance in State Corporations,
the Government developed Mwongozo as a critical building block in entrenching principles
and values of public service and best practices in corporate governance.
The governance challenges faced by State Corporations are relatively easy to identify. What
is needed is clear political leadership and commitment to change. For instance, a high level
of political affiliation and insufficient competence in Boards of State Corporations is a result
of an opaque appointment process. A professional and independent Board is more likely to
safeguard a State Corporation from political interference, lead to more efficient operations
through well-defined strategy and ultimately result in increased value-for-money to the
shareholders, that is, the public.
The state as the owner has established its overall expectations and set mandates for State
Corporations which have been given operational autonomy and insulated from political
interventions. The role of oversight institutions has been enhanced to monitor, consolidate
and share information across government. Mwongozo recognizes that the most important
tool for improving corporate governance is to appoint professional Boards with well-defined
skillset; undertake board induction and evaluation and require regular performance reports.
The reduction in the size of the Boards and the increase in the number of independent Board
members is therefore a game changer in boardroom affairs.
Mwongozo addresses matters of effectiveness of Boards, transparency and disclosure,
accountability, risk management, internal controls, ethical leadership and good corporate
citizenship. These practices are at the core of the values and principles of Public Service as
enshrined under Article 232 of the Constitution of Kenya, 2010. Mwongozo further provides
a platform for addressing shareholder rights and obligations and ensuring more effective
engagement with stakeholders. More importantly, Mwongozo will ensure that sustainability,
performance and excellence become the hallmark of management of State Corporations.
Mwongozo lays a firm foundation for the management, governance and oversight of State
Corporations. It is firmly grounded in our constitutional values and principles as well as best
global practices. Mwongozo builds on gains realized from past reform efforts in the State
Corporations sector. It is hoped that implementation of Mwongozo will result in effective and
efficient State Corporations that deliver value to Kenyans in a transparent and accountable
manner. The Mwongozo framework will lead to a positive impact on the Country’s national
budget while improving the public’s perception of quality and delivery of public service. It is
therefore the Government’s determination that all the provisions of Mwongozo be fully and
meticulously implemented by the State Corporations Advisory Committee (SCAC).
Joseph K. Kinyua, CBS Prof. Margaret Kobia, PhD, CBS

Chief of Staff and Head of Chairperson, Public Service
Public Service Commission

v
MEMBERS OF THE PARASTATAL REFORM
IMPLEMENTATION COMMITTEE
Mr. Joseph Kinyua, CBS.

Chief of Staff and Head of
Public Service
Chairman of the Implementation
Committee
Ms. Marianne Kitany, Dr. Kamau Thugge, Mr. Stephen Kirogo, Hon. Abdikadir Mohamed Mr. Issac Awuondo
Chief of Staff, office of PS, National Treasury Principal Admin. Senior Advisor to the President Group Managing Director,
the Deputy President Secretary/ Assistant and Head Constitutional and Commercial Bank of Africa
Secretary to the Cabinet Legislative Affairs office
Dr. Mbui Wagacha, Mr. Nelson Kuria, Dr. Korir Sing’oei, Ms. Christine Agimba Ms. Jane Mugambi
Senior advisor to the President, and Group CEO, CIC Legal Advisor to the Deputy Deputy Solicitor Secretary, SCAC/
Head of Economic Affairs office /Ag. Insurance Group President/Head LILO General Implementation Committee
Chair Central Bank of Kenya
vi
ACKNOWLEDGMENTS
M any dedicated public sector officers and private sector experts contributed to the
development of Mwongozo. It is not possible to list by name every person and institution
whose ideas, expertise and time went into the production of Mwongozo. However, the
following deserve special mention.
High commendation goes to His Excellency The President, Hon. Uhuru Muigai Kenyatta,
CGH, for the honour and trust bestowed on the Parastatal Reforms Implementation Committee
to spearhead the reforms in the State Corporations Sector. His Excellency The President
conceived the structural transformation, which led to his appointment of the Presidential
Taskforce on Parastatal Reforms. He subsequently adopted the Taskforce Report and the wide
ranging reform recommendations. He steered the reform process further through regular
follow up, and gave direction for the development of Mwongozo.
Mwongozo is ultimately an integral part of the reform recommendations developed by
the Presidential Taskforce on Parastatal Reforms that was co-chaired by Hon. Abdikadir
Mohammed and Mr. Isaac Awuondo. The bold and radical reform measures that the Taskforce
recommended heralded the birth of Mwongozo.
Many thanks also go to Mr. Joseph Kinyua, CBS, Chief of Staff and Head of the Public Service
who ably took up the mantle of chairing the Implementation Committee appointed by H.E The
President to oversee the implementation of the recommended reforms. Indeed Mwongozo is a
critical output of the implementation process. The Chairman led a dedicated team that tirelessly
put in their best to ensure that all the provisions in Mwongozo are sound and consistent with
international best practice. The membership of the Committee comprised of Ms. Marianne
Kitany, Dr. Kamau Thugge, Hon. Abdikadir H. Mohamed, Mr. Stephen Kirogo, Mr. Isaac
Awuondo, Mr. Nelson Kuria, Dr. Mbui Wagacha, Dr. Korir A. Sing’oei and Ms. Christine
Agimba. The Secretariat was headed by Mrs. Jane Mugambi while the Joint Secretaries were;
Mr. Simon M. Indimuli, Mr. Hamisi M. Williams, Ms. Grace Wandera, Dr. Eric Aligula, Mr.
Alexander George Owino, Mr. Brian Ikol, Mr. Morris Kaburu and Ms. Catherine Ochanda.
The Public Service Commission (PSC) under the Chairmanship of Prof. Margaret Kobia
reviewed the Code to ensure that it promotes the values and principles set out in Articles 10
and 232 of the Constitution of Kenya, 2010.
We are also thankful to the Chairman of the Constitutional Implementation Committee
for validating the values and principles in Mwongozo and providing for these under the
Government Owned Entities Bill, 2014 which was reviewed by the Commission. Towards this
end, the Vice Chairperson, Dr. Elizabeth Muli, convened various round-table sessions and her
professionalism in the exercise was exemplary. The World Bank team, led by Alexander Berg
provided valued benchmarks, thereby enriching the Code.
The State Corporations Advisory Committee (SCAC) through its Chairman Mr. Arthur Namu and
the Secretary, Mrs. Jane Mugambi, was critical in facilitating the entire process. SCAC engaged
the Institute of Certified Public Secretaries of Kenya (ICPSK) to assist in the development and
validation of Mwongozo. The Institute, being the legally recognized professional corporate
governance body in Kenya, guided the professional development of Mwongozo under the
chairmanship of Ms. Catherine Musakali, who tirelessly engaged with various stakeholders
to ensure that the provisions in Mwongozo are acceptable and conform to international
standards.
vii
“Good governance must be well
viii
coordinated and orchestrated.”
Uhuru Park Fountain - Nairobi County

Photo courtesy: National Museums of Kenya
Table of Contents
Foreword............................................................................................................................ iii
Preface................................................................................................................................v
Acknowledgments............................................................................................................. vii
Abbreviations...................................................................................................................... x
Introduction and background ............................................................................................ xi
CHAPTER 1 : The Board of Directors...................................................................................1
CHAPTER 2 : Transparency and Disclosure........................................................................16
CHAPTER 3 : Accountability, Risk Management and Internal Control................................20
CHAPTER 4 : Ethical Leadership and Corporate Citizenship..............................................25
CHAPTER 5 : Shareholder Rights and Obligations.............................................................28
CHAPTER 6 : Stakeholder Relationships............................................................................31
CHAPTER 7 : Sustainability and Performance Management...............................................34
CHAPTER 8 : Compliance with Laws and Regulations.......................................................36
CONCLUSION..................................................................................................................37
ANNEXURE I: Sample Board Charter.................................................................................39
ANNEXURE II: Code of Conduct and Ethics.......................................................................51
Glossary............................................................................................................................57
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ABBREVIATIONS
BCP Business Continuity Plan

CEO Chief Executive Officer
CMA Capital Market Authority
CoK Constitution of Kenya
EACC Ethics and Anti- Corruption Commission
ICPSK Institute of Certified Public Secretaries of Kenya
ICT Information Communication Technology
OECD Organization for Economic Co-operation and Development
PSC Public Service Commission
SC State Corporation
SCAC State Corporations Advisory Committee
SMART Specific, Measurable, Attainable, Realistic, and Time Bound
SRC Salaries and Remuneration Commission
x
INTRODUCTION AND BACKGROUND
Corporate governance is the structure and system of rules, practices and processes by which
an organization is directed, controlled and held accountable. It encompasses authority,
accountability, stewardship, leadership, direction and control exercised in organizations.
Corporate governance essentially involves balancing the interests of the many stakeholders
in an organization. These include its shareholders, management, customers, suppliers,
financiers, government and the community. Corporate governance also provides the
framework for achieving the objectives of the organization, and creates benchmarks for the
measurement of corporate performance and disclosure.
The weak financial performance of the majority of SCs in Kenya has been attributed to an
inadequate governance framework. The Presidential Taskforce on Parastatal Reforms noted
in its report that SCs operate under a governance structure that was complex, involving
relationship between Parliament, Ministries, Boards and CEOs. This complexity has been
a source of confusion and conflict, particularly in the allocation of responsibilities, and in
accountability for results. The improved performance and viability of SCs will require the
development of an appropriate governance framework.
In recommending the development of a consolidated code of governance for SCs, the
Taskforce identified the challenges that needed to be resolved. These were set out as: absence
of a clear framework for recruitment, selection, appointment and inductions of Boards of
SCs; lack of uniformity in the application of appointment procedures; inadequate induction
processes for Board members; lack of proper skills mix and bloated Boards; shortcomings in
the process of appointment of CEOs; lack of understanding of the role of Boards by directors;
and fusing of the roles of the Chief Executive and Board Secretary.
This Code of Governance is anchored on the Constitution of Kenya, 2010. Article 10 of
the Constitution entrenches national values and principles of governance while Article 73
places emphasis on public trust, honor and dignity of public offices. Personal integrity, and
values and principles of public service are reinforced in Article 232, which also provides for
efficiency, effectiveness and economic use of resources. The Code takes into consideration
Chapter Six of the Constitution on Leadership and Integrity as well as the Public Officers and
Ethics Act, 2003.
The achievement of Vision 2030, Kenya’s long term development blue print requires full,
transparent and accountable participation of SCs. Good corporate governance is therefore
crucial in transforming SCs into engines of economic development and social wellbeing in the
country. Further, good corporate governance promotes value enhancement for stakeholders
including the public and the governments, thus ensuring that benefits flow to every aspect
of the economy. Good corporate governance in the public sector in the country will result
in accelerated development and fast track the transformation of the Kenyan economy into a
newly industrialized country by 2030.
Global best practices demonstrate the strong linkage between good governance and
enterprise growth and profitability. The institutionalization of good governance practices in
the leadership and governance of SCs is therefore expected to spur growth, development,
employment creation and economic transformation of the country.
In recognition of the mandate and the role of the Institute of Certified Public Secretaries
of Kenya in championing good corporate governance, the Implementation Committee of
the Presidential Taskforce recommendations requested the State Corporations Advisory
xi
Committee jointly with the Institute to develop the Code of Governance for SCs. The Code
takes into account the national context of the economic, social and political development,
particularly, Vision 2030; and the Constitution of Kenya, 2010. It also includes lessons
learned from international best practice in good corporate governance.
This Code of Governance therefore seeks to improve the governance of SCs by addressing
the challenges identified by the Taskforce, and to pro-act to international best practice
in corporate governance. In this respect, the Code incorporates lessons learned in the
development of similar codes in United Kingdom, South Africa, Malaysia, Singapore and
India. Specific provisions in the Malaysian Code of Corporate Governance, (2012), the King
Code of Governance for South Africa (King III), (2009), and the SCAC Guidelines (2004), have
been reviewed for their relevance to Kenya’s SCs. Appropriate principles and practices have
been incorporated in this Code, with modifications as necessary. Reference has also been
made to the Corporate Governance Regulations of the Capital Markets Authority (CMA) and
relevant principles and practices adopted, as necessary. This Code has incorporated some
principles benchmarked from best practices by the SCAC Taskforce (2011) from China, South
Africa, Singapore and Malaysia.
The Corporate Governance framework developed into this Code embodies the six principles
of good governance developed by OECD, and which are now global benchmarks for
corporate governance principles. These are: ensuring the basis for an effective corporate
governance framework; the rights of shareholders and key ownership functions; the equitable
treatment of shareholders; the role of stakeholders; disclosure and transparency; and the
responsibilities of the Board. Further, the Code also takes into account the 2005 OECD
Guidelines on Corporate Governance of State-Owned Enterprises, which were meant to cater
for governance of state corporations. The governance guidelines include requirements that:
State-owned enterprises should observe high standards of transparency in accordance with
OECD principles of corporate governance; the boards of state-owned enterprises should have
the necessary authority, competencies and objectivity to carry out their function of strategic
guidance and monitoring of management; and members of the Board are required to act with
integrity and be held accountable for their actions.
This Code of Governance is organized into eight chapters as follows:
• Chapter One - The Board of Directors
• Chapter Two - Transparency and Disclosure
• Chapter Three - Accountability, Risk Management and Internal Control
• Chapter Four - Ethical Leadership and Corporate Citizenship
• Chapter Five - Shareholder Rights and Obligations
• Chapter Six - Stakeholder Relationships
• Chapter Seven - Sustainability and Performance Management
• Chapter Eight - Compliance with Laws and Regulations
Each Chapter has an overarching governance statement; the principles, which are the
underlying basis of the governance parameter; and the practices, which are the drivers of
good governance in SCs.
xii
This Code will be implemented on a “comply or explain” basis. The “comply or explain”
approach recognizes that at the implementation of Mwongozo, SCs will be at different
levels of compliance with corporate governance norms. This approach therefore allows
organizations time to fully comply at a pace that is realistic in their circumstances and to learn
from the experience of others, whilst at the same time taking responsibility and ownership for
any non-compliance. While full compliance is expected, the approach positively recognizes
that a satisfactory explanation, coupled with a roadmap to full compliance will, in certain
circumstances be acceptable. This requires that the disclosures for non-compliance will need
to be detailed and Boards will be held to account for any explanations given.
In the event that the provisions of this Code are in conflict with any sector specific code of
governance, the higher standard shall prevail.
xiii
“Peace, Love and Unity is the
bedrock of good governance
that propels us to greater
heights of performance.”
Uhuru Gardens - Nairobi County

