CORPORATE GOVERNANCE : KEY TO

ORGANIZATIONAL SUCCESS

BY

DR.S.O.AJOSE-HARRISONFCIPM,FIMC,FCAI,FPMA,FIMS,FITD
INTRODUCTION
What is governance ?
 Governance is the manner in which power is exercised
in the management of economic and social resources
for sustainable human development.
 It is a vital ingredient in the maintenance of a dynamic
balance between the need for order and equality in the
society as well as:
 the efficient production and delivery of goods and
services, including providing accountability in the use of
power;
 the protection of human rights and freedoms; and
 the maintenance of a corporate framework in which each
citizen can contribute fully towards finding innovative
solutions to common problems.
What is Corporate Governance?
 Corporate Governance refers to the way a
corporation is governed. It is the technique by which
companies are directed and managed.
 It means carrying the business as per the
stakeholders’ desires.
 It is actually conducted by the board of Directors
and the concerned committees for the company’s
stakeholder’s benefit.
 It is all about balancing individual and societal goals,
as well as, economic and social goals.
 Corporate Governance ensures transparency which
ensures strong and balanced economic
development.
 This also ensures that the interests of all
shareholders (majority as well as minority
shareholders) are safeguarded.
 It ensures that all shareholders fully exercise their
rights and that the organization fully recognizes their
rights.
CONCERNS OF CORPORATE GOVERNANCE
 Some of the issues corporate governance is
concerned with are:
Promoting an enabling environment and effective
regulatory framework for economic activities,
Ensuring that corporations act as good corporate
citizens with regard to human rights, social
responsibility and environmental sustainability,
Promoting adoption of codes of good business
ethics in achieving the objectives of a
corporation,
Ensuring corporations treat all their stakeholders
in a fair and just manner; and
Providing for accountability of corporations,
directors and officers.
NEED FOR GOOD CORPORATE GOVERNANCE
• Good Corporate Governance is necessary in order to:

• Attract investors – both local and foreign – and assure

them that their investments will be secure and
efficiently managed, and in a transparent and
accountable process;
• Create competitive and efficient companies and
business enterprises;
• Enhance the accountability and performance of those
entrusted to manage corporations; and
• Promote efficient and effective use of limited
resources.
Important Models of Corporate Governance
1. Canadian Model
2. UK and American Model
3. German Model
4. Italian Model
5. French Model
6. Japanese Model
7. Indian Model
Characteristics of good
corporate governance
 Good Corporate Governance has
seven distinguishing characteristics,
namely:

Discipline
Transparency
Independence
Accountability
Responsibility
Fairness
Social Responsibility
Benefits of Corporate Governance
1. Good corporate governance ensures corporate success and economic growth.
2. Strong corporate governance maintains investors’ confidence, as a result of which,
company can raise capital efficiently and effectively.
3. It lowers the capital cost.
4. There is a positive impact on the share price.
5. It provides proper inducement to the owners as well as managers to achieve
objectives that are in interests of the shareholders and the organization.
6. Good corporate governance also minimizes wastages, corruption, risks and
mismanagement.
7. It helps in brand formation and development.
8. It ensures organization in managed in a manner that fits the best interests of all.
5 COMMON ISSUES THAT ARISE IN
CORPORATE GOVERNANCE

