CORPORATE GOVERNANCE AND IMPLICATION FOR ORGANIZATIONAL EFFECTIVENESS

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ABSTRACT


The study sought to identify the benefits derived from corporate governance practice, assess the challenges encountered in corporate governance practice, and determine the nature of the relationship between corporate governance and organizational effectiveness. The study has a population size of 613, out of which a sample size of 242 was realized using Taro Yamane’s Formula at 5% error tolerance and 95% level of confidence. The Instruments used for data collection were questionnaire and interview. A total of 242 copies of the questionnaire were distributed while 191(79%) copies were returned and 51(21%) were not returned. The Survey research design was adopted for the study. Three hypotheses were tested using Pearson product moment correlation coefficient and chi- square statistical tools. The findings indicated that good corporate governance practice improves corporate performance, improves access to international capital markets and attracts quality foreign investments. Supply of accounting information, demand for information and monitoring cost are challenges encountered in corporate governance practice. There is a positive relationship between corporate governance practice and organizational effectiveness. The study recommended that organisations should be providing shareholders with periodic reports on changes affecting the shareholders in the company, and should hold regular meetings with members of the Board of Directors to ensure that their roles should be done.

TABLE OF CONTENTS

List of Tables
Abstract

CHAPTER ONE: INTRODUCTION
1.1       Background of the Study
1.2       Statement of the Problem
1.3       Objectives of the Study
1.4       Research Questions
1.5       Hypotheses
1.6       Significance of the Study
1.7       Scope of the Study
1.8       Limitations of the Study
1.9       Definition of Terms
1.10     Profile of Organization sunders Study
            References

CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1       Conceptual Framework
2.2       The Purpose and Objectives of Corporate Governance
2.3       Features of Good Corporate Governance
2.4       Principles of Good Corporate Governance
2.5       Functions of Corporate Governance/Mission
2.6       The Stakeholders in Corporate Governance
2.7       Causes of Corporate Governance Failure
2.8       Problems of Corporate Governance
2.9       Corporate Governance Controls
2.10     Benefits of Good Corporate Governance
2.11     Corporate Governance and the Current Crisis in the Nigerian Banking Sector
2.12     Corporate Governance Practices in Emerging Economies
2.13     Corporate Governance, Capital Markets and Firm Performance
2.14     Corporate Governance Role Model Structure on Performance of Manufacturing Firms
2.15     Actors in the Corporate Governance System
2.16     Stakeholders through Effective Corporate Communication
2.17     Board Structure of Corporate Governance
2.18     The Role of Internal Corporate Governance Mechanisms in Organisational Performance
2.19     Corporate Financial Policy
2.20     Theoretical Review
2.21     Empirical Review
2.22     Summary of Review of Related Literature
            References

CHAPTER THREE: METHODOLOGY
3.1       Introduction
3.2       Area of the Study
3.3       Sources of Data
3.4       Population of the Study
3.5       Description of the Research Instruments
3.6       Method of Data Analysis
3.7       Validity of the Research Instrument
3.8       Reliability of the Research Instrument
            References

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1       Data presentation and Analysis
4.2       Test of Hypotheses

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1       Summary of Findings
5.2       Conclusion
5.3       Recommendations
5.4       Suggested Areas of Further Studies
            Bibliography
            Appendix

CHAPTER ONE

INTRODUCTION

1.1          BACKGROUND OF THE STUDY

Corporate governance is a system by which companies (business organizations) are directed and controlled. Dignam and Lowry (2006:4) define corporate governance as a set of processes, customs, policies, laws and institutions affecting the way a corporation (organization) is directed, administered or controlled. They went further to state that corporate governance is meant to ensure accountability of certain individual in an organization through mechanism that try to reduce or eliminate the problem(s) that exist(s) between the principal and the agent.

Singh (2006:73) states that the broad concept of corporate governance is that it is a continuous process of the company which relentlessly pursues through full regulatory compliance, transparency, efficient operational practices, strong internal control and risk management systems, and operating with fairness and integrity to enhance the interest of stakeholders.

