Analysis of factors affecting implementation of corporate governance in small and medium enterprises in Kampala

Abstract

This study was motivated by the high mortality rate of SMEs in developing countries due to challenges that could be addressed by implementation of proper and appropriate corporate governance system. The study was designed to analyze the factors affecting corporate governance in SMEs in Kampala. The study was guided by the following objectives: to establish the nature of corporate governance system in SMEs in Kampala; to analyze the factors affecting effective corporate governance in SMEs in Kampala and to recommend possible courses of action to improve corporate governance in SMEs in Kampala The respondents were selected using stratified and random sampling techniques. A cross sectional and descriptive study design was adopted. During the study the information was collected from primary sources using questionnaires and interviews. The findings indicated that SMEs in Kampala have a corporate governance system but implementation varied greatly among different SMEs. Among the practices adopted included; appointment of board of directors, preparation of bookings of accounts on regular basis, regular meeting with management and shareholders and other stakeholders Regarding the effectiveness of the corporate governance system, the study revealed that there are loopholes such as not having non-executive members to the board, unaudited books of accounts. In order to improve governance of SMEs, the government and other stakeholders need to develop guidelines and raise awareness on the subject and subsidize services such as audit and promote mentors to volunteer on the Boards of SMEs.