Effects of CEO Duality and Board Tenure on Corporate Social Responsibility of Firms Listed in Nairobi Securities Exchange, Kenya

Abstract

Abstract:-CSR refers to voluntary managerial “actions that appear to further some social good, beyond the interests of the firm and that which is required by law. Board tenure and CEO duality are seen as potential determinants of corporate social responsibility but have not been fully explored in developing countries like Kenya. The research was to find out whether Board tenure and CEO duality have effects on corporate social responsibility investment of firms listed in Nairobi securities exchange in Kenya. The objectives for this study were to determine the effect of board tenure on corporate social responsibility and effect of CEO duality on corporate social responsibility. The study was guided by upper echelon theory which postulates that executive' experiences, values, and personalities greatly influence their interpretations of the situations they face and, in turn, affects their choices. The study employed explanatory research design. The research utilised secondary data derived from document analysis mainly from companies’ annual reports. The study targeted 65 firms listed on the Nairobi Securities Exchange for the period ranging from 2005 to 2015. The study utilised data from 11 companies. The study adopted descriptive statistics, correlation analysis, fixed effects and Random effects regression models. Hausman test was carried out and Random effect model was found to be the best model for predicting the change in CSR. Study findings indicate that CEO duality had a negative significant effect on CSR,(β=- 34173, p = 0.004), p<0.05) and board tenure had a negative significant effect on CSR. (β=-0.11066, p = 0.012), p<0.05). In conclusion the study found out that when a company is led by a dominant personality, shareholders’ interests are likely to be maltreated. It is therefore crucial for the board to have outside board member as the chair of the board because this will take care of shareholders’interests which include CSR. Furthermore the study found out that the longer the experience of managers, the more knowledgeable they become hence they are more capable of managing CSR. Therefore the study recommends organizations to have a balanced board size-one that is not too small or too large so that there is no time wastage and will better CSR performance. It is therefore necessary for firm to retain managers that have a vast wealth of experience since they are knowledgeable and more capable of managing CSR. Further the study recommends companies to separate the position of CEO and chairman because Stakeholders view those companies that separate the two positions to be more reputable.