Corporate governance practices and financial sustainability of non-governmental organizations in northern Kenya.

Abstract

Corporate governance practices are critical in the financial sustainability of Non-Governmental Organizations. With decreased donor funding, there’s a need for Non-Governmental Organizations to explore other sources of funding as well as look at organization corporate governance practices. Corporate governance plays a key role in guiding organizations, even those with non-profit objectives, to make well informed decisions concerning environmental, social, and governance matters. Nevertheless, non-profit entities like Kenyan Non-Governmental Organizations encounter challenges such as diminishing donor funding, restricted resource mobilization capabilities, and inadequate financial sustainability strategies, which the COVID-19 pandemic has further exacerbated. The existing literature lacks coherence in terms of methodologies and findings. Hence, the main aim of this research was to investigate the effects of corporate governance practices on the financial sustainability of Non-Governmental Organizations in Northern Kenya. The study's objectives encompassed exploring how board efficiency, board diversity, board composition, and board independence influence the financial sustainability of Non-Governmental Organizations in the region. The theoretical frameworks guiding the study comprised of stewardship theory, resource dependency theory, agency theory, stakeholder theory, and. Utilizing a descriptive research design, the study targeted a population consisting of 31 managers and 31 board chairpersons of conservancies in Northern Kenya. A multistage sampling method was employed. The sample size of 54 respondents was determined using the Yamane formula. Primary data was collected through self-administered questionnaires. The analysis involved using descriptive statistics to summarize the characteristics of the sample and employing multiple linear regression to explore relationships between variables. The study's findings indicated that the study variables had p-values greater than 5 percent, leading to the conclusion that there is no significant association between corporate governance practices and financial sustainability within Northern Kenyan Non-Governmental Organizations. However, these results provide an opportunity for organizations to explore alternative approaches and governance enhancements. Recommendations stemming from the study emphasize the importance of recruiting financially proficient conservancy managers and offering financial training for board members. The implementation of clear policy guidelines for decision-making, promoting a diverse board composition, and establishing a robust conflict of interest policy are also deemed essential. Additionally, introducing term limits for board directors and encouraging active stakeholder engagement, diversifying funding sources, measuring impact, and fostering collaborations collectively strengthen financial sustainability while enhancing corporate governance practices.