Photo courtesy: Kenya Yearbook Editorial Board
xiv
CHAPTER 1
THE BOARD OF DIRECTORS

Governance Statement
To achieve its strategic objectives, the organization should be led by an effective Board.
The Board should be composed of competent, diverse and qualified members capable
of exercising objective and independent judgment. The Board should have appropriate
autonomy and authority to exercise its functions and should be accountable to shareholders
and act responsibly towards stakeholders.
Governance Principles
1. The composition and size of the Board should provide a diversity of gender, competencies
and skills required for the effective leadership of the organization.
2. The Board should provide strategic direction to the organization, exercise control and
remain accountable to shareholders.
3. The Board should ensure that Board members are inducted and that their skills and
knowledge are continually developed to enhance effectiveness.
4. The performance of the Board, its committees and individual directors should be
evaluated annually.
Governance Parameter Governance Practice

1.1 Appointment, 1. Board appointments shall be made in line with
Composition and Size Article 27 of the Constitution of Kenya.
2. The Board should be appointed through a
transparent and formal process governed by the
overriding principle of merit.
3. The Board membership of all SCs shall be between
seven and nine members.
4. The Chief Executive Officer shall be a Board
member with no voting rights.
5. Board appointments should take into consideration
the mix of skills and competencies required for the
achievement of the organization’s long-term goals.
The Code of Governance for State Corporations 1

6. At least one Board member should be a financial
expert, meaning that he or she has the necessary
qualifications and expertise in financial
management or accounting and is a bona-fide
member of a professional body regulating the
Accountancy profession, and in compliance with
the requirements thereof.
7. At least one third of the Board members shall be
independent upon appointment and maintain their
independence during their term of service on the
Board.
8. For purposes of 1.1 (7) above, and 3.4(2) below, a
Board member shall be considered independent if
he/she:
(a) Is not in the Service of the National Government
or any of the County Governments or of any
statutory body or anybody or institution owned
or controlled by the National Government or any
County Government and who is not connected
or does not have any other relationship,
whether pecuniary or otherwise, with the SC,
its associated companies, subsidiaries, or any
holding company;
(b) Has not been employed by the SC in an
executive capacity within the last five (5) years;
(c) Is not associated to an advisor or consultant to the
SC or a member of the SC’s senior management
or a significant customer or supplier of the SC;
(d) Has no personal service contract(s) with the SC
or a member of the SC’s senior management;
(e) Is not a member of the immediate family of any
person described above.
9. The chairpersons of all SCs shall be appointed
by the President and shall at a minimum possess
the qualifications, skills and experience set out in
Attachment I.
10. The Board members of SCs shall be appointed by
the Cabinet Secretary of the parent ministry and
shall at a minimum possess the qualifications, skills
and experience set out in Attachment I.
11. Each Board member shall be formally appointed to
the Board through a Gazette Notice and thereafter
an appointment letter.
12. Board members shall be appointed by name, and
shall sit on the Board in their individual capacity
with no power to appoint alternates.
13. Each Board member shall signify their acceptance
2 The Code of Governance for State Corporations

of the appointment in writing.
14. The appointing authority shall ensure that any
person appointed to the Board of a SC satisfies the
fit and proper requirements.
15. The Board may recommend the removal of
a member based on non-performance, non-
attendance of meetings, unethical conduct or as
set out in any constitutive documents or applicable
law.
1.2 Role and functions of the 1. The Board should:

Board (a) Exercise their role collectively and not
individually.
(b) Determine the organization’s mission, vision,
purpose and core values.
(c) Set and oversee the overall strategy and approve
significant policies of the organization.
(d) Ensure that the strategy is aligned with the
purpose of the organization and the legitimate
interests and expectations of its shareholders
and other stakeholders.
(e) Ensure that the strategy of the organization is
aligned to the long term goals of the organization
on sustainability so as not to compromise the
ability of future generations to meet their own
needs.
(f) Approve the organizational structure.
(g) Approve the annual budget of the organization.
(h) Monitor the organization’s performance and
ensure sustainability.
(i) Enhance the corporate image of the
organization.
(j) Ensure availability of adequate resources for the
achievement of the organization’s objectives.
(k) Hire the CEO, on such terms and conditions
of service as may be approved by the relevant
government organ(s) and approve the
appointment of senior management staff.
(l) Ensure effective communication with
stakeholders.

1.3 Duties of Individual Board 1. Each Board member must:
members
(a) Exercise the highest degree of care, skill and
diligence in discharging their duties.
(b) Act in the best interest of the organization and
not for any other purpose.
(c) Act honestly at all times and must not place
themselves in a situation where their personal
interests conflict with those of the organization.
(d) Exercise independent judgment at all times.
(e)
Understand and accept the principle of
collective responsibility.
(f) Devote sufficient time to carry out their
responsibilities.
(g) Regularly update their knowledge and enhance
their skills.
(h) Promote transparency and accountability at
Board level.
(i) Promote teamwork within the Board and the
organization.
(j) Promote and protect the image of the
organization.
(k) Owe their duty to the organization and not to
the nominating or appointing authority.
(l) Owe the organization a duty to hold in
confidence all information available to them by
virtue of their position as a Board member.

1.4 Role of the Chairperson 1. The Chairperson should:
(a) Provide overall leadership to the Board.
(b) Play a key role in setting the agenda for Board
meetings.
(c) Conduct efficient Board meetings and guide the
Board’s decision-making process.
(d) Encourage Board members to participate fully
in Board deliberations.
(e) Harness the collective skills of the Board and its
committees.
(f) Lead the annual Board Evaluation Process.
(g) Monitor the performance of the CEO and lead
in the evaluation of their performance.
(h)
Maintain close, but independent working
relationship with the CEO.
(i) Ensure appropriate balance of power between
the CEO and the Board.
(j) Be available for consultations with Board
members and the CEO.
(k) Ensure that there is a formal succession plan for
Board members.
(l) Ensure new Board members are inducted
in accordance with the agreed induction
programme.
Encourage Board members to develop their
(m)
skills and competencies.
(n) Promote a positive image of the organization.
(o) Encourage a culture of transparency and
teamwork among Board members.
(p) Act as an informal link between the Board and
shareholders.
(q) Provide quarterly updates on governance
matters and any issues thereof to the responsible
Cabinet Secretary and SCAC.

1.5 Term Limits for Board 1. The tenure of a Board member shall not exceed a
Members cumulative term of six years or two terms of three
years each provided that upon first implementation
of this Code, the appointing authority may extend
the term of not more than a third of the members of
the Board in order to achieve continuity as set out
in 1.13 below.
2. The renewal of a Board Member’s tenure for a
second term should be subject to a favorable
evaluation.
1.6 Multiple Directorships 1. A Board member shall not hold such position in
more than two (2) SCs at any one time to ensure
effective participation in the Board.
2. A Chairperson of a SC shall not hold such position
in any other SC concurrently, in order to allow them
devote sufficient time to steering the Board.
1.7 Committees of the Board 1. The Board should:

(a) Establish not more than four committees of the
Board provided that the Board shall be at liberty
to establish such ad-hoc committees as required
to deal with any ad-hoc matters requiring
focused attention such as the recruitment of the
Chief Executive Officer.
(b) Establish an Audit Committee, and a maximum
of three other committees (by whatever name
called), to discharge the following functions:
i. Governance v. Technical matters
ii. Risk vi. Strategy
iii. Compliance vii. Human Resources.
iv. Finance

(c)
Provide Terms of Reference for each
committee which should set out, as a
minimum, objectives, delegated authority,
operations and reporting mechanism to the
Board.
(d) Review the mandate of the committees
periodically.
(e) Determine the frequency of committee
meetings.
(f) Appoint the chairperson of each committee.
(g) Annually review the effectiveness and
performance of its committees.
2. The Chairperson of the Board should not be a
member of any committee save for an ad hoc
committee.
3. Committee members should have the necessary
skills and expertise to execute their responsibilities.
4. Where required skills are not available to the
committee, the Board may, with the approval of the
oversight body, co-opt non-Board members to the
committee.
5. The committees shall make recommendations to
the Board

1.8 Board Meetings 1. Board members should:
(a) Dedicate adequate time and effort for meetings.
(b) Meet as regularly as required and at least quarterly
in order to effectively lead the organization.
2. The Chairperson shall chair all Board meetings and
in their absence or inability to chair for whatever
reason, the members present shall appoint one of
their number to preside over the meeting.
3. The quorum for Board meetings shall be five
members where the total Board membership is
eight to nine and four where the total membership
is seven and below.
4. Board papers should be made available to Board
members not less than ten days before the date of
the meeting.
5. The Corporation Secretary should attend all Board
meetings and in their absence or inability to attend
for whatever reason, the Board will appoint a
Secretary for the meeting from amongst the staff of
the Corporation.
1.9 Board Work Plan 1. Board members should ensure the development of
an annual Board work plan.
2. The Board work plan should at a minimum focus
on:
(a) A review of management’s implementation of
strategies, policies and plans.
(b) Risk Assessment and Management.
(c) Budgeting and Financial Management.
(d) Quality Assurance Processes.
(e) Board Evaluation.
(f) Strategic planning and review.
(g) Governance and compliance.
(h) Competence development for Board members.

