2.2 Nature
of Corporate Governance
The nature of a thing entails the
intrinsic or essential qualities of the thing.[1]
Thus, every definition of corporate governance drawing from its intrinsic
qualities also draws from the perceptions of the person defined. This, a
glossary look at the various definitions and postulates of what the concept of corporate
governance entails will help our understanding of the subject matter.
Corporate governance has been defined as the exercise of
authority which involves not only the right to direct but also to lead and
control within an organization.[2] Promoting
corporate fairness, transparency and accountability.[3]
According to Charles C. Okeahalam & Oludele A. Akinboarde, the,[4]
the consensus of corporate governance ranges from balancing between economic
and social goals and between individual and communal goals while encouraging efficient
use of resources, accountability in the use of power and stewardship and
aligingly the interests of individuals, corporations and society. I also
encompasses the establishment of an appropriate legal, economic and
institutional environment that allows companies to thrile as institutions for
advancing long-term shareholder value and maximum human centred development
while remaining conscious of their other responsibility to the shareholder, the
environment and the society at large.[5]
The basic tenets of corporate governance are accountability, efficiency and
effectiveness integrity and Fairness, Probility, responsibility and
transparency thus it refers to the broad ranges of policy and policies that
stockholders, executive managers and board of directors use to manage the
operations of corporate organizations towards fulfilling their responsibilities
to the investors and other stakeholders of the society.[6]
Corporate governance is concerned with the resolution of collective action
problems among dispensed intentions and the reconciliation of conflicts of
interest between various corporate claimholders.[7]
The organization for Economic Corporation and Development
(OECD)[8]
Examines corporate governance as:
The system by which business corporations are directed
and controlled. The corporate governance structure specifies the distribution
of rights and responsibilities among different participants in the corporate,
such as the board members, shareholders and other stakeholders and spells out
the rules and procedures for making decision on corporate affairs. By this, It
also provides the structure through which the company objectives are set and
the means of attaining those objectives and monitoring performance.[9]
The OECD Principles of Corporate governance and
organized into five headlines namely9b The rights of the
shareholders to deal with the protection of the shareholders to influence the
behaviour of the cooperative; the right to secure method of ownership
registration; convey or transfer of shares; obtain relevant information on the corporation
on timely and regular basis; participate and vote in general shareholder
meetings; elect members of the board and share in the profits of the coporation.9c
The
Cadbury Final Report defines Corporate governance in terms of how a Corporate
entity is directed and controlled.[10]
It states it states:
Corporate governance is the system by which companies
are directed and controlled. Boards of directives are responsible for the
governance of their companies. The shareholder’s role in governance is to
appoint the directors and the auditors and to satisfy themselves that an
appropriate governance structure is in place. The responsibilities of the board
include secting the company’s strategic aims, providing the leadership to put
them into effect, supervising the management of the business and reporting to
shareholders on their stewardship. The board’s actions are subject to law,
regulations and the shareholders in general meeting.[11]
Corporate governance has been defined as building credibility,
ensuring transparency and accountability as well as maintaining an effective
channel of information disclosure that would foster good corporate governance
performance, trust as well as sustaining confidence among various interest
groups that make up an organization.[12]
It includes the manner in which corporative are directed, controlled and held
to account.[13] It is
considered with effective leadership of corporatives to ensure wealth creation
in a sustainable manner.[14]
Tricker in defining corporate governance states that
corporate governance is concerned with the ways corporate entities are
governed, as distant from the way businesses within those companies are managed
thus it addresses the issues facing the board of directors such as the
interaction with top management and relationship with the owners and other
interested in the affairs of the company.[15]
D. A. Guobadia[16]
in explaining farmer’s definition[17]
of corporate governance prifers three aspects of corporate governance which
include. The direction of a company’s all round growth and development,
relationship between the board of directions and management and shares
accountability and disclosure.[18]
It is not just about compliance with rules but about responsibility to all
stakeholders of the fair, transparent and accountability.[19]
It ideal provides a level of disclosure and transparency regarding the conduct
of corporations and their board of directors that enables the supervisors of
their accountability while ensuring that they comply with their legal
obligations and remissions, are accountable to shareholders and responsible to
stakeholders including employees, supplies, creditors, customs and communities
and act responsibility regarding the environment.[20]
The concept of corporate governance implicates rules
and regulations that ensures that a company is governed in a transparent and an
accountable manner such that the enterprise surtives and meets the expectation
of its shareholders creditors and stakeholder of its shareholders, creditors
and stakeholders, which society forms a large of.[21]
Corporate Governance has also been defined as
institutional systems and protocols meant to ensure accountability an sound
ethics[22] a
process of customs, policies, systems laws and procedures that govern
institutions and the manner these rules are applied and controlled;[23]
an institutional arrangement which provide the discipline and check over
excesses of controlling mangers.[24]
A closer look at the definitions brings to light the
diverse perspectives in which corporate governance is seen. In the above
definitions, we can see the following views: a narrow view[25]
which concerns entity is managed and receives its basic orientation and
direction and a board perspective[26]
in which it is regarded as being the heart of both a market economy and a
democratic society.
