POLICY AND PRACTICES OF CORPORATE GOVERNANCE IN COMMERCIAL BANKS OF ETHIOPIA: THE CASE OF COMMERCIAL BANK OF EHIOPIA (CBE)

Abstract

The primary aim of this study was to examine the policies and practices of corporate governance of Commercial Bank of Ethiopia on the basis of best practices and principles endorsed by Basel committee on Banking Supervision. It adopted a descriptive research design and followed cross-section research strategy. The target populations of the study were Executive and Middle-Level Managers from the head office and Branch Managers from selected branches of the bank. Hence, the inquiry used both simple random sampling and purposive sampling technique in order to select sample from target population. In the study, it was founded that Commercial Bank of Ethiopia has a corporate governance policy, which adopted the principles enshrined in Basel Committee and OECD guidelines. The bank uses these basic principles to guide the roles and responsibilities of key corporate actors, design of remuneration structure, performance management systems, and internal audit, risk, and compliance management processes of the bank. Besides, both internal and external factors affect the effectiveness of the policies and practices of corporate governance of the bank. The findings of the study also indicates that management reluctance in implementing the provisions of the corporate governance policy, deficiency in the professional competency of board members, undue political interference and lack of corporate culture are the major challenges that limits the effectiveness of corporate governance of the bank. Finally, , based on the findings, the researcher recommends that the board, senior management, National Bank of Ethiopia, and the government should work together to ensure the integrity and effectiveness of the policies and practices of corporate governance in the bank.