1.10 Board Induction and 1. The Board should:
Continuous Skills
(a) Develop an induction programme for new Board
Development
members.
(b) Ensure that a competence needs assessment
is carried out and an annual development
programme for a minimum of two days per
Board member is put in place.
2. Board members should:
(a) Ensure they are up-to-date with continuous
professional development in their respective
professional bodies.
(b) Receive regular briefings on matters relevant
to the business of the organization, changes
in laws and regulations including government
accounting policies and practices.
(c) Be certified by an accredited body within six
months of their appointment.
1.11 The Board Charter 1. The Board should develop and adopt a Board
Charter.
2. The Board Charter should define the role,
responsibilities and functions of the Board in the
governance of the organization.
3. The Board should periodically review its Board
Charter.
1.12 Board Evaluation 1. The Board should:
(a) Determine its performance criteria.
Undertake an
(b) annual evaluation of its
performance.
2. The evaluation should cover the Board as a
whole, its committees, individual members, the
chairperson, the Chief Execution Officer and the
Corporation Secretary.

3. It is the responsibility of the Oversight body to
facilitate the annual evaluation.
4. The annual evaluation should result in a report with
recommendations for implementation.
5. The evaluation report should be shared with the
relevant stakeholders.
6. The re-appointment for a subsequent term for
any Board member or CEO shall be based on a
favourable evaluation as spelt out in the evaluation
tool.
1.13 The Governance Audit 1. The Board, in consultations with the Oversight
Office, should ensure that it subjects the
organization to an annual governance audit by
a member regulated by the Institute of Certified
Public Secretaries of Kenya (ICPSK) and accredited
for that purpose.
2. The governance audit should among other areas
cover the governance practices of the organization
in the following parameters:
(a) Leadership and strategic management;
(b) Transparency and Disclosure;
(c) Compliance with Laws and Regulations;
(d) Communication with stakeholders;
(e) Board independence and governance;
(f) Board systems and procedures;
(g) Consistent shareholder and stakeholders’ value
enhancement; and
(h) Corporate social responsibility and investment.
1.14 Succession Planning 1. The appointing authority should ensure that

the tenures of Board members are staggered to
ensure a phased transition.

1.15 Board Remuneration 1. The relevant authority should establish a formal
and transparent remuneration policy and
remunerate Board members fairly, ethically and
responsibly.
2. The relevant authority should ensure that the
remuneration policy is linked to performance.
3. The remuneration policy for Board members
should clearly stipulate the elements of
such remuneration including director’s fees,
attendance allowances and bonuses.
1.16 Board Independence 1. Board members should:

(a) Exercise independent judgment in discharging
its duties.
(b) Disclose all real or perceived conflicts of interest
and manage these within an agreed framework.
(c) Be free to seek independent advice in connection
with their duties following an agreed procedure.
(d) Not have served in the same organization as an
employee until a minimum period of five years
has elapsed.
2. Board members nominated by stakeholders
should recognize that they owe their duties
to the organization and not their nominating
authority.
1.17 Liability 1. Board members should be held liable for their

acts and omissions arising from their negligence,
default, breach of duty or breach of trust.
1.18 Appointment of the CEO 1. The Board should:

(a) Appoint and remove the CEO.
(b) Ensure that the CEO is recruited through a
competitive process.

(c) Ensure that the CEO possesses the minimum
qualifications and experience set out in
Attachment I.
(d) Define and approve authority levels for the CEO.
(e) Set the performance targets of the CEO.
(f) Ensure that it has put in place a succession plan
for the CEO and other senior management staff.
1.19 The Role of the CEO 1. The CEO shall:
(a) Be responsible for the day-to-day operations of
the organization.
(b) Provide leadership to senior management and
staff.
(c) Prepare the annual budgets and establish proper
internal controls.
(d)
Be responsible for the execution and
communication of the Board’s strategies,
decisions and policies.
(e) Develop and recommend to the Board the
annual business plans for the organization.
(f) Ensure that the organization has an effective
management structure including succession
plans.
(g) Ensure that all Board papers are accurately
written, are relevant and are availed to the Board
members in good time.
(h) Serve as the link between the Board and the
Management.
(i) Be responsible for the achievement of the
objectives of the organizations.
(j) Put in place effective administrative structures,
processes and systems.
(k)
Provide regular, thorough and prompt
communication to the Board on key technical,
financial and administrative matters.
(l) Be responsible for stakeholder management and
the enhancement of the corporate image of the
organization.

1.20 Appointment of 1. The Board should:
Corporation Secretary (a) Be assisted by a qualified, competent and
experienced Corporation Secretary who shall be
competitively recruited.
(b) Appoint and remove the Corporation Secretary.
(c) Ensure that the Corporation Secretary is qualified
in terms of the provisions of the Certified
Public Secretaries of Kenya Act or any statutory
modifications or re-enactment.
(d) Ensure that the Corporation Secretary is a
member of the Institute of Certified Public
Secretaries of Kenya in good standing.
(e) Empower the Corporation Secretary to enable
them effectively carry out their role.
2. The Corporation Secretary’s relationship with
Board members shall at all times be professional.
3. The Corporation Secretary may provide full-time
or part-time services depending on the needs of
the organization.
4. The Corporation Secretary shall not be a member
of the Board.
1.21 Role of Corporation 1. The Corporation Secretary should:
Secretary
(a) Provide guidance to the Board on their
duties and responsibilities and on matters of
governance.
(b) Assist the Board in carrying out the following:
i. Board induction and training
ii. Updating the Board and Committee charters
iii. Preparation of Board work plans
iv. Board evaluation
v. Governance audit
vi. Implementation of the code of conduct and
ethics.
(c) Ensure the timely preparation and circulation
of Board and Committee papers.

(d)
Ensure timely circulation of Board and
Committee minutes.
(e) Be the custodian of the seal of the Organization
and account to the Board for its use.
(f) Maintain and update the register of conflicts
of interest.
(g) Ensure that Board members are aware of all
relevant laws affecting the organization.
(h) Facilitate effective communication between
the organization and the shareholders.
(i) Ensure that annual returns are promptly filed
with the relevant authorities.
(j) Except in exceptional circumstances, ensure
that Board and Committee papers are
circulated in advance of any meeting.
1.22 Separation of Roles 1. The role of the Board should clearly be

separated from that of the Management.
2. The office of the Chairperson and that of the
CEO should be held by different persons.
3. The office of the CEO and that of the
Corporation Secretary should be held by
different persons.

“Always remember that good
governance is founded from
our heritage.”
Photo of Mt Kenya
Gedi Ruins - Kilifi County

CHAPTER 2
TRANSPARENCY AND DISCLOSURE

Transparency and disclosure is an important aspect of corporate leadership and management.

It creates and sustains confidence of investors, stakeholders and the wider society and provides
opportunities for continuous improvement of business structures and processes. These shall
be contained in the State Corporations quarterly and annual reports to be filled with the State
Corporations Advisory Committee.
Governance Principle
The Board shall ensure effective, accurate, timely and transparent disclosure of pertinent
information on the SC’s operations and performance.
2.1 Organizational Vision and 1. The Board shall ensure that the annual report includes
Values a statement on the organizational vision and values
and how these shape corporate behavior.
2.2 Policy on Corporate 1. The Board shall include a statement of policy on good
Governance governance in the annual report.
2. The statement should indicate aspects of the Mwongozo
that have not been complied with and reasons thereof.
2.3 Key Stakeholder Groups 1. The Board should disclose:

(a) The key shareholders and the extent of their
shareholding.
(b) The key stakeholders who may have an influence
on organizational performance and sustainability.
(c) The nature of its engagement with key stakeholders
and the outcome of those engagements in the
annual report.
(d) All relevant information to key stakeholders to
enable them exercise their rights.

2.4 Governance structures 1. The Board should:

(a) Include in the annual report:
i. The governance structure including the
composition and size of the Board, the committees
of the Board and the Management.
ii. Details about Board members including names,
qualifications, date of appointments, terms
served, other board memberships and any other
relevant information.
(b) Disclose a summary of the Board evaluation
results.
2.5 Board Performance and 1. The Board should disclose:

Remuneration Structure (a) In the financial statements, the remuneration of
directors, individually and collectively.
(b) The salaries and remuneration of the Chief
Executive Officer and the senior management.
(c) A summary of the Board evaluation results.
2.6 Code of Ethics and Conduct 1. The Board should disclose:

and Whistle-Blowing Policy (a) The Code of Ethics and Conduct of the organization
on the website of the organization.
(b) The policy of the organization on conflict of
interest.
(c) The policy of the organization on whistle blowing
on the website of the organization.
(d) To what extent the Code of Ethics and Conduct,
Conflict of Interest and whistle-blowing policies
have been effective in tackling unethical behavior
in the organization.
2.7 Key Organizational Risks 1. The Board should:

(a) Disclose in the annual report, the policy of the
organization on risk management.
(b) Disclose in the annual report, the key risks to
which the organization is exposed.
(c) Ensure complete, timely, relevant, accurate and
accessible risk disclosure to stakeholders.

2.8 Financial Reporting 1. The Board should disclose:

(a) In the annual report, the Management Discussion
and Analysis which sets out:
i. The assessment of Management of the factors that
affected the organization’s financial condition
and results of operation over the period under
review; and
ii. Known trends which are reasonably likely to have
a material effect on the financial condition and
results of operations in the future.
(b) That it has complied with applicable financial
reporting standards in preparing the financial
statements.
(c) Any deviation from financial policies.
(d) Related party transactions.
2.9 Corporate Citizenship 1. The Board should disclose the organization’s policy on
corporate social responsibility and investment.
2.10 Procurement 1. The Board should disclose:

(a) The policy of the organization on procurement.
(b) The top ten contracts of the organization in terms
of value.
(c) The number of legal challenges to procurement
decisions including details of any that may have
been successful.
2.11 Compliance with Laws, 1. The Board should disclose:

Regulations and Standards (a) The extent of compliance with Laws, Regulations
and Standards.
(b) Material departure from compliance, the cause of
non-compliance and the measures to address the
same.
2.12 Sustainability Reporting 1. The Board should:

(a) Include a commentary on sustainability in the
half-yearly and Annual Report.
(b) Disclose if the organization is a going concern
based on the Triple Bottom Line concept.
(c) Disclose to stakeholders the major sources of
revenue and items of expenditure.