1) Conflicts of interest
2) Oversight issues
3) Accountability issues
4) Transparency
5) Ethics violations
 Don’t let your organisation
fall victim to these five
common mistakes.
THE CORE PRINCIPLES OF GOOD CORPORATE
GOVERNANCE
The Cadbury Report which was released in the UK in 1991
outlined that "Corporate governance is the system by which
businesses are directed and controlled." Good corporate
governance is a key factor in underpinning the integrity and
efficiency of a company.
Poor corporate governance can weaken a company’s potential,
can lead to financial difficulties and in some cases can cause
long-term damage to a company’s reputation.
A company which applies the core principles of good corporate
governance; fairness, accountability, responsibility and
transparency, will usually out perform other companies and will
be able to attract investors, whose support can help to finance
further growth.
Fairness
 Fairness refers to equal treatment, for example, all
shareholders should receive equal consideration for
whatever shareholdings they hold. In the UK this is
protected by the Companies Act 2006 (CA 06).
However, some companies prefer to have a
shareholder agreement, which can include more
extensive and effective minority protection.
 In addition to shareholders, there should also be
fairness in the treatment of all stakeholders including
employees, communities and public officials. The fairer
the entity appears to stakeholders, the more likely it is
that it can survive the pressure of interested parties.
Accountability
Corporate accountability refers to the obligation and responsibility to
give an explanation or reason for the company’s actions and conduct.
In brief:
 The board should present a balanced and understandable
assessment of the company’s position and prospects;
 The board is responsible for determining the nature and extent of
the significant risks it is willing to take;
 The board should maintain sound risk management and internal
control systems;
 The board should establish formal and transparent arrangements
for corporate reporting and risk management and for maintaining
an appropriate relationship with the company’s auditor, and
 The board should communicate with stakeholders at regular
intervals, a fair, balanced and understandable assessment of how
the company is achieving its business purpose.
Responsibility
 The Board of Directors are given authority to act on
behalf of the company. They should therefore accept full
responsibility for the powers that it is given and the
authority that it exercises.
 The Board of Directors are responsible for overseeing the
management of the business, affairs of the company,
appointing the chief executive and monitoring the
performance of the company. In doing so, it is required to
act in the best interests of the company.
 Accountability goes hand in hand with responsibility. The
Board of Directors should be made accountable to the
shareholders for the way in which the company has
carried out its responsibilities.
Transparency
A principle of good governance is that stakeholders
should be informed about the company’s activities,
what it plans to do in the future and any risks
involved in its business strategies.
Transparency means openness, a willingness by the
company to provide clear information to
shareholders and other stakeholders. For example,
transparency refers to the openness and willingness
to disclose financial performance figures which are
truthful and accurate.
 Disclosure of material matters concerning the
organization’s performance and activities should be
timely and accurate to ensure that all investors have
access to clear, factual information which accurately
reflects the financial, social and environmental
position of the organization.
 Organizations should clarify and make publicly
known the roles and responsibilities of the board
and management to provide shareholders with a
level of accountability.
 Transparency ensures that stakeholders can have
confidence in the decision-making and management
processes of a company.
2018 Code of corporate Governance in
Nigeria by the Federal Republic of
Nigeria was launched in 15th January,
2019
 7 parts
 28 Principles
 15 Key highlights of the Code
Other Principles of corporate governance
1. Owners of a corporation shall jointly and severally
protect, preserve and actively exercise the
supreme authority of the corporation in general
meetings.

 Shareholders have a responsibility and duty to

remove fraudulent or corrupt directors during
AGMs.
2. Every corporation shall be headed by an effective
board which should exercise leadership, enterprise,
integrity and judgment in directing the corporation -
in a transparent, accountable and responsible manner.

 Since Directors are acting in the best interest of the

corporation and in a transparent and accountable
manner, fraud or corruption on their part should be
non-existent.
3. The process of appointing Directors to the Board
should ensure a proficient mix of individuals who
add value and bring independent judgment in
decision-making.

 A competent Board acting in the best interest of the

corporation should be able to steer a corporation
away from corruption.
4. The BOD should determine the purpose
and values of the corporation as well as its
strategy.

 If an organization values integrity and

honesty, and such values inform the
implementation process, fraud and corruption
is minimized.
5. The Board should ensure a proper management
structure (organization, systems and people) is in
place and make sure that the structure functions
to maintain corporate integrity, reputation and
responsibility.

 An effective structure and the right values if well

implemented should enhance corporate integrity
and reduce the risk of fraud and corruption.
6. The Board should monitor and evaluate the
implementation of strategies, policies and
management performance criteria and plans of
the corporation, as well as the viability and
financial stability of the enterprise – at least every
year.

