Influence of Ethical Leadership on Corporate Governance in Commercial Banks in Nakuru East Sub County, Kenya

Abstract

In the present-day business environment, characterized by a faster communication system, managers of a firm cannot afford to engage in unethical practices because of the detrimental effect it can have on a firm but also the negative publicity that it will create and the consequent effect on the value. Ethical leadership provides a pragmatic methodology for influencing organizations' stakeholders, thus harvesting desirable and sustainable organizational outcomes. This is because ethical leaders demonstrate ethical conduct through their actions and also promote such ethical conduct among their followers. The study sought to examine the influence of ethical leadership on corporate governance in commercial banks in Nakuru East Sub-County, Kenya. The specific objectives of the study were to establish the influence of ethical human resource practices on corporate governance in commercial banks in Nakuru East Sub-County, Kenya; Cross-sectional research design was adopted. The target population comprised of all the 28 commercial banks in Nakuru East Sub-County. A sample of 12 banks was selected using stratified techniques, and then a sample of 108 bank employees will be sampled purposively. Data from the bank employees was collected using questionnaires. The researcher used the Statistical Package for Social Sciences (SPSS) software version 22 to measure the correlation analysis and highlight the relationship between the success of ethical leadership and corporate governance in the listed commercial banks in Nakuru East Sub-County, Nakuru. Descriptive statistics involved the use of absolute and relative (percentages) frequencies, measures of central tendency and dispersion (mean and standard deviation, respectively). Frequency tables and graphs were used to present the data for easy comparison. The study uncovered significant findings regarding the nexus between ethical leadership practices and corporate governance in commercial banks within Nakuru East Sub-county. Notably, ethical human resource practices were found to exert a substantial impact on historical governance. The regression analysis affirmed a robust relationship between ethical leadership variables and corporate governance. The study recommends targeted enhancements in training programs, policy revisions, and stakeholder engagement. These findings contribute valuable insights to the ongoing discourse on ethical leadership in the banking sector, offering practical implications for bolstering corporate governance in financial institutions.