“Good governance glues us
together with a common fort.”

Thimlich Ohinga - Migori County
19
CHAPTER 3
ACCOUNTABILITY, RISK MANAGEMENT AND
INTERNAL CONTROL
The Board has the responsibility of ensuring that the organization has adequate systems and
processes of accountability, risk management and internal controls.
Governance Principles
1. The Board should ensure the timely preparation of accurate financial statements.
2. The Board should ensure that effective processes and systems of risk management and
internal controls are in place.
3. The Board should ensure that the procurement process is cost-effective and delivers value
for money.
3.1 Financial Reporting 1. The Board should:

(a) Ensure that the books of accounts are prepared on
a timely basis.
(b) State in the annual report its responsibility for
preparing the report and accounts
(c) Report in the annual financial statements and half-
yearly Management Accounts that the organization
is a going concern, with supporting assumptions
or qualifications as necessary.
(d) Ensure that the external audit of the financial
statements is completed and submitted within
timelines stipulated in any law and Government
policies.
(e) Ensure that an independent, competent and
qualified external auditor conducts the annual
audit of the organization in order to provide an
objective assurance as to whether the financial
statements fairly represent the financial position
and performance of the organization.

3.2 Risk Management 1. The Board should:

(a) Ensure the development of a policy on risk
management, which should take into account
sustainability, ethics and compliance risks.
(b) Set out its responsibility for risk management in the
Board charter.
(c) Approve the risk management policy and the risk
management framework.
(d) Delegate to management the responsibility to
implement the risk management plan.
(e) Monitor that risks taken are within the set tolerance
and appetite levels.
(f) Review the implementation of the risk management
framework on a quarterly basis.
(g) Appoint a Committee responsible for risk
management in the organization.
(h) Ensure that the Committee obtains relevant
technical advice where necessary.
(i) Evaluate the performance of the Committee once
a year.
(j) Establish a risk management function within the
organization.
(k) Ensure that risk assessment is carried out on a
continuous basis.
(l) Receive from the Internal Audit function, a written
assessment of the effectiveness of the system of
internal controls and risk management.
(m) Receive assurance from Management that the risk
management framework is integrated in the daily
activities of the organization.
3.3 Internal Controls 1. The Board should:

(a) Maintain an effective and efficient system of internal
controls.
(b) Set out its responsibility for internal controls in the
Board Charter.
(c) Delegate to management the responsibility of
designing, implementing and monitoring effectiveness
of internal control systems.
(d) Receive from the internal audit function a written
assessment of the effectiveness of the system of internal
controls on a quarterly basis.
(e) Receive from the external auditor an assessment of the
effectiveness of the system of internal control after the
audit process.
(f) Ensure that the internal audit function monitors for
rectification, weaknesses noted by the external auditor.

3.4 Audit Committee and the 1. The Board Committee responsible for audit should
External Auditor oversee the internal audit function and the external
audit.
2. The Board should:
(a) Ensure that the Chairperson of the Audit Committee
is independent.
(b) Ensure that at least one member of the Committee
has relevant qualifications and expertise in
audit, financial management or accounting, with
experience and knowledge in risk management
and is a member of a professional body in good
standing.
(c) Establish an internal audit function.
(d) Ensure that there is an effective risk-based internal
audit system.
(e) Approve the internal audit charter.
(f) Ensure that the internal audit function is
independent.
(g) Ensure that the internal audit function reports to
the Committee.
(h) Ensure that the Head of Internal Audit holds
a Senior position in the management team, is
professionally qualified and is a member in good
standing, of the professional body responsible for
regulating Auditors.
3. The Audit Committee should:
(a) Meet with external auditors at least once a year.
(b) Nominate the external auditor for appointment by
the Shareholders.
(c) Approve the terms of engagement and remuneration
for the external auditor.
(d) Deliberate on and propose solutions for any
material findings in any audit report.
(e) Review the quality and effectiveness of the external
audit process.

3.5 Procurement Process 1. The Board should:

(a) Establish a procurement policy that promotes
sustainability, high ethical standards and best practice.
(b) Establish a procurement function in the organization,
which is managed by competent and professionally
qualified persons of high integrity.
(c) Approve the annual procurement plan, which should
be aligned with the annual budget.
(d) Periodically review the implementation of the
procurement plan.
(e) Receive a quarterly report on the actual expenditure
compared to the budget and demand explanations
from management on any variances.
(f) Ensure that the Committee responsible for risk monitors
risks in the procurement process and that they are
addressed in accordance with the organization’s risk
management policy.
(g) Ensure that there exists a clearly documented audit
trail of procurement activities.
3.6 Information 1. The Board should:

Communication (a) Establish an ICT Policy, which is aligned to the
Technology (ICT) objectives of the Organization.
(b) Establish an ICT function in the organization.
(c) Integrate ICT in the operations of the organization.
(d) Ensure that an appropriate Business Continuity Plan
(BCP) is in place.
(e) Ensure that ICT related risks are identified and
managed.
(f) Utilize ICT in monitoring the performance of the
organization.

“Good governance is like a timeless
24
shelter. The principle never changes.”

Fort Jesus - Mombasa County
CHAPTER 4
ETHICAL LEADERSHIP AND CORPORATE CITIZENSHIP

The operations of the organization should be guided by ethical practices that seek to promote
good corporate citizenship.
The organization should commit to operate ethically and promote corporate social responsibility
and investments.
4.1 Ethics and Integrity 1. The Board should:

(a) Provide ethical leadership in the management of the
organization.
(b) Establish the core values of the organization and
ensure that the values are aligned to the Constitution
of Kenya and underpin sustainable practices.
(c) Ensure that all members of the organization adhere to
the core values.
(d) Ensure that the corporate strategy includes measurable
targets for improving ethical behaviour.
(e) Ensure that the ethical practices of the organization
are effectively monitored.
4.2 Code of Conduct and 1. The Board should:

Ethics (a) Ensure that a code of conduct and ethics is developed.
(b) Ensure that all members of the organization subscribe
to the code of conduct and ethics.
(c) Review the code of conduct and ethics as necessary.
(d) Promote ethical conduct and sanction misconduct.
(e) Ensure that a corporate gifts policy is in place.
(f) Receive from the Committee responsible for
Governance and Compliance, a report on the level
of adherence to the code of conduct and ethics by
members of the organization.

4.3 Conflict of Interest 1. The Board should ensure that a policy on the management
of conflict of interests is in place.
2. Board members shall:
(a) Declare any real or perceived conflict of interest with
the organization upon appointment to the Board.
(b) Declare to the Board any real or perceived conflict of
interest that may subsequently arise.
(c) Not take part in any discussions or decision-making
regarding any subject or transaction in which they
have a conflict of interest.
(d) Not influence in any manner whatsoever decision
making on any matter in which they have interest.
4.4 Corporate Reputation 1. The Board should:

and Image (a) Ensure that the organization develops a strategy on
corporate reputation and image.
(b) Promote a positive image of the organization.
4.5 Corporate Social 1. The Board should ensure:

Responsibility and (a) That a policy on good corporate citizenship is in place.
Investment
(b) That the policy on good corporate citizenship is
implemented.
(c) That a sustainable and appropriate budget is allocated
for corporate social responsibility and investment.
(d) That the organization respects and promotes
sustainable environment.
4.6 Whistle-Blowing 1. The Board should ensure that:

(a) There is a whistle blowing policy in the organization.
(b) The whistle-blowing policy protects and prohibits
victimization of those who disclose or provide
information in good faith.
(c) An independent party is responsible for receiving and
investigating reports received.

“Good governance is worth emulating. It is
the sum total of what an institution becomes.”

27
Siyu Fort - Lamu
CHAPTER 5
SHAREHOLDER RIGHTS AND OBLIGATIONS

The organizations should recognize the rights of all shareholders and in keeping with good
governance practices ensure their equitable treatment.
The Board should protect the rights of all shareholders and optimize shareholder value.
5.1 Ownership Rights and 1. The Board should:

Interests (a) Safeguard the rights of all shareholders.
(b) Ensure that there is an effective shareholder dispute
resolution mechanism.
(c) Ensure that the shareholders receive adequate and
timely information to enable them make appropriate
decisions.
(d) Ensure that the financial statements are presented to
shareholders in time.
(e) Ensure that where approved, shareholders receive
dividends.
(f) Facilitate consultations amongst shareholders on
key issues.
(g) Facilitate shareholders’ education on their rights
and obligations.
5.2 Shareholder 1. The shareholders should:

Obligations (a) Monitor the performance of the Board.
(b) Appoint the Board through a transparent and formal
process
(c) Approve remuneration of the Board members.
(d) Appoint the external auditor.
(e) Attend and participate in the general meetings.
(f) Approve the Financial Statements.
(g) Approve the distribution of profits.
(h) Approve all material transactions.
(i) Provide an environment that allows the Board
to exercise independent judgment and decision-
making.

5.3 Minority Shareholders 1. The Board should:

(a) Facilitate the participation of minority shareholders
in material corporate decisions.
(b) Ensure that minority shareholder rights are
safeguarded.
(c) Encourage minority shareholders to form
shareholder associations to champion their rights
where appropriate.
5.4 Oversight by the State 1. The State Corporations Advisory Committee shall
Corporations Advisory develop and issue guidelines on;
Committee
(a) Board induction
(b) Terms and Conditions of service for Chairpersons,
Board members and staff
(c) Board evaluation
(d) Governance audit
(e) Performance management
(f) Any incentives and rewards for Board members
2. The State Corporations Advisory Committee shall:
(a) Develop and issue any policies, regulations,
standards and such other guidance for the effective
implementation of this Code.
(b) Require evidence on compliance with the code
(c) Determine and enforce any desirable sanctions for
breach of this Code.

“The strength of good governance
30
lies in simplicity and discipline.”

Olorgesaile Prehistoric Site - Kajiado County
CHAPTER 6
STAKEHOLDER RELATIONSHIPS
Stakeholder relationships should be managed in a proactive manner to ensure the realization

of the legitimate interests and expectations of stakeholders and the achievement of corporate
objectives.
The effective management of stakeholder interests creates goodwill, promotes a positive

image of the organisation and enhances the achievement of corporate goals.

6.1 1. The Board should:
Stakeholder
Engagement (a) Carry out stakeholder mapping.
(b) Ensure that a policy on the management of stakeholder
relationships is developed and implemented.
(c) Ensure periodic review of the policy for the
management of stakeholder relationships.
(d) Promote effective communication with stakeholders.
(e) Ensure that stakeholder’ interests, expectations and
their power to influence the operations and direction
of the organization are documented.
(f) Ensure that the reputation of the organization and its
linkage with stakeholders is a regular Board agenda
item.
Stakeholder Rights
(a) Identify the rights of key stakeholders and ensure that
their rights are respected.
(b) Take account of the legitimate interests and
expectations of its stakeholders in its decision-making.
6. 3 1. The Board should:
Dispute Resolution
(a) Ensure that disputes with and among stakeholders are
resolved effectively, efficiently and expeditiously.
(b) Take reasonable steps to encourage stakeholders
to solve their disputes through Alternative Dispute
Resolution mechanisms.