It has also been divided into broad classifications[27]
of internal[28] and
external governance.[29]
This include law and regulation (specifically federal
law, self regulatory organisations and state law); market 1 (including capital
market and product market); market 2 emphasising providers of capital market
information; market 3 focusing on accountability, financial and legal services
from parties external to the firm; private sources of external oversight
particular generally op.cit at note 26 pp. 384.
Corporate governance in all ecompasses so many things
ranging from corporate discipline, transparency, independence, accountability,
fairness and social responsibility and[30]
so much more but a look at other aspects of the subject matter of corporate
governance will reveal more of the very nature of corporate governance.
2.3 Formation of Companies and Public Listing/quoting in Nigeria
2.4 Corporate Governance and Ownership
Structure of Companies in Nigeria
The need for corporate governance arises because of
the separation of management and ownership in the modern conplanation[31]
thus ownership is a total aspect in corporate governance. Good corporate
governance being a diligent way in which providers of corporate financial
capital guarantee appropriate rewards in a legal and ethically moral way and
having both internal and external ways of achieving this. This first is through
the structure of ownership (shareholding concentration and voting rights) and
board of directors or supervisory in some regulatory regime.
[1] Encarta Dictionaries
[2] Dominic Asada, “Trends in this
development of Modern Corporate Governance and Management Principles”, www.doc1p.3
[3] See James Wolfensohn’s definition of
corporate governance, (The World Bank) http://worldbank,
see generally Dominic
Asasa (id
[4] See A Review of Corporate Governance
in Africa Literature, issues and challenges” (2003) A Paper prepared for Global
Corporate Governance Forum www.DOc pp.4
[5] Id at Page 4
[6] Inyang Benjamin; Nutuing Corporate
Governance System: The Emerging Trends in Nigeria,” Journal of Business
Systems, Governance and Etchnic: Vol. 4, No 2 pp. 3 &4
[7] Marco Becht, Patrick Bolton et al
(2005) ecgi (Emylean corporate Governance Institute) www.ecgi.org
[8] See the OECD (Organisation for
Economic Co-operation and Development) Principles of Corporate Governance”
(1999), available at www.oecd.org/ab.utgeneralindex.html. See generally, Asada
Dominic, “Effective Corporate Governance and Management in Nigeria: An Analysis”.
[9] Id
9c See Nicholas, Garin J. et al,. “Boars Composition an Corporate
Performance: How the Australian Experience Informs Contrasting Theories of
Corporate Governance,” (2003), Corporate Governance: An International Review 11
(3) pp.4 Available at http://eprints.qut.edu.au
9c These headlines are organized into five
principles(4) Rights of Shareholders(2)
Equitable treatment of shareholders. The role of stakeholders in corporate
governance (4) Disclosure and transparency (5) the responsibilities of the
board. See Olivier Fremoral & Mierta Capaul,. “The State of Corporate
Governance Experience from Country Assessments” (2002) World Bank Policy
Research Working Paper 2858. Available at http://econ.work/bank .org.
[10] Joash
Ojo Amupitan, “Privatisation and Corporate Governance in Nigeria” (2007)
[11]
This view has been expressed to be for restrictive and control onlerted because
much of the emphases was on the controlled side of things rather than on the
formulation of policy and the development of strategy, which are the powers of
the shareholders and trinitation impose by law which are the starting points of
good corporate governance. See generally Id.
