Corporate governance is at the heart of how businesses are run. According to the
Corporate governance, broadly speaking, includes board efficiency, transparency, reporting requirements, investor communications and sustainability.
Corporate governance includes rules and practice guiding such matters as selection of the board and management, roles and responsibilities of a board, the oversight functions of a board over management, shareholder rights, accounting and reporting, and sustainability issues including relationship to host communities, consumers and general public, etc.
Corporate governance standards in an organization are typically based on macro factors at play in the country where a company operates including the country's legal and financial system, corporate ownership structures, and cultural, economic and political realities. In
However, current economic realities like the globalization of capital flows has rendered ethical relativism, the doctrine that morality exists in relation to culture or society, an unsound basis for setting corporate governance standards. Nigerian Companies must decide if they want corporate governance standards that lie in the eye of the beholder or corporate governance standards that lie in the eye of any beholder?
The need to change the basis of corporate governance standards to match good international practice is clear. First, because of the high cost of capital in
Till date, there are 7 Nigerian companies listed on the
Even Nigerian regulators have taken steps to imbibe good corporate governance practices. In 2003,
It is not only big companies that can benefit from adopting good and internationally acceptable corporate governance practices, small and medium sized enterprises (SMEs) without good corporate governance standards will miss out on the chance to participate in the value chain of multinational companies or even big local companies with good corporate governance practices. For example, it will constitute a reputational risk for big international brands like
Furthermore, organizations need to practice good corporate governance to guard against other risks that threaten the going concern of the organization. Such risks include the liability or asset damage that may occur if managers enter into transactions that are self-serving and that destroy the value of shareholder's equity. Others include fines and sanctions that may be levied if a company's financial statement and disclosures are incomplete, misleading or misstated. In extreme cases, it could lead to a loss of trust from customers that may lead to product boycotts and in the case of a bank, a run. This is necessary because even codified global corporate standards usually constitute an internationally acceptable ethical minimum and may not be sufficient for the nature of a business.
Despite the focus on corporate governance issues all over the world, several constraints still limit its application in
In sum, the business case for corporate governance is strong. Good corporate governance is germane to the going concern of an organization because the quality of corporate governance determines the strategic direction of the firm in terms of the mission and values, corporate culture, risk management and processes. Businesses in
Soji Apampa is the co-founder of
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