Relationship with
Governments (a) Take proactive steps to manage its relationship with
the National and County Governments.
(b) Disclose in its annual report the nature of the
organization’s engagements with the National and
County Governments and other SCs.
(c) Ensure that policies, practices and strategic plans
of the organization are aligned with Government
directives, National Policies and National
Development Goals, including the Kenya Vision
2030.

“Always remember that selfless
leadership and resilience form the
basis of good governance.”

33
Kapenguria Cells - West Pokot County
CHAPTER 7
SUSTAINABILITY AND PERFORMANCE MANAGEMENT

Organizations should embrace policies that meet the needs of the present without
compromising their ability to sustain their future development needs and objectives.
The goals and objectives of the organization should focus on the long term sustainability of
the organization.
7.1 Sustainability Goals and 1. The Board should:

Strategy (a) Integrate sustainability into the organization’s
strategy and management practices.
(b) Focus on the future sustainability of the organisation
(c) Adopt a holistic approach to economic, social, and
environmental issues in their core business strategy.
(d) Take into account in their decision-making, the
impact of the organization’s operations on the
community and the environment.
(e) Work closely with the management to ensure long
term goals are well formulated and subsequently met.
(f) Focus on long term talent development.
(g) Ensure continuous innovation of its processes,
products and services.
7.2 Performance 1. The Board should:

Management (a) Put in place a performance management system
that is linked to the mandate of the organization
and which is aligned to the national development
plans and sector performance standards.
(b) Set performance targets that will form the basis of
performance evaluation.
(c) Ensure that the performance targets are Specific, Measurable,
Attainable, Realistic, and Time bound (SMART).
(d) Agree on the performance parameters and targets
with the National Government or oversight body as
the case may be and ensure that the obligations of
the parties are documented.
(e) Ensure that the performance targets are cascaded
to the management and staff of the organization
through a performance management system.
(f) Continually monitor organizational performance
and identify areas that require improvement.

“The Pillar of a shining institution is
a reflection of good governance.”
Vasco Da Gama Pillar - Kilifi County

CHAPTER 8
COMPLIANCE WITH LAWS AND REGULATIONS

The organization should conduct its business affairs in full compliance with all applicable
laws, rules and regulations.
The organization shall comply with the Constitution, all applicable laws and regulations and
in line with accepted national and international standards, as well as, the internal policies of
the organization.
8.1 The Constitution of The Board shall:

Kenya (a) Ensure that the organization complies with the spirit
and the letter of the Constitution.
(b) Ensure that the policies, institutional frameworks
and administrative procedures of the organization
effectively support implementation of the Constitution.
8.2 Applicable Laws, The Board should ensure that laws, rules, regulations, codes
Regulations and and standards which are applicable to the organization are
Standards identified, documented and observed. These shall among
others include the Leadership and Integrity Act, 2012, and
the Public Officers Ethics Act, 2003.
8.3 Compliance Strategy The Board should:

(a) Establish internal procedures and monitoring
systems to promote compliance with applicable
laws, regulations and standards.
(b) Ensure that the compliance strategy is aligned to
the operations of the organization.
8.4 Legal Compliance Audit The Board should ensure:

and reporting (a) That a legal compliance audit is carried out at
least annually, with the objective of establishing
the level of adherence to applicable laws, rules,
regulations and standards.
(b) That the recommendations in the Legal Compliance
audit report are implemented.
(c) That a comprehensive and independent legal audit
is carried out, at least once every two years.
(d) The Board shall file compliance reports on
all statutory obligations in each quarter to the
responsible Cabinet Secretary and SCAC.

CONCLUSION
The objective of this Code of Governance is to promote the practice of good governance in the SC
sector in Kenya. Implementation of the principles and practices will not only ensure sustainability
of the organizations but will also contribute to accelerated national development for the benefit
of Wanjiku. The Code is aligned to the Constitution of Kenya and international best practices. It is
expected that the Code will assist the Boards of SCs to establish and enhance governance systems
that will ensure the efficiency and effectiveness of the organizations.
This Code places an obligation on the Board, the Chief Executive Officer and the Corporation
Secretary to promote good governance practices. It is envisaged that Board members and the
Chief Executive Officer will take responsibility for full compliance with the Code. The Corporation
Secretary, who is a professional on matters of governance and compliance, will be a key asset in
assisting the Board to comply with the governance requirements set out in the Code. Governance
tools have been developed to assist the Boards in the implementation of this Code including the
Board Charter, the Code of Conduct and Ethics and Board Performance Evaluation Tool.
This Code is applicable to all SCs. It addresses specific dimensions of governance and has therefore,
the potential to transform the governance of public institutions. For this to be realized, however,
the Code should be fully implemented. The Code should be reviewed at least every five years
to respond to the changes in the national and global environment. The practices of governance
should, in particular, respond to the changing dynamics in the field of corporate governance.

“Good governance requires
38
willingness and ability to
embrace change.”

Wild-beast Migration - Narok County
ANNEXURE I
SAMPLE BOARD CHARTER

A. INTRODUCTION
This Board of Directors Charter (the “Charter”) defines the Board’s roles and responsibilities as
well as functions and structures in a way that supports the members in carrying out their strategic
oversight function. It provides the Board members with an opportunity to think creatively and
critically about how their strategic and operational plans align with the organization’s strategic
direction and expectations, with respect to governance.
The Charter will help the Board in directing the organization to maximize the long term value of
services provided for all stakeholders. It is therefore imperative for Board members to understand
their individual and collective roles with the purpose of helping the organization fulfill its mandate.
The Charter has been adopted by the organization, acting in accordance with Mwongozo, Code
of Governance for State Corporations (‘the Code’), and is complementary to the requirements
regarding the Board and Board members contained in applicable Kenyan laws and regulations.
In particular, the principles and policies contained in the Charter are in addition to and are not
intended to change or interpret any statute, law or regulation.
The Board of Directors will review this Charter at least annually and, if appropriate, revise this
Charter from time to time. This Charter is available to all members of the Board for application and
is posted on the organization’s website for the information of stakeholders.
B. STATEMENT ON GOOD GOVERNANCE
The organization has adopted high standards and applies strict rules of conduct, based on the best
corporate practices. As part of this commitment, the Board adheres to good corporate governance
by embracing the following principles:
1. To observe high standards of ethical and moral behavior;
2. To act in the best interests of the organization;
3. To remunerate and promote fairly and responsibly;
4. To recognize the legitimate interests of all stakeholders; and
5. To ensure that the organization acts as a good corporate citizen.
In general, Board members shall act in the best interest of the organization and uphold their
fiduciary responsibilities and duty of care. This involves not disclosing confidential information,
avoiding real and perceived conflicts of interest, and favouring the interests of the organization
over other interests. They will act honestly and in good faith so as to create a culture built on
principles of integrity, accountability and transparency.

C. GUIDING PRINCIPLES
In line with Section 3 of the Leadership and Integrity Act No. 19 of 2012 of the Laws of
Kenya, the Board of Directors shall respect the values, principles and the requirements of the
Constitution, including:
1. The national values and principles provided for under Article 10 of the Constitution;
2. The rights and fundamental freedoms provided for under Chapter Four of the Constitution;
3. The responsibilities of leadership provided for under Article 73 of the Constitution;
4. The principles governing the conduct of State officers provided for under Article 75 of the
Constitution;
5. The educational, ethical and moral requirements in accordance with Article 99 (1) (b) and
193 (1)(b) of the Constitution;
6. In the case of County Governments, the objectives of devolution provided for under Article
174 of the Constitution; and
7. The values and principles of Public Service as provided for under Article 232 of the
Constitution.
D. THE BOARD OF DIRECTORS

The Board of Directors is the body of appointed members who jointly oversee the activities of the
organization. The Board is expected to provide strategic direction, exercise control and remain
accountable through effective leadership, enterprise, integrity and good judgment. It should
be diverse in its composition, independent but flexible, pragmatic, objective and focused on
balanced and sustainable performance of the organization.
1. Size of the Board
The Board shall have a minimum of seven (7) members and a maximum of nine (9) members.
2. Board Composition
The Board should ensure that:
a) Its composition complies with requirements in the Constitution of Kenya and any applicable
legislation;
b) Its members can act independently;
c) Each Board member understands the broad outline of the organization’s policies;
d) Each Board member is in good standing professionally and has sufficient expertise to perform
his or her role as a Board member; and
e) At least one member is a financial expert, meaning that he or she has expertise in financial
management and accounting.
The Board will, in consultation with the committee responsible for governance, and taking
into consideration the nature of the organization’s mandate, prepare its profile including size,
composition and members’ expertise for stakeholder information.

3 Appointment of Board Members
i. The relevant appointing authority shall select and appoint Board members. Every appointment
shall be by name and by notice in the Kenya Gazette but shall cease if the Board member:
(a) Serves the appointing authority with a written notice of resignation; or
(b) Is absent, without the permission of the Chairperson, from three consecutive
meetings; or
(c) Is convicted of an offence and sentenced to imprisonment for a term exceeding six
months or to a fine exceeding twenty thousand shillings; or
(d) Is incapacitated by prolonged physical or mental illness from performing his duties
as a member of the Board; or
(e) Conducts himself in a manner deemed by the appointing authority to be inconsistent
with membership of the Board.
ii. Any removal of a Board member under (i) above, shall be through formal revocation.
iii. The Corporation Secretary will ensure that a record of the appointment letter, gazette notice
and written acceptance by the Board member are kept in the personal file of the Board
member.
4. Independence of Board Members
All Board members, including those nominated by stakeholders, should recognize that they owe
their duties to the organization and not their nominating stakeholder.
5. Term Limits
Board members shall hold office for a period not exceeding three (3) years, and are eligible
for reappointment for one more term not exceeding three (3) years. A Board member may be
appointed for a cumulative term not exceeding six (6) years. The renewal of a Board Member’s
tenure for a second term should be subject to an acceptable evaluation as determined during
Board evaluations.
The appointing authority shall ensure staggering of Board appointments so that the respective
expiry dates of the members terms fall at different time to ensure continuity.
6. Resignation from the Board
A Board member may resign at any time by giving notice, in writing, to the appointing authority,
copied to the Chairperson of the Board and the CEO of the organization.
The resignation shall take effect upon receipt of notice by the appointing authority or at any
later time specified therein; and unless otherwise specified in the notice, the acceptance of such
resignation shall not be necessary to make it effective.
7. Chairperson of the Board
The Chairperson of the Board is primarily responsible for the activities of the Board and its
committees. The role of the Chairperson includes approving the agenda for board meetings,
chairing the meetings and ensuring that a record of proceedings of all Board activities is kept. The
Chairperson should act as the spokesperson for the Board and is the principal contact for the CEO.

