The Corporate Governance In Nigeria Accounting Essay


This study will be useless if it cannot add to knowledge or solve an existing problem. This chapter focuses on significant areas of benefits to the researcher as well as other individuals who might consider writing in the field of leadership. It gives room for further researchers to identify further problems and limitations in this study, and overcome these limitations by designing a study for themselves.

5.0 Introduction

The concept of corporate governance cannot be over emphasized. Big giants like Spring Bank Plc, Bank PHB, Intercontinental Bank Plc, Sona Breweries, Life Breweries, and the host of other banks in Nigeria have folded-up or have been in one way or the other absorbed by some other financial institutions. These companies were known for their high performance in the financial sector and the manufacturing sector. This study doesn't not look directly into the cause of company failure, but appraises the place of corporate governance in the process of increasing the performance of firms and also reducing the rate of liquidation or bankruptcy.

5.1 Significant learning

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In this study, the researcher examined corporate governance in Nigerian companies. The researcher sought to empirically find answers to the following research question:

How do companies perceive the role of corporate governance in achieving organisational objectives and goals?

How the principle of corporate governance contributes in the performance optimization of companies?

How corporate governance contributes in achieving high levels of economic efficiency to companies?

Does the performance of the firm increase or decrease as a result of separating the functions and roles of the CEO and Chairman of the Board?

Is there any relationship between board size and firms performance?

The internal structures of the firms sampled measures up in their composition and positions in the industry/ market. The financial positions of most of the companies show that they are performing towards their capacity. Although, the data does not specify the factors responsible for this performance increase or decrease, the principle of corporate governance contributes I no small measure in ensuring that the performance of the firms are kept at optimum levels. Companies like Forte Oil Plc have two insider members on the board who are also members of the executive management team. This study can draw a conclusion to the fact that the reason for their non-performance in the past two-three years might be as a result of the conflict in the composition of the board. Also, the absence of a specialized executive (expatriate) in the nature of their specialized service can also be responsible for the downward movement of the company.

As a result of the so man breakdowns in companies and the need to protect the shareholders from executive powers, the government has increased the parties involved in the process of upholding these principles. They are, the Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC), shareholders, board of directors, chief executive officer, and employees, creditors, depositors, customers and the community at large (Toyin, 2007). Because there is no single approach to determining a good corporate governance model, this study will focus on the composition of the board members, presence of competent auditors, and the number of board members of some of the companies that have been sighted. Haven seen some positive results in the books of some companies, it will not be out of context to ascribe some of those results to the adherence to strict corporate governance principles.

Analysis of some of the financial statements and board composition of some firms indicated that boards in publicly listed companies reflected the mission and objectives of the company and this reflected the theory which states that outside directors in particular play a refereeing role in the firm. According to Fama and Jensen (1983) from the literature, the board members are also being judged from outside the company and their ability to be appointed to other company boards depends on their evaluation.

Haven studied several literatures on the subject of corporate governance; the trend is the same in other parts of the world. The results from the composition of the boards were generally the trend in Ghana, as stated by (Ayogu, 2006). According to this author and his hypothesis on board sizes, it is a general rule in Africa that investors tend to punish companies with large board sizes and in South Africa, the most frequently occurring board size is four (4). Kenya has seven (7), eight (8) in Cote D'Ivoire and Zambia, nine (9) in Zimbabwe and ten (10) in Mauritius and Nigeria. However the gender balance on board composition was still tilted in favour of the males as the results revealed. There are no laws or theoretical evidence pointing to gender composition of boards or management of firms.

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Most companies in the sample, placed emphasis on corporate governance by indicating their practices in the annual operational reports. For listed companies where the agency problems are expected to be strong, the result supports Hansen and Torregrosa (1992) and Warner et al (1988) on their findings that run alternative the popularly held theories of Fama (1980) that claimed that managers and board members are rewarded for their performances. From the literature review, Black and Coffee (1994) concluded on large and institutional investors also involve in other activism to the detriment of any particular firm. Publicly listed companies tend to focus more on the core of their businesses and grow in line with their vision and mission statement.

Looking through the profile of most sampled companies in Nigeria and indeed the African, certain measure of confidence in the assurance provided by external auditors to shareholders, more especially in the public-listed corporations have been put in place. In private companies however, there is a certain measure of uncertainty in independence of external auditors. Most public listed companies even have separate internal audit and control units that act as watchdogs of the company. Majority of these companies send their reports directly to the board of the company to appraise the performance of the executive management team. Although, several company codes may be silent on the requirements for firms to have internal audit functions.

5.2 Conclusion

The adoption of corporate governance principles in Nigeria is a great step in the right direction to be able to alienate the fears of investors and also create a good economic climate for the country. Corporate governance is a tool used to safeguard the country from corruption and mismanagement of funds at the topmost levels of management. It is a tool used to create transparency in organizations and enable their shareholders has a clearer picture of what is going on within the company.

With all these benefits outlined, the implementation of this procedures and principles as with all other principles in Nigeria is always the issue of contention. Irrespective of the fact that so many principles have been outlined, the implementation and strict monitoring of these procedures are still lacking. Banks have been in distress, companies have folded up, mismanagement of funds happens to be the order of the day in most business in Nigeria and shareholders have little knowledge of what is going on within the business system.

From several literatures, their survey revealed that the legal and regulatory framework needs to be strengthened to address the major issues that would be monitors of the agency problems in the emergent economies. These would increase the confidence for investors that sought to spread their portfolio and grow the economic outputs of the respective countries. The main objectives of the OECD principles are still not yet attained in the Nigerian business environment. Compared to other parts of the globe, corporate governance implementation in Africa/Emergent Economies is gradually taking roots. The general score on the indicators of good governance may be low, but individual indicators are within acceptable range. However the issue of corruption and the lack of political will to enforce regulations cannot be ruled out as this and previous surveys have all pointed out. Corruption is closely linked to corporate governance as a corrupt system has an influence through the credibility of enforcement of regulations.

5.3 Implication and Recommendation

After much study and analysis of the concept and theory of corporate governance, the following recommendations are put forward:

Corruption has eaten too deep into the system of most corporations and must be reduced drastically. In order for this to be done, a well-established, monitored and implemented set of rules that govern business practices in order to increase transparency and reduce cases of corporations winding-up.

Although, most organizations are beginning to see the benefits of having internal auditors that police the activities of executive management team. Most organizations don't have a clear cut regulation on the place of an internal audit process within the organization that reports their findings directly to the board of directors (outside board members). This will go a long way in checking the excesses of the management team of organizations. Internal controls are the foundation of good corporate governance for companies.

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The government should put in place criminal persecution charges for CEO's and Managing Directors that have collaborated in bringing down corporations in the past and in the present especially for corporations that have the funds of the public.

5.4 Suggestion for Further Studies

The study examined corporate governance in Nigeria companies and to what extent they have an impact on the performance of the company. The study focused on the financial statements of 40 publicly listed companies on the Nigerian Stock so as to have access to data. The profile of the company was also analysed with special references to the composition of the board and board size. However, the following suggestions are made for further studies.

An appraisal of corporate governance principles in Nigerian companies. A case of 5 selected banks.

The impact of corporate governance on the performance of a firm. A quantitative approach

Board size requirements and how it improves the responsiveness of the management team of an organization. A case of two selected companies in Nigeria.