 The efficient monitoring of the corporation by the

Board should highlight malpractices and enhance
chances of minimizing fraud and corruption.
7. The Board must ensure that the corporation
complies with the relevant laws, regulations,
governance practices accounting and auditing
standards.

 When a corporation complies with the relevant

laws and standards, fraud and corruption have no
place to take root in the organization.
8. The Board should serve the legitimate interests of
all members and account to them fully.

 The survival of the Board depends on how well they

can increase shareholder value. This is only possible
when a corporation is done in a transparent and
accountable manner – and not fraudulent or
corrupt.
9. The Board should ensure that no one person or
group of persons has unfettered power and that
there is an appropriate balance of power on the
Board so that it can exercise objective and
independent judgment.

 With balance of power, integrity, transparency and

good judgment will always prevail.
10. The Board should regularly review systems,
processes and procedures to ensure the
effectiveness of its internal systems of control so
that its decision-making capability and the
accuracy of its reporting and financial results are
maintained at the highest levels at all times.

 Effective internal control procedures detect and

prevent fraud and corruption.
11 The Board should regularly assess its
performance and effectiveness as a whole and
that of individual members, including the CEO. A
summary of the Boards self-assessment report
should be presented during each AGM.

 This ensures that appropriate decisions are taken to

make the Board and organization more successful.
12 The Board should recognize the need for new
members to be inducted into their roles and for all
Board members to develop and strengthen their
governance skills in light of technological
developments, changing corporate environments
and other variables.

 This leads to the formation of a competent team

capable of steering the corporation to success while
minimizing fraud and corruption.
13 The Board should appoint a competent CEO and
participate in the appointment of all senior
management and ensure appropriate training

for management and other employees, and put

in place a clear succession plan for senior
management.

 Competency leads to efficient management which

prevents and exposes corruption and fraud.
 14. The Board must recognize that to survive and thrive,
it has to ensure that the technology, skills and systems
used in the corporation are adequate to run the
corporation and that the corporation constantly reviews
and adopts the same in order to remain
competitive.

 Internal controls based on the current technologies

(including trails left by electronic transactions) are
capable of highlighting inconsistencies – and hence
the exposure and prevention of fraud and
corruption.
15. The Board must identify key risk areas and key
performance indicators of the corporation’s
business and constantly monitor these factors.

 If fraud and corruption poses a risk to a corporation,

a competent Board should identify the risk and put
in place additional measures to curb it.
16. The Board must define, promote and protect the
corporate ethos, ethics and beliefs on which the
corporation premises its policies, actions and behavior
in its relationship with all who deal with it.

 Efficient enforcement of these can prevent or lead

to the detection of fraud and corruption.
17. The corporation must operate within the mandate
entrusted to it by society and shoulder its social
responsibility. It should not short-change beneficiaries
or customers, exploit labor, pollute the environment,
evade taxes, fail to conserve resources and neglect the
needs of the local community.

 Compliance with these requirements can lead to

reduced levels of corruption.
18. The Board must recognize and encourage
professional development and seek independent
professional advice when necessary.

 This places the Board in a strategic position to

detect and prevent corruption.
HOW DIRECTORS GET INTO TROUBLE
 The most frequent causes of trouble for
Directors are incompetence and dishonesty.

 More money, resources and opportunities are

lost through incompetence than through
criminal wrong doing.
 When they allow themselves to be drawn into
unfortunate situations. Eg. Joining Boards they don’t
know too well.

 When dishonest (stealing, lying etc.).

 When ignorant (lack of understanding their roles and

responsibilities as well as the organization they lead).

 When lacking independence (if a Director is very close to

the CEO, they may find it difficult to speak their mind).
 When there is conflict of interest (eg. When a
director profits or benefits from a decision or
action at the expense of the shareholders).

 When they fail to exercise the duty of care

(Directors should understand issues well and
make the right decisions).

 Insider trading
HOW BOARDS GET INTO TROUBLE
• Poor business performance – hence the wrath of
shareholders;
• Lack of Board leadership;
• Inadequate or inappropriate involvement in
management;
• Entrenchment (high % of members remaining in the
Board too long);
• Internal political or personal conflicts;
• Ineffective Board organization and process; and
• Conspiring in or tolerating legal violations.
TO IMPROVE CORPORATE GOVERNANCE,
HERE ARE FIVE BASIC STEPS:
1. Increase Diversity
2. Appoint Competent Board Members
3. Ensure Timely Information
4. Prioritize Risk Management
5. Evaluate Board Performance
CONCLUSION
 From the above discussion it should be clear
that good governance is an ideal which may
be difficult to achieve in its totality. Very few
countries and societies have come close to
achieving Good Governance in its totality.
However, to ensure sustainable human
development, actions must be taken to work
towards this ideal with the aim of making it a
reality.
 Every nation, no matter how under
developed, seeks to be part of the
VUGA world because a divine
arrangement has made nations to be
inter-dependent especially in the
areas of mineral and human
resources.

 The two big sectors in every Country –

public and private actually shape the
developmental agenda of the Country.
 To build a national therefore, and make it
become a nation-state, calls for a “re-
strategisation”, that truly looks at both the
stultifying forces and the enhancing forces,
even as posited by Kurt Lewin (1929) in has
force force-field analysis book.

 Good to advert to the fall-out from the October

9, 2019 National Economic Summit Group
(NESG) forum, that finally agreed on a
sustainable hand shake between the private
sector and public sector (PPP) in project
implementation in Nigeria and also with other
African countries so that a competitive
private sector economy is birthed.
 A nation is as good as its leaders. Japan is
known for quality strive, China is known for
quality shift and quality compromise,
depending on her trading partner’s wish.
Germany is known for resilience, agility,
creativity and innovation. All of these came
forth through their chequered histories of
socio-economic development in the Asian
bloc.
 Nations that have “truly” developed and
have become part of the 4th Industrial
revolution are those who have overcome
the challenges and problems of nation-
building to a level of between 78% - 88%
and have now become nation-states with
functional infrastructure and with capacity
to sustainably transfer technology to
“struggling to develop nations” in Africa
and may be Latin and South America
 The principles embedded in both good governance and
corporate governance are really pivotal in shaping the ways
nations develop, especially for the advanced economies of
the world.

 Nigerians are a different set of homo sapien sapien with

multi-cultures affecting “Nationhood”. Our approach
towards utilizing the principles of FART, in Nation-building
should be more of frontally sinking our differences through
a coming together that will harness our strengths as
different entities within the entire entity and we look at
how to mitigate our weaknesses and benchmark against
successful nations, even resorting to using sanctions for
violations of national/constitutional principles of
development in all its ramifications.
The model posited in this
discourse is also recommended
as a heuristic device to help our
great country to move on another
path of progress/development so
that the present and coming
generations could work on a
legacy and sharpen tools of the
legacy and truly live in a Nigeria
where peace and justice shall
reign
Addendum
The Seventeen Sustainable Development
Goals (SDGs) to Transform our World
GOAL 1 : No Poverty
GOAL 2 : Zero Hunger
GOAL 3 : Good Health and Well-Being
GOAL 4 : Quality Education
GOAL 5 : Gender Equality
GOAL 6 : Clean Water and Sanitation
GOAL 7 : Affordable and Clean Energy
GOAL 8 : Decent Work and Economic Growth
GOAL 9 : Industry, Innovation and Infrastructure
GOAL 10 : Reduced Inequality
GOAL 11 : Sustainable Cities and Communities
GOAL 12 : Responsible Consumption and

Production
GOAL 13: Climate Action
GOAL 14: Life Below Water
GOAL 15 : Life on Land
GOAL 16 : Peace and Justice Strong Institutions
GOAL 17 : Partnerships to achieve the Goal
THANK YOU
FOR
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