The Chairperson ensures that:
a) The Board satisfies its duties and responsibilities;
b) Board members when appointed participate in an induction programme and are thereafter
continually developed based on identified development needs;
c) Board members receive all information required for them to perform their duties;
d) The Board develops and adheres to an annual work plan;
e) The Board has sufficient time for consultation and decision-making;
f) The Board constitutes committees and that the committees function properly;
g) The performance of the Board, Board members, the CEO and the Corporation Secretary is
evaluated annually;
h) Problems relating to the performance of individual Board members are addressed;
i) Internal disputes and conflicts of interest concerning individual Board members are addressed;
and
j) The Board has appropriate contact with the management.
8. Chief Executive Officer

The CEO is an ex-officio Board member with no voting rights. The CEO and the Board play
separate and distinct roles but work together to achieve organizational goals.
The Board is responsible for appointing the CEO, through a competitive process, and for removing
them. The Board should also assist the CEO in selecting the management team and put in place a
succession plan for both the CEO and the team.
The CEO is responsible for overseeing the execution of the Board’s directions and policies to
ensure desirable outcomes. The CEO therefore serves as the link between the Board and the
Management.
The Board should provide the CEO with:

a) Defined performance goals and authority levels;
b) An attractive remuneration package;
c) Regular formal performance review feedback;
d) Constructive informal feedback on job performance;
e) Reward for exceptional performance; and
f) Prompt response to request for guidance or assistance.
The CEO should:
(a) Demonstrate commitment to the organization’s vision, mission, core values and mandate;
(b) Achieve set performance objectives and targets;
(c) Put in place effective administrative structures, processes and systems;
(d) Provide regular, thorough and prompt communication to the Board on key technical,
financial and administrative matters;
(e) Effectively represent the organization to stakeholders and enhance its public image; and
(f) Promptly respond to Board member’s requests for information.
9. Corporation Secretary
The Board should be assisted by a suitably qualified, competent and experienced Corporation
Secretary. The Corporation Secretary should satisfy the requirements of Chapter Six of the
Constitution on leadership and integrity and be a Certified Public Secretary in good professional
standing.
The Board should empower the Corporation Secretary to efficiently and effectively execute his or
her duties and responsibilities. The Board is responsible for the appointment and removal of the
Corporation Secretary.
The principle duties of the Corporation Secretary are:
(a) Providing guidance to the Board and Board members individually on their duties,
responsibilities and powers and how these should be exercised in the best interests of the
organization;
(b) Ensuring that board procedures are followed and reviewed regularly, and that the Board
complies with the Law, rules and regulations;
(c) Assisting the Chairperson in organizing Board activities, including providing information,
preparing agenda, issuing notices and preparing for meetings, board evaluations and
board development programs;
(d) Providing secretarial services to the Board including ensuring that the Board work plan
is prepared and adhered to, circulating board papers in advance of the meeting, keeping
a record of attendance at meetings, keeping safe custody of the seal and a record of its
usage, and preparing the Board for annual general meetings where applicable;
(e) Ensuring that the minutes of the Board and Board committees are promptly prepared and
circulated;
(f) Keeping the Board abreast of and informed on, current governance thinking and practice;
and
(g) Coordinating the governance audit process.
10. Relationship Between Board and Management

The Board and Management should execute their mandate in an environment of mutual trust and
respect having regard to the principles of good governance. In this regard, the Board shall provide
clear and distinct lines of responsibility and accountability, and maintain effective channels of
communication.
11. Committees of the Board

To effectively discharge its mandate, the Board shall establish committees with specific terms of
reference.
The Board shall appoint into committees, members with requisite skills and competence to
discharge allocated responsibilities. In the event that a committee lacks specific skills within its

membership, the Board may, with the approval of the oversight body, co-opt skilled non-Board
members to serve on the committee, provided that the chair of a committee shall not be a co-
opted member or the Chairperson of the Board. The Board may, from time to time, rotate Board
members between the committees.
The Board remains collectively responsible for the decisions and actions taken by any committee.
A committee may only perform the tasks delegated to it by the Board and may not exceed the
authority or powers of the Board.
The Chairperson of each committee, in consultation with the Board, will determine the frequency
of committee meetings as is necessary to fulfill the Committee’s functions. The Chairperson of
each committee, in consultation with management, will develop the committee’s agenda. The
Board will however determine the procedure and process within which committees may take
independent professional advice at the organization’s expense.
The committees will promptly report to the Board any actions taken for ratification and any major
developments that they become aware of. The Board shall, as set out in the terms of reference of
the respective committees, receive a report of the committee’s findings and actions.
The Board has established the following standing committees:-
[Organization must establish an Audit Committee in addition to a maximum of three other
committees to cover the following functions:
 Governance
 Risk
 Compliance
 Finance
 Technical matters
 Strategy
 Human Resources.
Organizations may establish any other ad hoc committees to handle any special business.
The Terms of Reference of any committee of the Board shall be developed by the Board in
consultation with the oversight office (SCAC).
E. PRACTICES OF THE BOARD

1. Board Responsibilities
The basic responsibility of the Board members is to exercise their best judgment and to act
in a manner that they reasonably believe to be in the best interest of the organization and its
stakeholders. In discharging that obligation, the members should be entitled to rely on the honesty
and integrity of the organization’s management, staff and its external professional advisors and
auditors.
In furtherance of its responsibilities, the Board will:
(a) Determine the organization’s mission, vision, purpose and core values;
(b) Review, evaluate and approve, on a regular basis, long-term plans for the organization;
(c) Review, evaluate and approve the organization’s budget and financial forecasts;
(d) Review, evaluate and approve major resource allocations and capital investments;
(e) Ensure that the procurement process is cost-effective and delivers value for money;
(f) Review and approve the operating and financial results of the organization;
(g) Ensure effective, accurate, timely and transparent disclosure of pertinent information on

the organization’s operations and performance;
(h) Ensure that effective processes and systems of risk management and internal controls are
in place;
(i) Review, evaluate and approve the overall organizational structure, the assignment of
senior management responsibilities and plans for senior management development and
succession;
(j) Review, evaluate and approve the remuneration structure of the organization;
(k) Adopt, implement and monitor compliance with the organization’s Code of Conduct and
Ethics;
(l) Review on a quarterly basis the attainment of targets and objectives set out in the agreed
performance measurement framework with the Government of Kenya;
(m) Review periodically the organization’s strategic objectives and policies relating to
sustainability and social responsibility/investment;
(n) Protect the rights of shareholders and optimize shareholder value;
(o) Enhance the organization’s public image and ensure engagement with stakeholders
through effective communication;
(p) Monitor compliance with the Constitution, all applicable laws, regulations and standards;
and
(q) Review, monitor and ensure that the organization is effectively and consistently delivering
on its mandate.
2. Responsibilities of Individual Board Members

Each Board member shall:
(a) Exercise the highest degree of care, skill and diligence in discharging their duties;
(b) Act in the best interest of the organization and not for any other purpose;
(c) Act honestly at all times and must not place themselves in a situation where their personal
interests conflict with those of the organization;
(d) Exercise independent judgment;
(e) Devote sufficient time to carry out their responsibilities, regularly update their knowledge
and enhance their skills;
(f) Promote and protect the image of the organization;
(g) Owe their duty to the organization and not to the nominating or appointing authority;
and
(h) Owe the organization the duty to hold in confidence all information available to them
by virtue of their position as a Board member.
3. Principles of Public Service

The Board, in performing its functions, shall be guided by the principles of Public Service as
provided in Chapter Thirteen of the Constitution of Kenya, which include:
(a) High standards of professional ethics;
(b) Efficient, effective and economic use of resources;
(c) Responsive, prompt, effective, impartial and equitable provision of services;
(d) Involvement of stakeholders in policy making;
(e) Accountability for administrative acts;
(f) Transparent and timely provision to the public of accurate information;

(g) Fair competition and merit as the basis of appointments and promotions;
(h) Representation of Kenya’s diverse communities; and
(i) Affording adequate and equal opportunities for appointment, training and advancement,
at all levels of public service, of men and women, members of all ethnic groups and
persons with disabilities.
4. Board and Committee Meetings

Board meetings will be held at least four (4) times a year, and not more than 4 months shall elapse
between the date of one meeting and the date of the next meeting. A schedule of dates of the
meetings will be agreed upon by the Board members and set out in the Board work plan. Notices
of the location and the timing of meetings will be issued prior to the meetings. The Board work
plan may be adjusted if deemed necessary by the Board.
The quorum for a Board meeting will be five members where the total Board membership is eight
to nine and four where the total membership is seven and below.
The quorum for Board committee meetings will not be less than three (3) members. Board members are
expected to attend Board meetings and meetings of the committees on which they serve.
The Chairperson, CEO or Committee Chairpersons may from time to time invite senior managers,
other employees and advisors to attend Board or Committee meetings whenever deemed
appropriate.
The Board should set aside adequate time, annually, to discuss strategy and policy matters.
5. Notice and Agenda for Meetings

Notice and agenda of Board and committee meetings will issue from the Corporation Secretary
as directed by the Chairperson of the Board or relevant committee. Each Board member is free
to suggest the inclusion of items on the agenda by providing notice to the Chairperson at least
fourteen (14) days’ prior to the meeting, to enable preparation. Additional agenda items may be
included in the agenda during the meeting subject to approval by the Board or the committee.
Save for the additional agenda items, the agenda for the meetings will be aligned to the Board‘s
work plan which will establish a schedule of agenda subjects to be discussed during the year to
the degree this can be foreseen.
Except for urgent cases, as determined by the Chairperson, detailed agenda accompanied by
relevant supporting documents and recommendations will be provided to the Board members at
least ten (10) days prior to a meeting. Board members should review these materials in advance
of the meeting to enhance effectiveness.
6. Venue of Meetings
Board and committee meetings are generally held at the head office of the organization but may
also take place elsewhere with relevant approvals. The time and venue of the meetings should be
clearly communicated in the notice for the meeting.
In addition, meetings of the Board or committees may be held by video or conference call or by
any other means of communication approved by the Board, provided that all members have been
given prior notification and they can communicate with each other simultaneously.

7. Attendance of Meetings
The CEO shall attend all Board meetings and, if requested by the Board, other members of the
senior management shall also attend a Board meeting in whole or in part.
A Board member who is unable to attend a meeting will explain their absence to the Chairperson
and notify the Corporation Secretary for the purpose of recording the apology.
8. Procedure of Meetings
(a) Chairing of Meetings

Board meetings shall be chaired by the Chairperson of the Board or in the case of a committee
meeting, the Chairperson of that committee. In the absence of the Chairperson, one of the Board
members designated by the Board members present at the meeting, will chair.
(b) Constitution of the Meeting

The Board meeting will be constituted in accordance with constitutive documents of the
organization and shall include a confirmation that there is quorum for the meeting to proceed
and recording of attendance.
(c) Protocol of Board Meetings

The Chairperson, having ensured that the meeting is properly constituted, will also ensure that at
an appropriate time during the meeting, the minutes of the previous meeting are confirmed and
matters arising therefrom handled.
A special meeting of the Board or Board Committee will not discuss any matter other than that
specified in the agenda.
The conduct of Board meetings may also be undertaken through tele/video conferencing, in
the case where some of the participants will not be physically present. The following guiding
principles shall apply:
1. The Corporation Secretary should ensure that the constitutive documents of the
organization allow for tele/video conferencing;
2. The Corporation Secretary shall ensure that the necessary arrangements are in place
to facilitate effective and secure communication during the meeting;
3. On sending out the notice of the meeting, the Corporation Secretary shall also
confirm whether each Board member or participant will attend physically or through
tele/video conferencing;
4. At the start of the scheduled meeting and for the purpose of confirming quorum, a
record of attendance shall be taken during which each Board member or participant
will clearly state, for the record, their full name, location, type of device being used
and give confirmation that they can clearly hear the others;
5. All Board members or participants shall identify themselves for the record before
speaking and must confirm that they can clearly hear and/or see each other in the
course of the meeting;
6. If a statement of a Board member or participant in the meeting via tele/video

conferencing is interrupted or garbled, the Chairperson shall request for a repeat or
reiteration;
7. The Chairperson should ensure that resolutions are clarified for record purposes;
and
8. The Chairperson should ensure that the agenda is suitable for tele/video conferencing.
(d) Decision-Making
The Board members, with the guidance of the Chairperson, should work towards unanimous
adoption of resolutions. However, Board members are entitled to voice dissenting opinions and
have these recorded in the minutes when unanimity cannot be reached.
Resolutions of the Board will be made at Board meetings or approved in writing by circulation,
provided that in respect to the latter the proposed resolution is submitted to all Board members
and none of them objects to this form of adoption. Approval of resolutions by circulation shall be
effected in writing by all Board members. Objection to this method of adoption or to the proposed
resolution should also be in writing.
(e) Resolutions and Minutes