O’Donovan (2006:2) opines that corporate governance as an internal control system encompassing policies, processes, and people which serves the needs of shareholders and other stakeholders by directing and controlling management activities with good business savvy, objectivity, accountability and integrity. it is a system of structuring operating and controlling a company with a view to achieve a long term strategic goal to satisfy shareholders, creditors, employees, customers and suppliers and complying with the legal and regulatory requirements, apart from meeting environmental and local community need (social responsibility).


Ayida (2004:82) stresses that corporate governance is a set of mechanism through which outside investors are protected from expropriation by insiders (including management, family interest and /or governments). He states that expropriation of outsiders takes many forms: outright theft of assets, transfer pricing, excessive executive compensation, entrenchment of in-depth management terms, diversion of funds to unsuitable projects that benefit one group of insiders etc.

The recent spate of corporate failure in Nigeria especially the private/public owned organizations, has brought to the fore the need to re-examine the issues of corporate governance practices in Nigeria.

Kootnz and Weihrich (2006:425) assert that since 2001, there has been renewed interest in corporate governance in modern corporations due to high profile collapses of a number of US (multinational) firms such as Enron Corporation, MCI Inc., formally known as Worldcom, Tyco, a conglomerate and others. All these corporate failures have rekindled the need to ascertain what makes up corporate governance and the attendant reasons for its failures.

Molokwu (2003:2) states that corporate governance facilitates the achievement of economic development, provides the tools for plugging loopholes, checking of pilfering and leakages and encourages rationality and virtues which are highly needed in the Nigerian economy.
Johnson and Scholes (1999:19) opine that Corporate governance serving as a tool for corporate profitability in organizations involves corporate planning and control in competitive environment that strategically position them. In their analysis, it was clearly expressed that competition among corporate organizations about the present and future resources available in their environment determines their good corporate governance (competence) as well as achieving their profit objective.

In other words, the ability of corporate organizations to effectively and efficiently manage the complex factors of the environment (commercial, economic, political, technological, cultural and social) is very important in their profit making goals. In coping with competition, a review of opportunities and threats as well as strengths and weakness available in an industry is necessary so as to minimize costs and maximize profit (benefits). It is paramount to note that corporate governance could be utilized in achieving corporate or organizational goals when such an organization address some internal management problems that could hinder her from attaining competitive advantage over her colleagues in the industry. Some internal resources to corporate organizations in good governance includes: location or sitting of such organization, technology, favour, market, human resources and skills (proficiency), responsibility to each of the stakeholders (government, shareholders, creditors, customers, cultural influences etc)( Pool and Warner, 2000:681).

1.2        STATEMENT OF THE PROBLEM

Corporate governance is regarded as the key foundation of organizations to be more productive, governed and controlled. Corporate Governance is needed to create a corporate culture of consciousness, transparency and openness. Good corporate governance is essential for any company or country that is willing to compete effectively in the global market. The effect of corporate governance on the financial performance of firms was an important issue since the last financial distresses over the world. It is widely accepted that bad management practices have triggered the financial crises and company scandals that broke out in recent years. This has clarified the importance of the concept of sound corporate management practices.

In the immediate past two decades, the financial services industry has experienced fluctuating fortunes leading to high profile cases of corporate failure. Banking businesses are not conducted with high ethical standard; there are gross insider abuses such as granting of insider-related credits resulting in large quantum of non-performing credits. The internal control and operational procedures are often not followed thus rendering the system very weak and allowing fraudulent and self-serving practices among members of the board, management and staff. There is also deliberate manipulation or distortion of records to conceal the correct and true statement of affairs. These records which form the bedrock of supervisory oversight by the regulatory authorities in monitoring the soundness of the system has thus been undermined. The implications of these on our tottering economy are obviously negative.

Consequently these have resulted in unprecedented rise in operating cost, drastic fall in share price, abuse of lending resulting in huge bad debts, weak risk management practices resulting in large quantum of non-performing credits including insider related credits, poor leadership and administrative ability, loss of public confidence and government patronage. Furthermore, the merger of some of the banks and outright sale of non performing banks have all led to huge.....

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