12Sanusi S. O. “Enhancing Good Corporate Governance, A Strategy
for Financial Sector Soundness.” A Keynote Address Presented at the Dinner
Night of the chartered Institution of Branches Nigeria Nov. 8, 2002. Available
at www.expisc.com/gov.htm
13Inam Wilson, “Regulatory and Institutional Challenges in
Nigeria Post Banking Consolidation. pp.1 www.Doc
[14] Id.
Pp.1
[15] See
Chambers A. Tolley’s corporate Governance Handbook, 2nd ed. Reed
Elseier (UK ltd 2000) Contained in Joash O. A. Op Cit at note 10. He desribes
the process of corporate governance as having four principles activities –
Direction involves formulating the strategic directions for the future of the
enterprise in the long run. Executive action deplicts the involvement in
crucial executive decisions. Supervision entails the monitoring and
oversighting of management performance
and accountability is in recognizing responsibility to those making legitimate
demand for accountability. Joash O.A. pp. 178.
16The Rules of Efficient
Corportate Governance and the method of Efficient Implementation. A Nigerian
Experience (2001) 22(4) Company lawyer 119 at 120, See generally Joash O – A op
cit at note 10 pp. 179.
17He defined corporate
governance as a process of direction of a company, the relationship between the
board of directors and management and it is also untimely about regimess of
accountability
[18] See
generally Joash Op. at note 10
[19] Anthony
Idighe, “A Review of CAMA 1990: Issues Auditor Indulgence” (2007), Auditor A. Committee and Auditor
Indeligence” (2900), A Player delivered at Nigerian Accountability Standard
Board 4th Annual corporate Financial Reorting Summit Dinne.
Subenu O. J & Aremu O.
S., “Corporate Governance and Merger Activity in the Nigeria Banking Industry” (2010).
Pp. 1
[21] Nworji,
Adebayo & Adeyanju, “Corporate Governance and Bank Failure in Nigeria:
Issue Challenges and Opportunities “(2011) Research Journal of Finance &
Accountability Vol. 2, No. 2 pp. 3, available at www.iiste.org
[22] Nwakama
P-C et al, An Empirical Evaluation of Corporate Governance Mechanism in Banking
Sector: Impact and Implication in Nigeria,” Asian Journal of Banking
and Management Sciences Vol. 1 No. 2 pp 2 & 3. Available at www.cigbms.org
[23] See
Central Bank of Nigeria Website (2010) See general Id.
[24] Aemaki
G-O, “Philifederation of Codes of corporate Governance in Nigeria and Economic
Development” (2011) Business and Management Review vol. 1. (6) pp. 2. Available
at www.businessjournals.org/bmr
[25] Oyejide
A. & Adedoyin S. “Corporate Governance in Nigeria,”
(2001) A Paper Presented at the conference in Nigeria”
conference of corporate Governance Accra Ghana. This pleceives coporate
governance in terms of issues relating to shareholders protection, management
control and the popular principle – agency problems of economic theory.
[26] This
drawing from the privatization crusade in developing countries refers to issues
of institutional, legal and capacity building as well as the rule of law. Id.
[27] Gillian
S. L., “Recent Developments in corporate Governance, (2006) Journal of
corporate Finance pp. 382. www.doe
[28] This
Id. This is divided into five basic categories board of directors; managerial
incentives; Capital Structure; Byelaw and Charter Proristors and Internal
Control Systems.
[29]
This include law and regulation (specifically
federal law, self regulatory organizations and state law); market 1 (including
capital market and product market); market 2 emphasising providers of capital
market information; market 3 focusing on accountability, financial and legal
services from parties external to the firm; private sources of external oversight
particular generally op.cit at note 26 pp. 384.
[30] See
Central Bank of Nigeria of Nigeria (CBN) Website (2010). This includes timely
and accurate disclosure of all material matters regarding a company including
the financial situation, performance, ownership and governance agreements and
compliance with legal and regulatory requirements, see generally Nwakama P. C.
Op Cit at note 22.
[31] Charles C. Okeahalam, “A Review of
corporate governance in Africa: Literature,
Issues and Challenges (2003) www.Doc pp.3