Minutes must be drawn up for every Board and committee meeting with resolutions highlighted
therein. The minutes should be circulated to the Board members as soon as possible after the
meeting. Upon confirmation, the minutes should be signed by the Chairperson and added to
the records of the organization. Substantial corrections to previous minutes will be recorded in
the minutes of the meeting where the corrections are made and adopted by the Board members.
Urgent resolutions may be drawn up and signed immediately in the relevant meeting.
(f) Implementation of Resolutions

Generally, the Board delegates to the CEO responsibility to implement the resolutions of the
Board. The CEO may delegate some of these responsibilities to senior management. The Board is
responsible for monitoring the implementation of the resolutions.
9. Liability of Board Members

A Board member shall not be liable for any act done in good faith in carrying out duties and
responsibilities in the organization. However, there is no limitation of liability for negligence or
breach of the member’s duty of care to the organization or its stakeholders, or for acts or omissions
not in good faith, or which involve intentional misconduct or violation of the law.
10. Conflict of Interest

A conflict of interest may arise where a Board member or close family member such as a spouse,
child, parent or sibling has private interests that could improperly influence the performance of
the Board member’s official duties and responsibilities. Conflict may also arise where a Board
member uses their office for personal gain.
Board members are required to avoid conflict of interest and deal at arms-length in any matter
that relates to the organization. However, a Board member who identifies an area of conflict shall
be required to disclose any actual or potential conflict of interest to the Board. In so reporting,

the Board member is required to provide all relevant information, including information which
relates to their immediate family members by blood or marriage which is related to the area of
conflict. When declared, the Board member shall abstain from decisions where the conflict exists.
The Corporation Secretary should keep a record of conflicts of interest declared, for accountability
purposes, and as a rule of good practice on appointment and on regular intervals or at any time
when circumstances change, all members shall in good faith disclose to the Board for recording,
any other business or interest likely to create a potential conflict of interest.
11. Notice of Other Directorships

Board members should carefully consider the number of other boards on which they can serve,
consistent with the time and energy necessary to satisfy the requirements of the organization
provided that a Board member shall not serve in more than three boards of State Corporations
concurrently.
In furtherance of these considerations, Board members should notify the appointing authority in
a timely fashion before accepting an invitation to serve on the Board of another public or private
body. This prior notice is to allow discussion with the Chairperson of the Board and to obtain
legal advice on whether such other service will interfere with the Board members service on the
organization’s Board, impact the Board member’s independence, or create an actual or apparent
conflict of interest for the Board member.
12. Board Members Access to Employees

Board members should have full and free access to employees of the organization but such access
should be arranged through the CEO. The Board members will use their judgment to ensure that
any such access does not disrupt the operations of the organization.
13. Independent Advisors

Board members may individually and collectively seek independent advice in connection with
their duties in the corporation as and when required. Independent professional advice for the
purposes of this Charter shall include legal advice, advice on matters of governance, the advice
of accountants and other professional financial advisors on matters of law, accounting and other
regulatory matters but shall exclude advice concerning the personal interests of the director
concerned, such as matters relating to their appointment or disputes with the organization.
14. Interaction with Stakeholders

Only designated representatives of the organization shall communicate on behalf of the
organization with the Government, media, stakeholders and the general public.
15. Board Induction and Continuous Skills Development

The Board will provide new Board members with an effective induction programme in order to
familiarize them with their responsibilities as directors, general principles of corporate governance
and Board practices. The induction programme will also provide the Board member with an
orientation of the organization, strategic plans, financial status and policies, risk management,
compliance programmes and the Code of Conduct and Ethics.
The Board will ensure that a competence needs assessment is carried out periodically and an
annual development plan prepared to address identified gaps. In this regard, Board members will

be provided with access to, or notice of, continuing development programs that are designed to
keep members abreast of the latest developments in sector best practice, corporate governance
and critical issues relating to the operation of public sector boards.
The Board will satisfy itself that its members are up-to-date with continuous professional
development in their respective professional bodies.
16. Board Remuneration

Board members shall be remunerated for their services in accordance with the prevailing relevant
legislative provisions and/or guidance from the relevant authority. In line with best practice, the
remuneration should include base pay, attendance allowances and bonuses.
17. Board Performance

The Board will conduct an annual evaluation to appraise its performance. This evaluation will be
carried out in accordance with the Board Evaluation Tool.
The Board evaluation provides an opportunity for Board members to identify strengths, collective
skill gaps and individual areas of improvement. The Board will also review the performance of
each committee against the agreed Terms of Reference.
The Board will also evaluate the performance of the CEO and Corporation Secretary.
18. Board and Management Succession

The Board will put in place a succession plan for both the Board and management and review
the same regularly.
19. Governance Audit

The Board should ensure that a governance audit of the organization is undertaken on an
annual basis. The purpose of the governance audit is to ensure that the organization conforms
to the highest standards of good governance. The governance audit should cover the following
parameters among others:
(a) Leadership and strategic management;
(b) Transparency and Disclosure;
(c) Compliance with Laws and Regulations;
(d) Communication with stakeholders;
(e) Board independence and governance;
(f) Board systems and procedures;
(g) Consistent shareholder and stakeholders’ value enhancement; and
(h) Corporate social responsibility and investment.
__________________________________________________________________________________
This Board Charter is Effective from ___________________ day of ___________________
Signed:
____________________________________________
Chairperson

ANNEXURE II
CODE OF CONDUCT AND ETHICS

1. Background
1.1 Introduction
The Code of Conduct and Ethics for State Corporations (SCs) focuses on ethical conduct and
integrity at the workplace. It defines SC’s commitment to the highest standards of behaviour so as
to contribute to the achievement of the national development goals.
The Code sets out expectations for individual behaviour necessary to meet these standards and
includes requirements and guidance to help you to carry out your role with integrity and in
compliance with the law.
The Code cannot cover everything; it is therefore essential that you understand applicable laws
and detailed policies that are relevant to your role. It is also important that the Code is not used
as a substitute for the good judgment expected of Board members and employees working for
any SC.
1.2. Objective
By exemplifying the ethical behaviours and corporate values described in the Code, the
organization will continue to uphold Article 10 of the Constitution of Kenya on National
Values and Principles of Governance and Chapter 6 on Leadership and Integrity.
1.3. Application
This Code applies to everyone in the SC – every Board member and employee – and also to
contract staff. Adherence to the values in this Code is a condition of Board appointment or
employment of staff.
A breach of this Code will result in disciplinary measures being taken, including separation from
the SC.
2. Values
2.1 Respect for People
Board members and employees are entitled to work in an environment in which people are
treated with respect. Board members and employees must therefore avoid actions or behaviours
that are or could be viewed as harassment and are required to treat all people with respect,
dignity and fairness.
2.2 Integrity
Board members and employees are expected to act with integrity by consistently upholding the
highest standards of honesty and truthfulness. They should not use their positions to inappropriately
obtain an advantage for themselves or to advantage or disadvantage others; and should take all
possible steps to prevent and resolve any real, apparent or potential conflicts of interest between
their official responsibilities and their private affairs.
2.3 Transparency and Accountability

Transparency of operations, planning and reporting and a clear accountability framework are

fundamental principles that underlie good governance. It is expected that Board members
and employees will work together in a spirit of openness, honesty and transparency. This will
encourage engagement, collaboration and respectful communication.
2.4 Stewardship
Every Board member and employee is responsible for using appropriately the assets entrusted to
them. They are responsible for safeguarding the assets against waste, loss, damage, misuse, theft,
misappropriation or infringement, in order to protect their value.
All transactions of the organization must be reflected accurately and fairly in the books of accounts.
Falsification of asset records or misrepresentation of facts will constitute fraud.
2.5 Excellence
Board members and employees shall demonstrate excellence by providing fair, timely, efficient
and effective services to the public. They should exercise high levels of discipline and commitment
in the performance of their duties. They are also required to continually improve the quality
of policies, programs and services by fostering a work environment that promotes teamwork,
learning and innovation.
3. Conflict of Interest
Board members and employees must avoid conflicts of interest between their private activities
and their part in the conduct of the organizations business.
A conflict of interest may arise where a Board member, employee or close family member such
as a spouse, child, parent or sibling has private interests that could improperly influence the
performance of the Board member or employee’s official duties and responsibilities. Conflict may
also arise where a Board member or employee uses their office for personal gain.
A real conflict of interest exists at the present time. An apparent conflict of interest could be
perceived by a reasonable observer to exist, whether or not it is the case, and a potential conflict
of interest could reasonably be foreseen to exist in the future. A conflict of duty arises, not because
of an employee’s private interests, but as a result of one or more concurrent or competing official
roles. For example, these roles could include the employee’s primary employment and his or her
responsibilities in an outside role that forms part of their official duties, such as an appointment
to a board of directors, or other outside function.
3.1 Prevention of Conflict of Interest

Board members and employees maintain public confidence in the objectivity of their service
by preventing and avoiding situations that could give the appearance of a conflict of interest or
result in a potential or actual conflict of interest. In addition, Board members and employees are
required to observe any specific conduct requirements contained in the statutes governing ethical
behaviour and their profession, where applicable.
It is not possible to foresee every situation that could give rise to real, apparent or potential
conflict of interest, however, where conflict arises, the Board member or employee should:
Excuse themselves, or anyone who works for them, from any decision-making that may create a
conflict of interest with their private interests;
(a) Disclose in writing, to the relevant authority the facts and explain the circumstances that create
or could create the conflict of interest;
(b) Seek guidance from the immediate authority;

(c) Seek additional legal or financial guidance if you are a Board member;
(d) Conduct your relationship with contractors and suppliers in a professional, impartial and
competitive manner;
(e) Refrain from the direct or indirect use of, or allowing the direct or indirect use of organization
property, for anything other than officially approved activities;
(f) Maintain the impartiality of the public service and not engage in any outside or political activities
that impair or could be seen to impair their ability to perform their duties in an objective or
impartial manner;
(g) Be aware that the acceptance of any offer of future employment including consultancy or
directorship with a contractor, supplier, customer or business partner constitutes a potential
conflict of interest;
(h) Ensure that concurrent outside appointments, such as to a Board of directors, are managed
appropriately and that any resulting conflicts of duties are resolved in the public interest; and
(i) Declare to the relevant authority, a benefit or income received either directly or indirectly from
a contract with external parties on contractual or other arrangements. The relevant authority will
determine whether the arrangement presents a real, apparent or potential conflict of interest, and
may require that the contract be modified or terminated.
(j) Similarly, a Board member or employee should not:
o Get involved in the hire, supervision, management or career planning of any relative;
o Make improper use of one’s position or of confidential information gained in that position
to achieve personal interests or direct gain;
o Allow relationships with contractors and suppliers to influence business decisions made on
behalf of the organization; and
o Accept gifts or inducements, including hospitality that may place you under an obligation.
3.2 Use of Information Communication Technology

Organizations recognize the importance of the use of Information Communication Technology
(ICT) tools to conduct business and interact with stakeholders. Use of social networks in an
official capacity must comply with the legislative requirements and the organization policy on the
use of the internet and electronic networks. Board members and employees using ICT for personal
or professional use are expected to exercise the same kind of judgment and criteria as would be
applied to any other workplace decision.
3.3 Gifts, Hospitality and other Benefits
Board members and employees should not accept any gifts, hospitality or other benefits that may
have a real, apparent or potential influence on their objectivity in carrying out their official duties
and responsibilities or that may place them under obligation to the donor.
As a general rule, Board members and employees should not accept gifts or other advantages
except as set out in the Public Officer Ethics Act, 2003 and any other relevant statutes and policies.
3.4 Solicitation
With the exception of fundraising for officially supported activities such as those relating to
corporate social responsibility, Board members or employees may not solicit gifts, hospitality, other
benefits or transfers of economic value from a person, group or company who has dealings with
the organization. When fundraising for supported official activities, Board members or employees
should ensure that they have prior written authorization from the relevant authority in order to

solicit donations, prizes or contributions in kind from external organizations or individuals.
3.5 Register of Conflict of Interests
The organization shall maintain a register to record conflict of interests.
4. Whistle-Blowing
Any person who has reason to believe that a Board member or employee has not acted in
accordance with this Code should bring the matter to the relevant authority or the appropriate
government agency.
The organization should not retaliate nor tolerate retaliation against any person who brings an
issue to its attention in good faith.
5. Resolution
Board members and employees are expected to adhere to this Code. The Board members and
employees are expected to resolve issues in a fair and respectful manner and consider informal
processes such as dialogue or mediation.
In the event of an ethical dilemma or dispute, Board members and management may seek advice
and support from other appropriate sources such as the Ethics and Anti-Corruption Commission
(EACC), and any other oversight body.
ACCEPTANCE
I agree to the terms of the organization’s Code of Conduct and Ethics, which forms
part of my Board appointment or contract of employment. I have read and understood
the Code and agree to abide by its provisions.
I understand that any breach of its provisions will render me liable to appropriate
disciplinary action.
…………………………………… …………………………………
Full Name of Board Member/Employee Signature
……………………………………………………………………………….........……..
Position
……………………………………
Date

ADDENDUM: Attachment I
MWONGOZO; The Code of Governance for State Corporations
APPOINTMENT AND PERFORMANCE MANAGEMENT FRAMEWORK FOR BOARDS OF STATE CORPORATIONS
Designation Appointing Person specifications Tenure Remuneration Performance

Authority Management
CHAIRPERSONS The President or as i) Holds a degree in the relevant field Three year term Determined by the Set PC targets
OF BOARDS otherwise provided from a university recognized in renewable once State Corporations and Signs
under any other Kenya. subject to evaluated Advisory corporate
written law ii) Has proven business management performance Committee in Performance
or other relevant professional terms of section 10 Contract with
experience. of Cap. 446 the Cabinet
iii) Has served in a position of senior Secretary of
management for a period of at least respective
six years. Ministries
iv) Has not served in the same entity as
an employee in the preceding five
years.
v) Meets the requirements of Chapter
six of the Constitution
vi) Meets the requirements of the fit and
proper test.
BOARD The Cabinet i) Holds a degree in the relevant field Three year term Determined by the Set PC targets
MEMBERS Secretary or as from a university recognized in renewable once State Corporations and Sign

otherwise provided Kenya. subject to evaluated Advisory corporate
by any other written ii) Has proven business management performance Committee in Performance
law or other relevant professional terms of section 10 Contract with
experience. of Cap. 446 the Cabinet
iii) Has served in a position of senior Secretary of
management for a period of at least respective
six years. Ministries
iv) Has not served in the same entity as
an employee in the preceding five
years.
v) Meets the requirements of Chapter
six of the Constitution
vi) Meets the requirements of the fit and
55
proper test.
Designation Appointing Person specifications Tenure Remuneration Performance
56
Authority Management
CHIEF Respective Board i) Holds a degree in the relevant field i) Three year term Determined by the Signs
EXECUTIVE of the State from a university recognized in or as otherwise Respective Board performance
OFFICERS Corporation Kenya provided under within SCAC contract
ii) Has at least ten years knowledge and any other written guidelines in terms with the
experience in the relevant field. law of section 5(3) of respective Board
iii) Meet the requirements of Chapter six ii) Renewable Cap. 446 and cascades the
of the Constitution. once subject to same
iv) Has served in a position of senior performance
management for a period of at least evaluated by the
five years. Board
v) Meets the requirements of the fit and
proper test.
COMPANY/ Respective Board i) Holds a degree in the relevant field Employment Determined by the Signs
CORPORATION of the State from a university recognized in terms applicable respective Board performance
SECRETRARY Corporation Kenya to the staff of the contract
ii) Meet the requirements of Chapter six Corporation with the Chief
of the Constitution. Executive
iii) Meets the requirements of the fit and Officer
proper test.
iv) Certified Public Secretary (CPS) and
member of the institute of Certified
Public Secretary of Kenya in good
standing;

v) Proven experience as corporation
secretary or in similar governance
role;
GLOSSARY
Accountability Taking responsibility for actions.

Board Charter A document setting out the role and
responsibilities of the Board, its powers and
those of the various Board Committees, the
separation of roles between the Board and
Management; and the policies and practices of
the Board in respect of corporate governance
matters.
Board Work Plan A document setting out the activities of the

Board over a period of time.
Code This Code of Corporate Governance for

State Corporations, setting out a harmonized
approach to Governance matters.
Comply or Explain Full compliance with the Code is required but

in the event of non-compliance reasons should
be given with a detailed and acceptable action
plan for achieving full compliance.
Corporate Social Investment Donations, other kinds of financial assistance

and contributions beyond financial assistance
such as employee time, which bring benefits
over and above those directly associated with
core business activities.
Corporate Responsibility The responsibility of the organization for the

impact of its decisions and activities on society
and its environment.
Ethics A set of values, principles and moral standards

that prescribe how a group of people behaves.
Fiduciary A legal or ethical relationship of trust between

two or more parties.
Fit and Proper Requirements Requirements ensuring that only persons

of good character are appointed as Board
members. Such requirements include but are
not limited to;
(a) The individual meets the requirements of

Chapter Six of the Constitution
(b) Is a recognized professional with relevant
experience;
(c) Has no convictions resulting from integrity
related matters or civil liabilities.
Independence Absence of undue influence and bias which
could affect the ability of an individual to
make objective decisions.

Internal Controls A process used by the Board and Management
to provide reasonable assurance regarding the
reliability of financial reporting and compliance
with applicable laws and regulations so as to
achieve the objectives and long-term goals of
an organization.
Mali ya umma A Swahili term used in Kenya to describe

public resources.
Management Discussion and Analysis A section of a company’s annual report in

which management discusses numerous
aspects of the organization, both past and
present.
Member in Good Standing Status assigned to a Member when he or
she has remained current on a professional
body’s dues and continuous professional
development credits.
Mwongozo A Swahili word meaning guide, guidelines,

direction or manual. It assumes a clear
direction or path to follow.
Oversight Office State Corporations Advisory Committee.
Risk Real or potential events that may impact an

organization’s ability to achieve its objectives.
Risk Management Process of identifying real or potential events

that may impact the organization’s ability
to achieve its objectives and developing a
framework for managing the risks.
Senior Management The team at the highest level of the

organization with the responsibility for day-to-
day management.
Sustainability Conducting operations in a manner that

meets existing needs without compromising
the ability of future generations to meet their
needs.
Triple Bottom Line The pursuit of balance in economic, social

and environmental aspects in the management
of an organization.
Wanjiku A name that is used to signify the common

man (and woman) in the context of national
politics in Kenya.
Whistle-Blowing Making a disclosure in the public interest or

exposing alleged misconduct, dishonest or
illegal activity occurring in an organization.

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Republic of Kenya

Issued jointly by:

Public Service Commission (PSC)

State Corporations Advisory Committee (SCAC)

His Excellency Hon. Uhuru Kenyatta, C.G.H.,

Prof. Margaret Kobia, PhD, CBS

Joseph K. Kinyua, CBS Prof. Margaret Kobia, PhD, CBS

Mr. Joseph Kinyua, CBS.

Uhuru Park Fountain - Nairobi County

Introduction and background ............................................................................................ xi

CHAPTER 1 : The Board of Directors...................................................................................1

CHAPTER 2 : Transparency and Disclosure........................................................................16

CHAPTER 3 : Accountability, Risk Management and Internal Control................................20

CHAPTER 4 : Ethical Leadership and Corporate Citizenship..............................................25

CHAPTER 5 : Shareholder Rights and Obligations.............................................................28

CHAPTER 6 : Stakeholder Relationships............................................................................31

CHAPTER 7 : Sustainability and Performance Management...............................................34

CHAPTER 8 : Compliance with Laws and Regulations.......................................................36

ANNEXURE I: Sample Board Charter.................................................................................39

ANNEXURE II: Code of Conduct and Ethics.......................................................................51

BCP Business Continuity Plan

Uhuru Gardens - Nairobi County

THE BOARD OF DIRECTORS

Governance Parameter Governance Practice

The Code of Governance for State Corporations 1

2 The Code of Governance for State Corporations

1.2 Role and functions of the 1. The Board should:

The Code of Governance for State Corporations 3

4 The Code of Governance for State Corporations

The Code of Governance for State Corporations 5

1.7 Committees of the Board 1. The Board should:

6 The Code of Governance for State Corporations

The Code of Governance for State Corporations 7

8 The Code of Governance for State Corporations

The Code of Governance for State Corporations 9

1.14 Succession Planning 1. The appointing authority should ensure that

10 The Code of Governance for State Corporations

1.16 Board Independence 1. Board members should:

1.17 Liability 1. Board members should be held liable for their

1.18 Appointment of the CEO 1. The Board should:

The Code of Governance for State Corporations 11

12 The Code of Governance for State Corporations

The Code of Governance for State Corporations 13

1.22 Separation of Roles 1. The role of the Board should clearly be

14 The Code of Governance for State Corporations

Gedi Ruins - Kilifi County

TRANSPARENCY AND DISCLOSURE

Transparency and disclosure is an important aspect of corporate leadership and management.

Governance Parameter Governance Practice

2.3 Key Stakeholder Groups 1. The Board should disclose:

16 The Code of Governance for State Corporations

2.4 Governance structures 1. The Board should:

2.5 Board Performance and 1. The Board should disclose:

2.6 Code of Ethics and Conduct 1. The Board should disclose:

2.7 Key Organizational Risks 1. The Board should:

The Code of Governance for State Corporations 17

2.8 Financial Reporting 1. The Board should disclose:

2.10 Procurement 1. The Board should disclose:

2.11 Compliance with Laws, 1. The Board should disclose: