stakeholders and sustainable corporate governance in nigeria
TRANSCRIPT
STAKEHOLDERS AND SUSTAINABLE CORPORATE
GOVERNANCE IN NIGERIA
(CASE STUDY OF OGUN STATE LIASON OFFICE, ABUJA-
NIGERIA)
BY:
BAMDUS BASTU
OCTOBER, 2009.
CHAPTER ONE: INTRODUCTION
1.1 Background to the Study
Corporate governance has become a topic of a worldwide
political, economic and business debate. A series of events over
the last two decades has placed corporate governance issues -
including the power and responsibilities of boards of directors
or executive council as the case may be, the rules governing
takeovers, the role and influence of institutional investors, and
the compensation of chief executives - as a top concern for
both the international and local corporate institutions. In
Nigeria currently, there is an increasing demand for a better
organization of management, supervision and accountability
within corporations in all sectors. International economic
pressures have induced the country to adopt a program of
economic liberalization and deregulation. Advocates of the
reforms tout their potential not only for generating greater
economic growth, but also for contributing to more responsible
corporate governance.
In a Board Culture of Corporate Governance, business author
Gabrielle O'Donovan defines corporate governance as 'an
internal 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. Sound
corporate governance is reliant on external marketplace
commitment and legislation, plus a healthy board culture which
safeguards policies and processes.
It is concerned with ways in which all parties interested in the
well-being of the firm (the stakeholders) attempt to ensure that
managers and other insiders take measures or adopt
mechanisms that safeguard the interests of the stakeholders.
Such measures are necessitated by the separation of ownership
from management, an increasingly vital feature of the modern
firm. A typical modern firm is characterized by numerous
owners having no management function, and managers with no
equity interest in the firm. Corporate managers have long been
concerned with ways to address the problem that may arise
from the incongruence of the interests of the equity owners and
managers.
Corporate governance is of great importance for national
development because it has a growing role in helping to
increase the flow of financial capital to firms in developing
countries. Equally important are the potential benefits of
improved corporate governance for overcoming barriers to
achieving sustained productivity growth, such as the actions of
vested interest groups.
Improved corporate governance, however, cannot be
considered in isolation. In the financial sector, attention must
also be given to measures to strengthen the banking sector and
a country’s financial institutions as a whole. In the “real” sector,
close attention must be given to competition policy and sector–
specific regulatory reform (OECD, 2001).
Recent financial international scandals have generated hyped
interest in the area of corporate governance as a mean to
mitigate financial problems faced in developing nations
(Tsamenyi et al. 2007, Gugler et al. 2003, Reed 2002, Ahunwan
2002). The financial problems faced by developing economies
include weak and illiquid stock markets, government
interventions, economic uncertainties, weak legal controls and
investor protection, and frequent government intervention. In
addition, developing nations suffer from poor performance, and
large concentration of ownership (Tsamenyi et al. 2007, Rabelo
and Vasconcelos 2002).
Nigeria has adopted several far-reaching measures aimed at
improving the local investment environment. Among these
measures, Nigeria engaged in a number of activities aimed at
improving its corporate governance practices, in the late 1990s
to date. It has been recognized that if applied properly,
corporate governance helps countries to realize high and
sustainable rates of growth. When practiced widely, good
practices in corporate governance disclosure boost investor
confidence in a country's economy, deepen capital markets and
increase the ability of a country to mobilize savings and raise
investment rates. Corporate governance disclosure facilitates
access to a wider pool of investors by helping to protect the
rights of minority shareholders and small investors. It also
encourages the growth of the private sector by supporting its
competitive capabilities, helping to secure financing for
projects, generating profits, and creating job opportunities
(Fawzy 2003).
There is a need for understanding the interaction of corporate
governance in developing countries in general and Nigeria in
particular. Globalization, international trade, international
investment practices and public expenditure ethics calls for the
development of corporate governance in developing nations
(Reed 2002). In addition, Mensah (2002) reports the presence
of differences between the factors giving rise to corporate
governance in developing nations than those in developed
nations. Developing nations are known to have different
political and economic environments than those of the
developed nations. They usually suffer from state ownership of
companies, weak legal and judiciary system, weak institutions,
limited human resources capabilities, and closed/family
companies (Young et al. 2008).
It is incontrovertible that corporate governance is one of the
most critical issues in the business world today. With the
failures of corporations like Johnson Mathews Bank (JMB) Bank
of Credit and Commerce International (BCCI), Baring Brothers,
Nomura Securities of the 1980s and 1990s and the more recent
Enron and World Com debacles, corporate governance has
taken a central stage in business discuss. The new millennium
presented citizens of the corporate world -shareholders,
executives, employees and others - with the bankruptcies of
Enron and other giants of the most developed segment of the
corporate world - the USA. Corporate America, which was
perceived before as an example to follow, showed the
corporate world citizens many disadvantages in the existing
systems and instruments of corporate governance. This rather
deflated the trust of shareholders in the existing principles and
concepts of corporate governance both in developed and
developing countries.
The rise in interest in the subject of corporate governance
could be trace to the fact that there is now an increasingly clear
separation of ownership from management, which has come to
define modern corporations. This disconnection of ownership
from management and the insulation of the owners from the
day to day operations of business have raised the need to
install an appropriate framework for ensuring transparency and
accountability in the Management of corporate organizations.
Also, the current wave of globalization and the recent
advancement in information and communication technology
(ICT) have greatly facilitates business across national
boundaries. This has necessitated the development of
international best practices in the management of business for
the benefit of all stakeholders. The existence of such standards
would give comfort to investors, creditors, regulatory agencies
and other stakeholders on the conduct of corporate
organizations.
Corporate governance is directly related to financing and
investments. Making public officers disciplined by means of
corporate governance mechanisms results in an efficient
allocation of resources. For countries in transition it is doubly
important: the scarcity of domestic savings demands that
capital be directed towards the most profitable companies,
which is possible only if principles of corporate governance are
given publicity, transparency and monitoring; in addition, due
to the imperfection of market mechanisms, corporate
governance presents an additional mechanism for discipline
and effective management control in corporations. We can
conclude that good corporate governance is an important
factor for the smooth functioning of a financial market, which
leads to efficient allocation of financial resources and is the key
to economic growth. The efficient financial market itself should
promote better practice of corporate governance, reinforcing
market discipline for corporate managers.
International capital flows enable companies to tap sources of
financing from a great number of investors. If countries want to
take full advantage of global capital markets and if they want
to attract long-term capital, they must follow clear standards of
corporate governance at the international level. The degree to
which corporations use basic principles for good corporate
governance is a relevant factor for investment decisions as
well. It is especially important when we talk about direct
investments, which are of the greatest benefit to countries in
transition because they mean not only capital, but the transfer
of skills, technology and know-how as well. Although direct
investors exercise a lot of control, they also pay considerable
attention to the framework of corporate governance. They
request adapting to the global standards (of transparency,
accounting), in order not to be in an environment where local
companies may externalize their costs by means of corruption
and hidden government subsidies.
A number of issues come to play in analyzing corporate
governance in Nigeria and factors that have impeded the
running of corporations. Various efforts have been made by
successive governments in Nigeria and a very important one to
be mentioned is that of the Shagari administration which
established Presidential liaison offices in each of the 36 states
of the Federation between 1979 and 1983, to cater for the
problem of intergovernmental relations. The main purpose of
the state Liaison offices was to serve as a localised embassy or
mission situated at the centre of government. Because of the
Federal system of government there was need for a liaison
between the 3 tiers of government to foster good economic,
social and political gains with a dual mandate to benefit both
the state government and federal government in the execution
of their administration of policies and programmes. This by
extension remains same for the local governments.
The Ogun State Government in line with the policies of the then
President Shehu Shagari administration established liaison
offices across the country with Abuja Office as the co-ordinating
unit. The Ogun State Liaison office, Abuja was created to assist
indigenes of Ogun state and potential investors both within and
outside the Nigeria. She offers protocol services and necessary
hosting of important dignitaries in and around Abuja. The
liaison office projects the resources of the state to the centre
and its constituent environs in order to increase internally
generated revenue. This is complemented by tax desk for
remittance of taxes. There are numerous other duties and
functions of the liaison office as may be directed by the
Executive Governor of Ogun state at any point in time.
However, smooth functioning of the liaison office and
achievement of the purposes for which it was established lies
strongly on proper corporate governance model.
“It is expected that with the increased campaign for
stakeholder’s participation as a pre-requisite for good corporate
governance both in the private and public sector, this country
will experience growth and further development” (Iyiegbuniwe,
2004). In addition to this, focus on public corporations is highly
necessary as their private counterparts depend a great deal on
them. It is in view of this that this dissertation seeks to
advocate a management model which allows for all
stakeholders: all groups and individuals who are seriously
involved in the activities of the company (i.e the stakeholder
model) as a major drive to good corporate governance and the
strengthening of company/stakeholder relationship with
particular reference to Public corporation. It is hoped that this
work would fill a vacuum in academic literatures.
1.2 Statement of the Problem
Liaison offices in Nigeria and anywhere else are setup to act as
local embassy to intermediate between governments at various
levels but it’s observed that most of these liaison offices are not
functioning as expected in the direction for which they are
established. This to a large extent is due to lack of good
corporate governance model or non-existence of a model in
some of the liaison offices. This problem however is not limited
to only the Liaison offices but covers the entire public sector
and even private sector.
Surprisingly, most articles and academic works have been
silent on public corporations when it comes to corporate
governance as if it is not relevant to them and also a great deal
of attention is given in most cases to shareholders (i.e the
shareholder model) neglecting other stakeholders as if they do
not matter. This is a very big problem that needs urgent
attention. There is need to increase awareness in this area and
more academic works in this aspect is of high necessity.
The Ogun State Liaison office, Abuja, Nigeria was chosen as
case study because it’s a State government’s executive agency
and a public corporation whose performance (corporate
governance) in the past few years is highly commendable. The
paper will therefore attempt to investigate into the
organization’s corporate governance model, find out its content
and its relationship with the organization’s recorded
performance.
The recent experiences of some countries show that the
assumption that a strong system of corporate governance will
appear automatically as a result of ownership transformation is
unrealistic. Even in developed market economies, differences in
the ownership structure and level of concentration or dispersion
of owners influence the selection and adjustment of corporate
control mechanisms. For the countries in transition, the
problem of good corporate governance development becomes
more complicated due to the underdeveloped institutional
infrastructure. For this reason there is a need for a careful
approach to governance restructuring so that a private and
public sector can be formed, powerful enough to realize
successful economic transformations towards a market
economy.
Many researchers have examined the status of corporate
governance in developed nations. However, developing nations
have not enjoyed such level of investigation. There is a need for
understanding the interaction of corporate governance in the
developing nations. Globalization, international trade, and
international investment practices calls for the development of
corporate governance in developing nations (Reed 2002). In
addition, Rabelo and Vasconncelos (2002) report the presence
of differences between the factors giving rise to corporate
governance in developing nations than those in developed
nations. Developing nations are known to have different
political and economic environments than those of the
developed nations. They usually suffer from state ownership of
companies, weak legal and judiciary system, weak institutions,
limited human resources capabilities, and closed/family
companies (Mensah 2002, Young et al. 2008).
Rabelo and Vasconcelos (2002) observed that the special
problems faced by developing nations makes the type and
degree of corporate governance in developing nations
significantly different from that in developed nations. In
addition, it is reported that special issues like dominance of
government ownership and/or family/closed companies makes
corporate governance implementation questionable and
difficult (Mensah 2002).
In addition, individual developing countries are very different
between themselves. There are major difference in the Middle
East, North Africa countries and sub-Saharan African countries
(Euromoney 2007, Fawzy 2004). Therefore, there is a need to
study corporate governance in each country separately.
Research in the area of corporate governance spans multiple
disciplines, including finance, strategic management, sociology
and political science. The state of current knowledge is such
that we need to have an interdisciplinary approach to studying
the problem of corporate governance. The study of corporate
governance can involve the problems of corporate decision
making, strategic management, leadership, organization
theory, and the sociology of elites. It can also be related to a
whole range of other broader subjects, including
macroeconomic policy, the level of market competition and
political science.
The framework of corporate governance also depends on the
legal and regulatory environment. In addition, the factors of
corporate responsibility and ethics are significant aspects of the
problem of corporate governance. Thus one must first
recognize the complexity and interdisciplinary nature of
corporate governance before attempting to research its
problems in a developing economy like Nigeria.
The stakeholders some times are not able to direct
management of organization appropriately and prevent
managerial opportunism and agency conflicts development,
destroying shareholders’ wealth. Large shareholders, taking
care of keeping their own interests, do not care of keeping
interests of all shareholders balanced. Under such
circumstances block shareholders will distort a system of
mechanisms of corporate governance to make it centered only
at their own interests. Therefore, interests of minority
shareholders are violated, that leads to conflict of interests
among shareholders and destroys shareholder wealth too.
Absent of transparent executive compensation system, decision
system, monitoring system, poor accountability and
transparency has impeded corporate governance in Nigeria.
The managers of corporate institutions especially public
institutions are motivated to increase their own wealth through
well known unjustified high compensation and assets tunneling.
The corporate governance failure in Nigeria over time had
raised some fundamental questions such as the efficiency and
effectiveness of managing public institutions, dependability on
information from these institutions, their level of administrative
independence, the role of regulators, conflict of interest and the
question of ethics and professionalism.
The Ogun state Liaison office despite its credible performance
still experience certain difficulties which have affected her
corporate governance performance. These include isolating
major stakeholders (citizens) and focusing more on the political
well being of the governor, beureaucracy and due process
which tend to slow down developmental activities, lack of
proper orientation and general civil service problems and finally
existence of good corporate governance codes but not
documented.
The major task of this research work therefore is to call the
attention of the general public, the government and
stakeholders to these aspects and demonstrate practical
solutions to the problems.
1.3 Objectives of the Study
The main objective of this study is to examines the relationship
between stakeholders, corporate governance mechanisms and
organizational performance in Ogun State Liaison office, Abuja,
Nigeria,
The specific objectives of the study are:
(i) Examine the stakeholders role in enhancing the
performance of corporate governance in Nigeria;
(ii) Ascertain the constraints of organization’s corporate
governance in Nigeria; and
(iii) To draw conclusion based on fundamental findings and
give recommendation on its applicability in corporate bodies
(profit making or not).
1.4 Research Questions
This study seeks to address the following research questions;
(i) What are the linkages between stakeholders, managers
and corporate governance in Nigeria?
(ii) What are the challenges of corporate governance in
Nigeria?
(iii) How can good corporate governance be enhanced and
sustained in Nigeria?
1.5 Hypothesis of the Study
In line with the objectives of the study, the hypothesis to be
tested can be stated as follows:
(i) H0: There is no significant relationship between
stakeholders, corporate governance mechanisms and
organizational performance in Nigeria.
H1: There is significant relationship between stakeholders,
corporate governance mechanisms and organizational
performance in Nigeria.
(ii) H0: Stakeholders do not significantly enhance corporate
governance in Nigeria.
H1: Stakeholders significantly enhance corporate
governance in Nigeria.
1.6 Significance of the Study
Among the most important factors that must be present before
an organization is considered sound is effective corporate
governance principles. Without good corporate governance,
organizations cannot fulfill their main missions of service
delivery making and contribution to the social welfare with
maximum effectiveness. Organizations cannot operate
successfully without adequate rules of governance and the
institutions that support them, or without the acceptance of a
culture of corporate governance among managers, owners and
other stakeholders.
It is important to provide organizations with information to
recruit, train and reward professional managers who can be
held to high standards of competency, ethics, and responsibility
that are fundamental in enshrining good corporate governance
in Nigeria. This study aims to provide insights into the
relationship between governance mechanisms and firm’s
performance in Nigeria.
The study will provide important information on the cauldron of
policy as well as the practical administration of corporate
governance in Ogun state liaison office. This is more so,
because of the growing concern for the desire to entrench good
corporate governance in Ogun state liaison office in particular
and Nigeria in general. This project would serve as a guide to
the principles to be considered in formulating corporate
governance models in any organization. The data gathered
from the study would yield valuable information for public
policy regarding the involvement of all stakeholders in
organization setup to achieve sustainable corporate
governance and hence objectives of organization.
It is hoped that it would also be of immense use to the private
sector, multi-lateral and bi-lateral organizations, development
partners and non-governmental organizations who wished to
intervene in the sector.
The findings of this study will provide information for
stakeholders, researchers and policy makers as to the
desirability and extent of good corporate governance in an
organization like Ogun state liaison office and recommend
same for all other organizations.
1.7 Organization of the Study
The study examines the role of the stakeholders in the
sustainability of corporate governance performance using Ogun
state liaison office in Abuja as a case study.
This is with a view to explore the linkage between stakeholders
and corporate performance in the public sector. The scope of
the study is therefore, to focus on Ogun state liaison office as a
public institutions that aim at delivering services to the public.
To achieve the objective of this study, the study is structured
into five chapters. Apart from chapter one which this part
concludes, chapter two is literature review and theoretical
framework. In this part the related literature is reviewed,
conceptual issues and theoretical framework is discuss to
establish the linkages between stakeholders and corporate
governance performance in Ogun state liaison office.
Chapter three is research methodology and it discusses the
methodological foundation and data analysis technique
including scope/limitations. It seeks to discuss the series of
data employed in the study and the statistic model used will be
outlined. Considering the available option, the researcher
chooses the use of primary data as the best option suitable for
this study. This approach is employed to assess the corporate
governance principles in the Ogun state liaison office, Abuja-
Nigeria.
Chapter four is presentation and analysis of data obtained from
the field survey including discussion of results. The data were
collected primarily from the field of five different locations
including the Ogun state Government house in Abeokuta, ogun
state, the Ogun state governor’s lodge in Abuja, the ogun state
liaison office in Abuja, three selected ministries in Abuja and
the presidency/national assembly.
Chapter five is summary of major findings, conclusion and
policy recommendations. Here the researcher made an attempt
to point out in few words the major issues relating to the
subject of discussion. She also went further to discuss the
major findings and proffer solutions that can help organizations
attain a standard level of corporate governance.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.0 INTRODUCTION
Corporate governance is the set of processes,
customs, policies, laws, and institutions affecting the way a
corporation (or agency) is directed, administered or controlled.
Corporate governance also includes the relationships among
the many stakeholders involved and the goals for which the
corporation is governed.
The Ogun state liaison office, Abuja is a not-for-profit
making organisation and a very strong state government
agency with multiple stakeholders. The principal stakeholders
in the case of Ogun state liaison office, Abuja are the executive
governor of Ogun state, the Ogun state citizens (or tax payers),
management, and the directors (executive and independent).
Other stakeholders include labour (the liaison office
employees), regulators, the presidency, the Ogun state
executives and legislators, the financial community, civil
society, federal and state ministries, Nigerian embassies
abroad, international embassies in Nigeria and the community
at large. For Not-For-Profit Corporations or other membership
Organizations like the Ogun state liaison office "shareholders"
are usually absent.
Corporate governance is a multi-faceted subject. An
important theme of corporate governance is to ensure the
accountability of certain individuals in an organization or
agency through mechanisms that try to reduce or eliminate the
principal-agent problem.
This thread of discussions focuses on the impact of a
corporate governance system in Ogun state liaison office Abuja,
Nigeria with a strong emphasis on stakeholders' participation.
There are several aspects to the corporate governance subject
discussed in this section, such as the stakeholder theories,
conceptual issues on corporate governance, corporations and
stakeholders etc.
2.1 CONCEPTUALISATION OF CORPORATE GOVERNANCE
‘Good governance’, a relatively newly celebrated concept
in the public sector in Nigeria has engaged the minds of
scholars and technocrats since the close of the last century,
resulting in several levels of interpretation and intellectual
polemics. Ordinarily, governance is associated with leadership
and the process of managing public affairs. The strong appeal
of the concept which has sustained the interest of scholars in
recent time is not unconnected to its centrality in the issues of
public accountability, transparency and efficiently in the
conduct of government business.
Good governance is reduced “to simple concepts such as
efficiency and rationality in allocating resources, curbing
corruption which inhibits development and investment,
guarantee to civil and human rights and accountability to the
people” (Johnson, 1991:396).
In the same vein, Olowu, (2005:2) observed that,
governance emphasizes leadership the manner in which (state)
political leaders manage, use (or misuse) power whether to
promote social and economic development or to pursue
agendas that undermine such goals”. Therefore, the
governance debate which is gaining currency in both the
developed and developing countries is rooted in the philosophy
of welfares aimed at evaluating the capacity of the state to
deliver existential goods and services to the people. According
to adejumobi, governance transcends the state and it’s
institutions to accommodate the process of steering state and
society towards the realization of collective goals. It point to
the dynamic but problematic and often times contradictory
relationship between the state and society (Adejumobi,
2004:14).
Governance from public sector view could be
conceptualized as the manner in which power is exercised in
the management of economic and social resources for
sustainable human development. It addresses the leadership
role in the institutional framework. According to Kwakwa and
Nzekwu (2003), governance is a ‘vital ingredient in the
maintenance of the dynamic balance between the need for
order and equality in society; promoting the efficient production
and delivery of goods and services; ensuring accountability in
the house of power and the protection of human rights and
freedoms’. Governance is, therefore, concerned with the
processes, systems, practices and procedures that govern
institutions, the manner in which these rules and regulations
are applied and followed, the relationships created by these
rules and nature of the relationships.
Thus, corporate governance is also concerned with the
creation of a balance between economic and social goals and
between individual and communal goals. To achieve this, there
is the need to encourage efficient use of resources,
accountability in the use of power, and, the alignment of the
interest of the various stakeholders, such as, individuals’
corporations and the society.
David Smith (2002), sees corporate governance as a
“Culture that has a common understanding of the roles of
management and the board” To him, “corporate governance is
a culture of mutual respect that both parties have for each
other’s role”. It is a culture of continuous open dialogue and
communication. In rounding up his views on corporate
governance, Smith noted that it is about people. “People doing
not just what the rules say but about doing what is right”.
“Corporate governance is about "the whole set” of legal,
cultural, and institutional arrangements that determine what
public agencies can do, who controls them, how that control is
exercised, and how the risks and return from the activities they
undertake are allocated.” (Margaret Blair, Professor of Law,
Vanderbilt University Law School).
“Corporate Governance is concerned with holding the
balance between economic and social goals and between
individual and communal goals. The corporate governance
framework is there to encourage the efficient use of resources
and equally to require accountability for the stewardship of
those resources. The aim is to align as nearly as possible the
interests of individuals, corporations and society.” (Adrian,
2000).
Contemporary articulation of the concept of good
governance has also engaged the attention of International
Financial Institutions like the World Bank and some other
specialized agencies of the United Nations. Governance is
defined as “the manner in which power is exercised in the
management of a country’s economic and social development”
(World Bank, 1994). Also good Governance is about promoting
corporate fairness, transparency and accountability
(Woldensohn, 1999). Good governance implies the efficient
management of state institutions, which underscores the need
for a prudent application of the Commonwealth of a state to
improve the human condition. It emphasizes the virtues of
financial discipline. As Stoker noted, “governance is the
acceptable face of spending cuts” (Stoker, 1998:39).
Governance is also seen as “a process of social
engagement between the rules and the ruled in a political
community. Its component parts are rule making and standard
setting, management of regime structures and outcome and
results of the social pact” (UNECA, 1999). The United Nations
Development Programmes (UNDP) view governance as: the
totality of the exercise of authority in the management of a
state’s affairs, comprising of the complex mechanism,
processes and institutions through which citizens and groups
articulate their interests, exercise their legal rights, and
mediate their differences (UNDP, 1997a:7).
Notwithstanding the variations in the definition of good
governance, scholars are in agreement that there are three
actors involved in the governance project. Thus Adejumobi
(2004:14) noted that “there is a consensus on the major actors
or agency of the governance project. These are the state, the
civil society, and the private sector”. It is in this sense that
Kooiman, (1993:2) defined governance as “forms in which
public or private actors do not separately but in conjunction,
engage in problem solving together”.
From the foregoing clarification, another school has
emerged in the governance debate, the multi-organizational
school (Kooiman, 1993; Ogendo, 1999; Strosberg and Gimbel,
2002; Olowu, 2005). The multi-organizations school advocates
a tripartite approach to governance involving the synergy of
the public sector, the private sector and civil society
organizations. At this level of interpretation, governance is a
collective and participatory endeavour to serve the interest of
the greatest number of people in society. In the final analysis,
governance is good when all the actors involved in the process
are guided by the principles, norms and standards of the
governance project as conceived by the society (Mohideen,
1997).
From the foregoing, it is apparent that no matter the angle
from which corporate governance is viewed, there is always a
common consensus that corporate governance is concerned
with improving stakeholder value, and that governance and
management should be mutually reinforcing in working towards
the realization of that objective. However, understanding
corporate governance as it relates to the public sector cannot
be completed without critically examining the public sector
reform.
2.2 PUBLIC SECTOR REFORM: NEW PUBLIC
MANAGEMENT
This means a definition and redefinition of the role of the
government. In the advanced economies, government is being
remodelled to cope with citizens rising expectations. As
Nunberg observes that:
Governments have sought to reshape rigidly hierarchical,
nineteenth-century bureaucracies into more flexible,
decentralized client-responsive organizations, compatible with
late twentieth century technological, economic and political
requirements (Nunberg, 1997:14).
The New Public Management (NPM) has brought about
radical reforms of the public sector. The United States has re-
invented government with a National Performance Review
(NPR) meant to “create a government that works better and
costs less” based on the four principles of putting customers
(i.e stakeholders) first, cutting red tapes, empowering
employees, and cutting back basics (Kamensky, 1997). In
Britain and New Zealand, the Westminster model of
manageriallism seeks to radically transform the traditional
bureaucratic structures and revolutionalize the business of
government (Schick, 1996).
This wave of transformation made an inroad into the
policy arena of developing economies in the wake of the
economic crisis of the late 1970s and 1980s. The success of the
market friendly economies, the onslaught of globalization, and
the unimpressive performance of the institutions of governance
in the Third World, all combined to provide the need impetuses
or redefine the role of government in the development process.
The central focus of this new definition is to progressively
withdraw the public sector from direct production of goods and
services, and entrench a new orientation that will make
government bureaucracies to adopt private sector initiatives in
the discharge of its statutory responsibilities. As Vigoda
(2002:7) observed, “premises originally rooted in business
management have become increasingly adjusted and applied
to the public sector”.
A limited government will ensure financial frugality
designed to meet the expectations of the International
Financial Institution (IFI) (Stokes 1998). This view was
corroborated by the Breton Woods Institutions when they
reduced ‘good governance’ to “institutional adaptability to
achieve the goal of macro-economic stability in a process,
which allows for responsibility to the creditors” (Odion, 2004:2).
In fact, this new orientation envisage a public sector that
remains the most potent for in the development process by
creating an enabling environment for private initiatives, by
undertaking appropriate policy reforms and the necessary legal
and regulatory framework.
The primacy of the government in development and social
progress of the society is underscored by the fact that: one; the
public sector alone can provide basic services that affect the
living standards of the poor, generally referred to as ‘public
goods’, two; it creates a climate conductive to private sector
development (World Bank, 2000a).
A review of the current reform agenda in Nigeria will
suggest that the initiatives are rooted in the philosophy of
limited but strong and pro-active government including
performance review, (that of course is pre-emptive and hasty
for now), the writer is of the opinion that the reform initiatives
is a predictable response to the imperative of globalization
which calls for the creation of good governance model in an
emerging world order.
2.2.1 PUBLIC SECTOR REFORMS IN NIGERIA
The current public sector reforms in Nigeria is anchored on
the provisions of the charter for public service in Africa, which
was adopted at the 3rd Biennial Pan- African Conference of
ministers of Civil Service held in Windhock, Namibia on 5th ,
February, 2002. Issues such as transparency, professionalism
and ethical standards and obligations of public service
employees in the performance of their duties were identified
among others as the principles and rules governing African
public services.
i. Determine the appropriate structure and manning levels
of government ministries, agencies and parastatals;
ii. Up-skill and re-professionalize the public service;
iii. Re align and strengthen public institutions; and in
particular, transform these institutions to enhance their
capacity in the effectiveness of customer service delivery;
iv. Tackle corruption more vigorously by strengthening
transparency and accountability in the conduct of government
business; and
v. Reduce waste and improve the efficiency of government
expenditure through monetization of benefits, public
procurement reforms, pension reforms, privatization and
liberalization.
The Domain of Reforms Programme include
i Budget and Financial Management: Procurement system
review, Institutionalization of fiscal responsibility and
Accounting reforms.
ii Accounting Issues: Installation of due process and
transparency, Establishment of services charter and
Compliance enforcement.
iii Human Resource Management: Clean-up of personnel
record and payroll, Review of stall cadres, Remodelling of
recruitment and promotion processes, Installation of a new
performance management scheme, Pay reform, Injection of
competent personnel including relevant Professionals and
young bright people, Capacity development and training and
Organizational culture change.
iv. Operations and Systems: Organizational restructuring and
right-sizing process re-design and Information technology
applications
The goal of the current public sector reforms is to build a
better society where the state through high performance
institutions will ensure quality service delivery to a growing
number of citizens. To accomplish this goal, government is
compelled to seek the involvement of other institutional actors.
First and foremost, the reform agenda is emphatic on the
increased responsibility of the organized private sector. Civil
society has come to be recognized as the third sector in a multi
organizational approach to good governance. Strosberg and
Gimbel (2002) have articulated an ‘Iron triangle’ which
accommodates (1) public administrators who manage
programs, and carry out policies (2) the private sector whose
initiatives and operation propels the engine of development,
and (3) Non-Governmental Organizations and interest groups
who focus on particular policy area. And interest groups who
focus on particular policy area.
The advent of civil society organizations (CSOs) into the
governance project has the primary aim of increasing the
diffusion of policy impact in the society. Being closer to the
people, CSOs can articulate and reflect the needs of society on
an ongoing basis, and channel these toward the public
authority. The autonomy which CSOs enjoy in terms of their
relationship with the state, underscores the credible
contributions they are likely to make to good governance from
their numerous diverse constituencies. Their legitimacy does
not only derive from the support they receive from a particular
constituency, but also from their responsibility to promote a
wider public interest.
Comparatively, CSOs in developing economies is a novel
development as against the already vibrant and highly diffused
CSOs and the state is largely determined by the nature and
character of national government. Whereas in advanced
democracies with a tradition of tolerance and accommodation,
CSOs operate in an environment that permit healthy dialogue
and robust engagement, in most of the Third World states
characterized by political instability and authoritarian regime,
CSOs is stifled and contained. As Aiyede observed:
The consolidation of single parties, president-for-life,
extensive security establishment, widespread inequalities, and
personal rule necessarily involved the denying of the people’
right to participate in the decision-making process… (Aiyede,
2002:2).
There has been the situation in Nigeria before the
commencement of the current democratic dispensation.
However, the efforts of a handful of CSOs in the vanguard of
the democratic struggle, which consequently led to a break
with the authoritarian military cabal, must be noted. The civil
society has been acknowledged not only as the engine of the
transition to democracy in Africa and elsewhere, but also as
equally crucial to the vitality of democracy (Aiyede 2002).
Moreover, “the nurturing of civil society is widely perceived as
the most effective means of controlling repeated abuses of
state power, holding ruler accountable to their citizens and
establishing the foundation for a durable democratic
government” (Chazan, 1996:282). Durable or sustainable
democratic government as used here implies a responsible
governance system capable of meeting the yearnings and
aspirations of the citizens.
2.3 CORPORATE GOVERNANCE AND ECONOMIC GROWTH
Corporate governance has been a central issue in
developing countries long before the recent spate of corporate
scandals in advanced economies made headlines. Indeed
corporate governance and economic development are
intrinsically linked. Effective corporate governance systems
promote the development of strong financial systems –
irrespective of whether they are largely bank-based or market-
based – which, in turn, have an unmistakably positive effect on
economic growth and poverty reduction.
There are several channels through which the causality works.
Effective corporate governance enhances access to external
financing by firms, leading to greater investment, as well as
higher growth and employment. The proportion of private
credit to GDP in countries in the highest quartile of creditor
right enactment and enforcement is more than double that in
the countries in the lowest quartile. As for equity financing, the
ratio of stock market capitalization to GDP in the countries in
the highest quartile of shareholder right enactment and
enforcement is about four times as large as that for countries in
the lowest quartile.
Poor corporate governance also hinders the creation and
development of new firms. Good corporate governance also
lowers of the cost of capital by reducing risk and creates higher
firm valuation once again boosting real investments. There is a
variation of a factor of 8 in the “control premium” (transaction
price of shares in block transfers signifying control transfer less
the ordinary share price) between countries with the highest
level of equity rights protection and those with the lowest.
Effective corporate governance mechanisms ensure better
resource allocation and management raising the return to
capital. The return on assets (ROA) is about twice as high in the
countries with the highest level of equity rights protection as in
countries with the lowest protection.
Good corporate governance can significantly reduce the
risk of nation-wide financial crises. There is a strong inverse
relationship between the quality of corporate governance and
currency depreciation.
Indeed poor transparency and corporate governance
norms are believed to be the key reasons behind the Asian
Crisis of 1997. Such financial crises have massive economic
and social costs and can set a country several years back in its
path to development.
Finally, good corporate governance can remove mistrust
between different stakeholders, reduce legal costs and improve
social and labor relationships and external economies like
environmental protection. Shleifer and Vishny (1997),
Claessens (2003), La Porta et al (1997) and La Porta et al
(2000).
2.4 THEORETICAL FRAMEWORK
The theoretical framework upon which this study is based
is the agency theory/model, which posits that in the presence
of information asymmetry the agent (in this case, the directors
and managers) is likely to pursue interests that may hurt the
principal, or shareholder (Ross, 1973; Fama, 1980). At first the
theory was applied to the relationship between managers and
equity holders with no explicit recognition of other parties
interested in the well-being of the firm.
Subsequent research efforts widened the scope to include
not just the equity holders but all other stakeholders, including
employees, creditors, government, etc. This approach, which
attempts to align the interests of managers and all
stakeholders, has come to be regarded as the stakeholder
theory.
The stakeholder theory has been a subject of some
investigation. John and Senbet (1998) provide a comprehensive
review of corporate governance, with a particular focus on the
stakeholder theory. The authors note the presence of many
parties interested in the well-being of the firm and that these
parties often have competing interests. The review also
emphasizes the role of non market mechanisms, citing as an
example the need to determine an optimal size of the board of
directors especially in view of the tendency for board size to
exhibit a negative correlation with firm performance. Other
non-market mechanisms reviewed by John and Senbet include
the need to design a committee structure in a way that allows
the setting up of specialized committees with different
membership on separate critical areas of operations of the firm.
Such a structure would allow, for example, productivity-
oriented committees and monitoring-oriented ones.
In an article extending the stakeholder theory, Jensen
(2001) also recognizes the multiplicity of stakeholders. He
concurs with John and Senbet that certain actions of
management might have conflicting effects on various classes
of stakeholders. This implies that the managers have a
multiplicity of objective functions to optimize, something that
Jensen sees as an important weakness of the stakeholder
theory “because it violates the proposition that a single-valued
objective is a prerequisite for purposeful or rational behaviour
by any organisation” (Jensen, 2001: 10).
In search of a single valued objective function that
conforms to rationality, Jensen suggests a refinement of the
stakeholder theory – the enlightened stakeholder theory. For
him, the enlightened stakeholder theory offers at least two
advantages. First, unlike the earlier version with multiple
objectives, the modified form of the theory proposes only one
objective that managers should pursue: the maximization of
the long-run value of the firm. If the interest of any major
stakeholder was not protected, the objective of long-run value
maximization would not be achieved.
A second, related, appeal of the enlightened stakeholder
theory is that it offers a simple criterion to enable managers to
decide whether they are protecting the interests of all
stakeholders: invest a dollar of the firm’s resources as long as
that will increase by at least one dollar the long-term value of
the firm. There is an important caveat, however. Jensen himself
cautions that the criterion may be weakened by the presence
of a monopoly situation or externalities.
Despite its appeal, the stakeholder theory of the variety
proposed by Jensen has not been subjected to much empirical
evaluation. At least two factors might have contributed to the
gap between theory and evidence. The first, already alluded to,
concerns the prevalence of externalities and monopoly
situation. The second is the problem of measurement,
especially in view of the problems associated with getting an
accurate measure of the long-term value of the firm.
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Scope of the Study
This research work has been narrowed to a particular area
of study. The study examines the relationship between
stakeholders, corporate governance mechanisms and
organizational performance of the Ogun state liaison office,
Abuja in Nigeria. The study is set to dwell specifically on the
impact of stakeholders in attaining sustainable corporate
governance in corporations in Nigeria, focusing more on the
public sector. Therefore, for the purpose of this study, Ogun
state Liaison Office, Abuja, Nigeria is the case study so as to
reduce monotony of having to study all the corporate firms in
the country.
3.2 Sources of Data
Both primary and secondary data were used. The main
sources of data for the study were questionnaire, interview,
textbooks, journals and other relevant publications. To obtain
the primary data about the perception of all relevant
stakeholders on the level of corporate governance in Ogun
state liaison office, Abuja and its role on the agency’s
performance, questionnaires were administered to some of the
stakeholders (internal and external) while the main officials
were interviewed.
3.3 Methods of Data Collection
(i) Questionnaires:
The data collection was through the use of questionnaires,
to collect information on stakeholders’ involvement and
sustainable corporate governance in Ogun state liaison office,
Abuja-Nigeria. The Liaison office is the type that has numerous
stakeholders. However, the researcher decided to group them
so as to ease the administration of the questionnaire and
questionnaires were distributed equally. A total of 600
questionnaires were administered.
(ii) Interviews
Interviews were conducted with the Head of information
directorate, the executive Governor of Ogun state, chairman
house committee on intergovernmental affairs and other
important personnel.
(iii) Publications
Secondary data were collected from the mail records of
the Liaison office which indicated the rate of inflow and outflow
of correspondence between the Liaison office and selected
stakeholders. The draft copy of the new Ogun state liaison
office’s code of conduct was also examined. Also, information
from textbooks, journal articles and conference proceedings
were used which helped in the development of literature
reviews relating to the subject at hand.
(iv) Focus Group Discussion
It is also known as representative survey group: a
small group of representative people who are questioned about
their opinions as part of political or market research.
There are two types of research: qualitative and
quantitative. To gain a general impression of the market,
consumers, or the product, companies generally start with
qualitative research. This approach asks open-ended rather
than yes or no questions in order to enable people to explain
their thoughts, feelings, or beliefs in detail. One of the most
common qualitative research techniques is the focus group in
which a moderator leads a discussion among a small group of
consumers who are typical of the target market. The discussion
usually involves a particular product, service, or marketing
situation. Focus groups can yield insights into consumer
perceptions and attitudes, but the findings cannot be applied to
the whole market, because the sample size is too small. Focus
group results, then, are suggestive rather than definitive.
The insights generated by a focus group are often
explored further through quantitative research, which provides
reliable, hard statistics. This type of research uses closed-
ended questions, enabling the researcher to determine the
exact percentage of people who answered yes or no to a
question or who selected answer a, b, c, or d on a
questionnaire. One of the most common quantitative research
techniques is the survey in which researchers sample the
opinions of a large group of people. If the sample group is large
enough and is representative of a particular group, such as
executives who use cell phones, statisticians consider the
findings statistically valid, which means that if all consumers in
that particular category could be surveyed, the findings would
still be the same. This means that quantitative findings are
conclusive in a way that qualitative findings cannot be.
Here the focus group discussion was to support further the
responses recorded from interviews conducted. The bulk of
analysis of the data collected was dependent on the survey/poll
through questionnaires administered.
3.4 Sampling Techniques
Sampling is the process of selecting a part of a group
under study. A sample is part of a greater group from which it
was drawn. Sampling is the process through which it is decided
who will be observed. The aim of making inferences that will be
applicable to the greater group from which the sample is drawn
still remains. However, the confidence with which
generalisations can be made depends on the accuracy of the
process of sampling.
This study adopted two types of probability sampling
namely; simple random sampling and the stratified sampling.
Our decision is influenced by the fact that the Ogun state
Liaison Office is a multi stakeholder organisation and analysis
would be easier carried out when they are all represented
(stratified sample), hence samples drawn from each stratum
(simple random sampling).
The population of study is the total staffs of the Liaison
office in Abuja and other stakeholders broken down to different
strata. Where the population is relatively large, samples were
drawn from each stratum through the simple random sampling
methods to represent the entire population.
For this study, a total number of six hundred
questionnaires were administered but only four hundred and
ninety eight (498) questionnaires were retrieved, that is 83
percent.
3.5 Statement of Hypothesis
In line with the objectives of the study, the
hypothesis as stated in chapter one to be tested can be
restated as follows:
(i) H0: There is no significant relationship between
stakeholders, corporate governance mechanisms and
organizational performance in Nigeria.
H1: There is significant relationship between
stakeholders, corporate governance mechanisms and
organizational performance in Nigeria.
(ii) H0: Stakeholders do not significantly enhance
corporate governance in Nigeria.
H1: Stakeholders significantly enhance corporate
governance in Nigeria.
3.6 Model Specification
From the literature and other theoretical analysis, the
model specification is as follows:
CG = f (SH)
Where;
Dependent variable:
CG is Corporate Governance
Independent Variable:
SH is Stakeholders involvement/participation
The expected sign of the variable is that Stakeholders
involvement/participation will positively impact on Corporate
Governance.
3.7 Technique of Data Analysis
Descriptive statistics technique were used in analyzing the
data collected that is, frequency/ percentage tables, graphs
and as well as chi-square (X2) to test the hypothesis.
Specifically, the statistical techniques used for the purpose
of the data analysis were tabulation, simple percentages and
bar charts.
The chi-square (X2) test of independence used is given by
the following formula:
X2 = (fo - fe) 2
fe
Where X2 is the chi-square
fo is the observed frequency
fe is the expected frequency
Furthermore, the expected frequency can be expressed as,
fe = (rt) (ct)
gt
where fe is the expected frequency; rt is the row total; ct is the
column total; and gt is the grand total or total observations in
the study.
3.8 RESEARCH THEORY
The research theory adopted for this study is the positivist
epistemology with a deductive quantitative research approach.
In its broadest sense, positivism is a rejection of metaphysics. It
is a position that holds that the goal of knowledge is simply to
describe the phenomena that we experience. The purpose of
science is simply to stick to what we can observe and measure.
Knowledge of anything beyond that, a positivist would hold, is
impossible. Since we can't directly observe emotions, thoughts,
etc. (although we may be able to measure some of the physical
and physiological accompaniments), these were not legitimate
topics for a scientific psychology. B.F. Skinner argued that
psychology needed to concentrate only on the positive and
negative re-inforcers of behaviour in order to predict how
people will behave -- everything else in between (like what the
person is thinking) is irrelevant because it can't be measured.
Positivism is guided by five principles:
1. The unity of the scientific method – i.e., the logic of inquiry
is the same across all sciences (social and natural).
2. The goal of inquiry is to explain and predict. Most
positivists would also say that the ultimate goal is to
develop the law of general understanding, by discovering
necessary and sufficient conditions for any phenomenon
(creating a perfect model of it).
3. Scientific knowledge is testable. Research can be proved
only by empirical means, not argumentations. Research
should be mostly deductive, i.e. deductive logic is used to
develop statements that can be tested (theory leads to
hypothesis which in turn leads to discovery and/or study of
evidence).
4. Science does not equal common sense. Researchers must
be careful not to let common sense bias their research.
5. The relation of theory to practice – science should be as
value-free as possible, and the ultimate goal of science is
to produce knowledge, regardless of any politics, morals,
or values held by those involved in the research.
In positivist epistemology we use deductive reasoning to
postulate theories that we can test. Based on the results of our
studies, we may learn that our theory doesn't fit the facts well
and so we need to revise our theory to better predict reality.
The positivist believed in empiricism -- the idea that
observation and measurement was the core of the scientific
endeavour. The key approach of the scientific method is the
experiment, the attempt to discern natural laws through direct
manipulation and observation.
Considering the topic of discussion at hand which is clearly
a case study research, positivism is indeed an epistemology
most relevant. However, case study research can be positivist
(Yin, 2002) or even interpretive (Walsham, 1993). A case study
is an empirical inquiry that investigates a contemporary
phenomenon within its real-life context, especially when the
boundaries between phenomenon and context are not clearly
evident (Yin 2002).
Typically, a case study researcher uses interviews and
documentary materials first and foremost and then followed by
participant observation. The distinguishing feature however, is
that the researcher spends a significant amount of time in the
field. The fieldwork notes and the experience become an
important addition to any other data gathering techniques that
may be used.
In our case, in an attempt to establish linkage between
organisation’s performance and good governance using Ogun
State liaison office, Abuja, Nigeria as case study, we employed
the use of questionnaire as the main research instrument.
However, the responses expected due to the structure of
questions contained therein are both quantitative and
qualitative in nature but all qualitative responses have been
quantified for easy analysis (deductive quantitative research
approach). Quantitative research is "a formal, objective,
systematic process in which numerical data are utilised to
obtain information about the world" (Burns and Grove cited by
Cormack 1991 p 140). Objectivity, deductiveness,
generalisability and numbers are features often associated with
quantitative research.
In addition, the proceedings from both study group and
the interviews conducted were presented and analysed using
the narrative approach.
3.9 LIMITATIONS OF THE STUDY
Time constraints, poor environmental facilities, inability of
much materials and low financial capacity on the side of the
researcher are all among the major constraints faced by this
research work. Some of these limitations are discussed in the
following paragraphs.
The respondents’ complaint of the bulky and sophisticated
nature of the questionnaires vis-à-vis the short period of time
given to fill them. As a result of this, some potential
respondents adopted non-challant attitude towards filling them.
Appeals by the research assistants and the researcher
eventually led to the acceptance of the questionnaires by the
few. However, some of the operators still returned the
questionnaires uncompleted.
Granting of interview by the interviewees was another
major threat to the complete conceptualization of the subject
matter and assessment of Ogun state’s corporate governance
model. However, with persistency and patience some of the
intending interviewee turned in.
In the same vein another problem encountered in the field
had to do with the operators’ reluctance to cooperate due to (i)
suspicion that disclosing information may be used against the
agency, (ii) apathy towards government’s gesture to properly
manage public institutions.
As it is in all researches that finance is critical,
undertaking this research work was constraint by insufficient
funds as may be necessary to carry out a thorough work. The
time constraint was another challenge. Due to unforeseen
circumstances like unstable power supply, the timeframe
proposed as can be found in the research proposal was a little
bit exceeded.
The study is bedevilled by materials and data constraints.
Some of the data that should have aid the research work could
not be accessed. This problem has come to be associated with
developing economies including Nigeria where non-availability
of data has come to be one of the major impediments in
research. In the Liaison office in particular, unavailability of
data was largely caused by military intervention in
Government, a time of fear when nobody has the right to
complain or allowed to think straight. Documentations were
mostly seen as threat to the Government administration.
The myriad of problems encountered during the field work
emanating from suspicion, lack of confidence in governance,
capital and time requirement, and the non-challant attitudes
displayed by some respondents were resolved through
persuasion, better planning and proper use of time. Therefore,
with these measures put in place the data gathered from the
field is reliable and has significantly eliminated or at least
minimized the potential negative consequences of the
constraints pointed above.
CHAPTER FOUR
BACKGROUND OF THE STUDY AREA
4.1 AN OVERVIEW OF OGUN STATE LIAISON OFFICE
We can say that the Ogun state liaison office is a state’s
agency which makes it to fall within the category of public
sector. It is one of the agencies through which Ogun state
government executes her public administration.
Public sector is the domain of public administration, and
“a country’s public administration system comprises the civil
service, special purpose bodies, and local authorities” (Olowu,
2002:123). Accordingly to Ahmed, (2005) define Public service
as an agglomeration of all organizations that exist as part of
government machinery which are established by government
for the delivery of services. He divides the public sector into
four broad categories;
i. The civil service The Career Personnel of the Presidency,
the ministries, the Extra-ministerial Departments and the
services of the national assembly and the Judiciary.
ii. The Armed Forces
iii. The Police and other security agencies.
iv. The Parastatals including social services / infrastructure
agencies, regulatory Agencies, Educational Institutions,
Research institutes etc.
By this classification, public sector contrast sharply from
private sector in the sense that “Goods and Services that
require exclusion, jointness of use or consumption, and not
easily divisible are regarded as ‘public’ goods and services”
(Olowu, 2002:123).
Given the above classification, the Ogun state liaison
office fall under the fourth category and hence discussion of
corporate governance as relating to Ogun state Liaison office
will take a different dimension from the everyday
conceptualisation of corporate governance as used in the
business world, which represent sharply the private sector.
Hence, corporate governance in the business world is
synonymous to good governance in the public sector or the
“government business world.”
The Ogun state liaison office, Abuja was established by the
then Governor of Ogun State under the directives of the then
Head of state; Alhaji Sheu Shagari alongside other Liaison
offices of all states in Nigeria is situated in one of the glorious
section of the Federal Capital Territory (FCT); Central District
Area, Abuja and complemented by the Ogun state Governor’s
lodge at Jorse Marti Street, Asokoro. Specifically, the liaison
office is located at 74, Ralph Sodeinde Street.
The Liaison office operates from a dual location of both the
Liaison office and the golden edifice of the governor’s lodge
unveiled just one month to return of democracy, 27th April,
1999 under the Military administrator of the state; Navy
Captain Kayode Luke Olofin Moyin.
The office was established to among other purpose
midwife between the state government on one side and the
Federal Government of Nigeria, Ogun indigenes and other
Stakeholders on the other side. It was to serve as a localised
embassy or mission situated at the centre of government,
Lagos initially but Abuja the new federal capital territory
ultimately. Apart from the above purpose the state liaison office
was also created to assist indigenes of the state and potential
investor both within and outside the country. She also offered
protocol services and necessary hosting of important
dignitaries in and around Abuja. However, there are numerous
other duties and functions of the liaison office as may be
directed by the Executive Governor of the state at any point in
time.
It can be described as a State Government’s agency in all
ramifications. Because Nigeria practice Federal system of
government, there was need for a liaison between the 3 tiers of
government to foster good economic, social and political gains
with a dual mandate to benefit both the state government and
federal government in the execution of their administration of
policies and programmes. This by extension remains same for
the local governments. However, it was discovered that Ogun
state liaison office has other unique features distinct from the
everyday understanding that an average Nigerian is made to
conceive of a Government agency. These unique features have
generated so much discussion about its performance over the
years.
4.1.1 CORPORATE GOVERNANCE IN OGUN STATE
LIAISON OFFICE
Governance issues on the Ogun State Liaison office are as
old as the Liaison office herself. At first, the structure and mode
of her operation was not known to anyone but its existence was
quite known. Studies have shown that it was due largely to the
fact that it was new and secondly because there were no
structures to awaken people’s awareness of governance and
what it ought to be. Aside from the reason just mentioned, the
transition from civil to military rule which continued from 1983
through 1999 was another reason for this; a time when citizens
had no right to question the authority of the Government.
However, the issues of good governance in all sectors of
the economy generated so much heat following the return of
Democracy in 1999 when the then President of the Federal
Republic of Nigeria; Rtd. General Olusegun Obasanjo introduced
series of structural reform program to sanitise the system (both
public and private sector). Moral and Ethical values,
accountability and transparency etc in all sectors of the
economy were the order of the day. This trend continued
throughout his 1st and 2nd term and the instruments used by
his administration are still in place till today. It is however
observed that public officers have relaxed since the beginning
of the Yar’adua’s administration in May 2007.
The case of Ogun State Liaison Office, Abuja is however
very distinct compared to other Liaison Offices in Nigeria as this
period marked the continual increase of a new look in the
administration of the Liaison office. A turning point to say, when
the activities of the Liaison office were made more formal and
accountability through good governance were the watchwords.
The new Liaison Officer; Otegbola Lola (Mrs) at the
assumption of office in 2003 initiated a formidable team led by
her Special Adviser (S.A) to investigate the activities of the
liaison office in the past, the Federal Government’s reform
programs and there relevancies to the Liaison office, the
standards of the code of conduct bureau, the code of conduct
in other sectors and draw up modalities for how the Liaison
office is to be administered.
The committee came back with their report which was
later metamorphosed into “Code of Best Practice for Ogun
State Liaison Office” after gaining approval from the Executive
Governor; His Excellency Chief Otunba Gbenga Daniel.
The reformation programs considered and which greatly
influenced this initiative were:
i. The NEEDS (National Economic Empowerment and
Development Strategy) and SEEDS (State Economic
Empowerment and Development Strategy)
ii. SERVICOM (Service Compact With All Nigerians)
iii. Review of EFCC (Economic and Financial Crime
Commision) and ICPC’s (Independent Corrupt Practices and
other related matters Commission) activities.
iv. The joint CBN and CAC code of corporate governance
formulated for private sector
v. Other Public sector reforms Policies
Aside from the above mentioned policies, the major factor
that influenced this remarkable revolution was the desire on
the part of the Liaison Officer to really serve her people
optimally. This singular event and other efforts made her
status to be upgraded by the Governor of the state; Otunba
Gbenga Daniel from Liaison Officer to Director General, Inter-
governmental Relations (DIR) in 2004 to among other
functions, supervise the Ogun state liaison office both in Abuja
and Lagos and also to supervise all other inter-governmental
related matters.
In addition and to complement her efforts, The Governor
of Ogun State, Otunba Gbenga Daniel, in his determination to
open up the state to other parts of the country, also upgraded
the information directorate of the state's Liaison office in Abuja.
The directorate is now to be headed by the Governor's Personal
Assistant on Information and strategy, Mr. Fela Oliyide. A
statement from the maiden director of Intergovernmental
affairs in the liaison office said the idea behind the upgrading
was to, among others, project the political and economic
ideologies of Daniel to a larger population and assist the
administration in its socio-economic acceleration drive of the
State.
The Directorate is also to adequately cover the governor's
activities, build cordial relationship between the State and the
media and foster a healthy and profitable inter-state
partnership among its various publics. The head of the new
directorate was the political editor of City People Magazine.
In addition to that, other offices were created which
include the investment office, education scholarship office,
poverty eradication unit, empowerment unit, internal audit unit,
budget unit, Millennium Development Goals (MDGs) unit,
SERVICOM charter and whole lots of others.
The liaison office from records has discovered lots of
talents through its various empowerment programs and
scholarship programs. This to a large extent contributed to the
accelerated growth of the state. A cross section with Ogun
state students at the University of Abuja also revealed to us
that Ogun state liaison office is living beyond expectation in
building intellectual capacity in the youths.
In a statement issued by the director of intergovernmental
affairs; Ogun state liaison office is determined to be at the fore
front of eradicating poverty in Nigeria starting with Ogun state
indigene. This made the agency to establish millennium
development Goals MDGs unit and empowerment unit within its
structure.
Worthy of mentioning is the innovative Investment unit
through which the liaison office projects the resources of the
state to the centre and its constituent environs in order to
increase internally generated revenue. A number of profitable
individual initiatives have been financed by the liaison office. In
addition, lots of Multinationals which is typical of Ogun state
were established through the support of the liaison office. Aside
from sourcing for investors which help the state generates lots
of revenue, there is yet another structure in place; the tax desk
for remittance of taxes.
In order to ensure quality of service delivery, public
procurement and good governance within the agency, the
director of intergovernmental affairs called for the
establishment of SERVICOM charter within the structure and
completely embrace all its provisions. Moral and ethical values
have since been redefined in the agency. For the first time in
the history of the Ogun state liaison office, the liaison office is
mandated to publish its annual report in the annual news
bulletin of the state which just kicked off at about the same
time the governance model were enacted.
Most recently, the function of the Ogun state liaison office
was felt by the Ogun state executive council, lawmakers and
the National assembly as it played an active role in bringing
down the Ogun State political imbroglio earlier this year; April
14, 2009.
4.1.2 OGUN STATE LIAISON OFFICE’S ORG.
STRUCTURE
EXTERNAL
AUDITOR
INTERNAL AUDIT UNIT
AUDITCOMMITT
EE
THE EXECUTIVE GOVERNOR
DIRECTOR GENERAL INTER-GOVERNMENTAL
AFFAIRS(ABUJA) LIAISON OFFICER
(LAG)
SPECIAL ASSISTANT (SA) 1&2 TO DG
INTER GOVERNMENTAL
AFFAIRS
SPECIAL ASSISTANT
(SA) ABJ
SPECIAL ASSISTANT
(SA) LAG
DRIVERS, SECURITY, KITCHEN STAFFS, GARDENER AND
OTHERS (ABUJA AND LAGOS)
INVESTMENT UNIT
INFORMATION
DIRECTORATE
ACCOUNTING UNIT
MDGs UNIT
EDUCATION
SCHOLARSHIP UNIT
LIAISON OFFICER (ABJ)
ALL DIRECTORATES/UNITS
ANNEXES
SERVICOM
CHARTER
CORPORATE SECRETARIATE
TAX DESK EMPOWERMENT UNIT
Figure 1: The Ogun State Liaison Office Abuja, org. structure
Prior to the period under review, the Ogun State Liaison
Office like every other liaison office in the country had no
clearly defined structures. However, following the remarkable
inputs of the new liaison officer, presently director of
intergovernmental affairs, a clearly defined structure can be
described as seen above.
The executive governor is at the top of the chart as the
principal officer. The next to him is the director of
intergovernmental affairs who reports directly to the executive
governor on the activities of the liaison offices (Lagos and
Abuja). She also receives special directives from the governor
that can make her perform beyond her duty limit. However, her
major task is to put all machineries in place to see that
intergovernmental activities of the state are carried out
successfully. She does this by co-ordinating both the human
and material resources available.
As clearly indicated in the chart above, the liaison officers
both in Abuja and Lagos including her special assistant and all
other directors work closely with her in order to see that the
objectives of the agency are achieved optimally. In the area of
maintenance and other administration lie the low level
employees of the Liaison office such as the cleaners, drivers,
gardeners etc.
Accountability and transparency are of utmost importance
in any organisation and of course the reverse can kill the
smooth running of an organisation. The liaison office for the
first time apart from the internal audit unit is subjected to the
external auditors made up of representatives from independent
auditing firm; it’s also complemented by audit committee made
up the EFCC representatives with the Liaison office’s secretary
as the secretary of the committee. The committee’s duty is to
supervise the activities of both the internal and external
auditors in relations to their audit report, submit findings to the
executive governor of the state and if necessary probe
unethical attitudes of the public officers in relation to
mismanagement of funds or any other corrupt act. This
relationship is clearly shown in the organogram above.
SERVICOM is yet another watchdog within the structure of
Ogun state liaison office. As we can see from the organogram,
it has link with all the various units of the organisation. It
ensures that service delivery is carried out in such a manner
that meets up the standard and provisions of SERVICOM. The
charter is also open to indigenes and other stakeholders
through which they can file petitions when they are been
marginalised in any form.
The agency secretariat, another strategic unit of the
liaison office is at the centre to handle all secretarial related
activities of the Ogun state liaison office. It’s also charged with
the responsibility of keeping records and publishing of the Ogun
state annual news bulletin. The secretariat headed by a highly
skilled and certified agency secretary is also among other
functions serve as the secretary of the board of directors (BOD)
and the external audit committee.
It should be noted as shown from the chart that all
units/organ through which the liaison office operates have
annexes in Lagos which carry out the same functions as that of
Abuja. However, the organogram shown above represents a
summarised structure of the liaison office as the actual staff
strength is not featured therein. The staff strength as at the
time of this research is estimated at five hundred and twenty
three (523) representing statistics for Lagos and Abuja.
4.2 THE STAKEHOLDER MODEL (CASE OF OGUN STATE
LIAISON OFFICE)
Post, et. al., (2002), in their theory called Stakeholder
view, use the following definition of the term "stakeholder":
"The stakeholders in a corporation are the individuals and
constituencies that contribute, either voluntarily or
involuntarily, to its wealth-creating capacity and activities, and
that are therefore its potential beneficiaries and/or risk
bearers." This definition differs from the older definition of the
term stakeholder in Stakeholder theory (Freeman, 1984) that
also includes competitors as stakeholders of a corporation.
Robert Phillips provides a moral foundation for stakeholder
theory in Stakeholder Theory and Organizational Ethics. There
he defends a "principle of stakeholder fairness" based on the
work of John Rawls, as well as a distinction between
normatively and derivatively legitimate stakeholders.
At this moment we observed that the internal members as
seen in the structural graph claims a stronger position and
insufficient light is shed on the position of other stakeholders in
the corporate governance debate. While in the past few years,
we seemed to be gradually moving towards a stakeholder
economy, an economy which allows for the influence and the
interest of all parties concerned.
However the next few paragraphs will reveal the level of
stakeholders’ involvement in governance in the Ogun state
liaison office, Abuja. Our choice, our plea/recommendation of
the stakeholder model is based on the following principles of
good management in the Ogun state liaison office, Abuja:
• Decision making in consultation
• A broad and responsible weight of interest
• Countervailing power and competition of ideas
• A certain/minimum balance of power in relations
• Ability and power to learn, creating adaptability and
flexibility
• Not only short time problem solving but also longer time
orientation
• Durable commitment
• Shared responsibilities
• Societal legitimacy
• Visions and values based on debate
• Performance measurement and ethical auditing
All based on the public sector reforms discussed earlier.
Because of these principles, we plea for and recommend an
active role and involvement of the stakeholders in all
organisations and in the public sector in particular.
The stakeholder model as presented below considers the
interest and possible contributions of all relevant stakeholders
in strategic decision making at corporate level in the Ogun
state liaison office. In this model, we define strategic decision
making as a continuous and cyclic planning process: a process
of analysing external and internal key factors, making strategic
choices, drawing up policy plans, implementation , testing and
if necessary, adjusting plans. Stakeholders must be able to
participate in the decision making (each from his position and
responsibilities and in relation to each other).
Other categorie
s
OGUN STATE LIAISON OFFICE ABUJA
Strategic Decision Making
Ogun state govt executive
s and judiciary
The liaison office MGT
Presidency
Fed. Ministrie
s
Donor Agencie
s
Financial Communit
y
The liaison office Staffs
Ogun state
indigenes
Other liaison office
s
Other states’ govt
Nigeria embassies
abroad
Regulatory bodies
Potential investors
Tax Authority
Political parties
Suppliers/Contractor
s
The Media
Civil Society
Organisations
International
Embassies in Nigeria
Non Government
al Organisation
State Ministries
Govt.Parastatal
s
Figure 2: The Stakeholder Model of Ogun State Liaison Office
4.3 CODE OF CORPORATE GOVERNANCE IN OGUN STATE
LIAISON OFFICE
Long before the highly publicized corporate scandals and
failures worldwide, the global community has shown increasing
concern on the issues of corporate governance. The reason for
this trend is not far to seek. There is growing consensus that
corporate governance, which has been defined as the way and
manner in which the affairs of companies are conducted by
those charged with the responsibility, has a positive link to
national growth and development.
Little wonder therefore that several studies and initiatives
have been undertaken by countries and International
Institutions on the subject “Corporate Governance”. As a result
of the foregoing, several Codes of Corporate Practices and
Conduct have been fashioned out and are in use in various
jurisdictions.
The importance of effective corporate governance to
corporate and economic performance cannot be over-
emphasised in today's global market place. Companies
perceived as adopting international best corporate governance
practices are more likely to attract international investors than
those whose practices are perceived to be below international
standards. However, in our case in Ogun state liaison office,
there exist verbal/oral codes of corporate governance which are
not known by staffs and some principal officers not to talk of
abiding by its provisions. It is even worst that our survey
revealed to us that there are no codes of good governance at
all in other liaison offices.
This realisation prompted the Director of
intergovernmental affairs Ogun state in conjunction with the
liaison officer of the agency in Lagos to inaugurated a five (5)
member Committee on Good Governance of Ogun state liaison
office (“the Committee”) on June 15, 2003. The Committee
was carefully constituted to include major management staffs
of the agency headed by Special adviser to the Liaison officer
now director general of intergovernmental affairs.
The Committee headed by Mr Kehinde, had the following
terms of reference:
• To identify weaknesses in the current corporate
governance practices in Nigeria with respect to public agencies
and the Ogun state liaison office in particular.
* To examine practices in other jurisdictions with a view to the
adoption of international best practices in corporate
governance in the liaison office.
* To make recommendations on necessary changes to current
practices.
* To examine any other issue relating to good governance in
the liaison office.
The Committee set about its task by establishing the
corporate governance practices already prevalent in Ogun
state, Nigeria. This they did by preparing a detailed
questionnaire on agency operations and these were circulated
to various state ministries and other public agency throughout
the length and breadth of Ogun state. Thereafter they
proceeded to make a comparative analysis of Good
Governance practices around other jurisdictions and markets
with particular emphasis on emerging markets and countries
like the U. K. which had similar statutes. Recall that we have
stated earlier in this debate that the whole idea of public sector
reform was to inculcate the private business principles in
government businesses. With the results of their findings, they
set about crafting a Code of Best Practices for Ogun state
liaison office putting into consideration its multiple
stakeholders.
The Committee submitted a draft Code, which was
forwarded to the executive governor through the then liaison
officer now director of intergovernmental affairs. It was further
reviewed by selected members of the state house of assembly
and the executive council. This extensive exposure was
designed to elicit stakeholders input before the Code was
finalized. Subsequently, the final report was ratified and
approved by the executive governor, Chief Otunba Gbenga
Daniel for compliance.
The board of directors and the management of the liaison
office are convinced that the adoption of this Code will no doubt
enhance corporate discipline, transparency and accountability.
Although the main target of the Code is the Board of
Directors and the management as leaders of the agency, the
responsibilities of other stakeholders including Ogun indigenes
and regulatory authorities were equally given due attention. We
believe that one of the ways to improve the standard of
corporate governance is to ensure that all stakeholders have a
clear understanding of their roles. This is aptly provided for by
this Code.
Experience from other jurisdictions has shown that
answers to enforcement or compliance with a Code of this
nature are not easily found. While voluntary compliance is
generally encouraged, appropriate sanctions are applied when
it becomes necessary and applicable. We therefore like to
encourage all stakeholders to comply with the Code which is
contained herein.
PART I: NEED FOR A NEW CODE OF CORPORATE
GOVERNANCE IN OGUN STATE LIAISON OFFICE
I.0 Introduction
“Service is what we offer ourselves for. And service is what the
people are entitled to expect from us.”
- President Olusegun Obasanjo
“Nigerians have for too long been feeling short changed by the
quality of public services. Our public offices have for too long
been showcases for the combined evils of inefficiency and
corruption, whilst being impediments to effective
implementation of government policies. Nigerians deserve
better. We will ensure they get what is better!”
- President Olusegun Obasanjo, June 2003
I.I Address by His Excellency President Olusegun Obasanjo at
the opening of the Special Presidential Retreat on Service
Delivery in Abuja 19th – 21st March 2004 had once again
informed the need for the practice of good corporate
governance, which is a system by which corporations are
governed and controlled with a view to increasing and meeting
the expectations of the stakeholders.
I.II For the Ogun state Liaison office, the retention of public
confidence through the enthronement of good governance
remains of utmost importance given the role of the office in the
maintenance of intergovernmental relationship between the
State (Ogun State) and its various stakeholders in Nigeria and
the Diaspora, especially the Presidency, Ogun indigenes
worldwide, other states and Nigeria embassies worldwide.
I.III A survey, by the corporate governance committee setup
by me (Ogun State Liaison Officer, Abuja; Mrs Lola Otegbola),
reported in June 2004, showed that corporate governance was
at a rudimentary Stage, as no single Liaison office in Nigeria
had recognized codes of corporate governance in place. Even
the so called Ogun State Liaison office only had verbal and non
written corporate governance principles.
I.IV Yet, the on-going reformation by the President
Obasanjo’s SERVICOM (Service Compact With All Nigerians)
committee is likely to pose additional corporate governance
challenges arising from integration of processes and culture.
Research had shown that almost all Government agencies are
influenced from outside, the heads are reduced to ordinary
“figure-heads” and the decisions they make mostly are not
their own and not in the best interest of the stakeholders. This,
to a large extent has made corruption a strong culture in the
public sector. However, a well-defined code of corporate
governance practices should help these agencies overcome
such difficulties.
I.V Since 1979 when the Sheu Shagari administration
established Liaison offices for all states, there had been a large
gap between the actual objectives and what the Liaison offices
do in reality.
I.VI Other weaknesses include inability to plan and
respond to changing circumstances in government business,
ineffective management information system (MIS), inadequate
Management Capacity, high Level Malpractices and inadequate
Operational and Financial Controls to mention but few.
I.VII The above mentioned reasons, however,
necessitated a review of the existing code for the Ogun state
Liaison office. This new code therefore is developed to
complement the earlier ones (the verbal/unwritten codes) and
enhance their effectiveness for the Ogun state Liaison office.
I.VIII Compliance with the provisions of this Code is mandatory.
PART II: CODE OF BEST PRACTICES ON CORPORATE
GOVERNANCE IN OGUN STATE LIAISON
II.0 Principles and Practices that Promote Good Governance
The watch words are:
CONVICTIONS
That Nigeria can only realise its full potentials if citizens receive
prompt and efficient services from the State
RENEWAL
Of commitment to the service of the Nigerian Nation
CONSIDERATION
For the needs and rights of all Nigerians to enjoy social and
economic advancement
AVOWAL
To deliver quality based services based upon the needs of the
citizens
DEDICATION
To providing the basic services to which each citizen is entitled
in a timely, fair, honest, effective and transparent manner
II.I The establishment of strategic objectives and a set of
governance values, clear lines of responsibility and
accountability.
II.II Installation of committed and focused Directors which will
exercise its oversight functions with a high degree of
independence from external influence.
II.III A proactive and committed management team.
II.IV There is a well-defined and acceptable division of
responsibilities among various cadres within the structure of
the Liaison office.
II.V There is balance of power and authority so that no
individual or coalition of individuals has unfettered powers of
decision making.
II.VI All Directors or liaison officers as the case may be should
be knowledgeable in government business and also possess the
requisite experience.
II.VII There should be a definite management succession plan.
II.VIII The staffs and other internal stakeholders need to be
responsive, responsible, enlightened and carried along.
II.IX There should be a strong rigid culture of compliance with
rules and regulations herein.
II.X Effective and efficient Audit Committee should be set up
by the Executive Governor to checkmate activities. In addition
to that, there should also be existence of external auditors and
the internal ones that would be part of the structure and serve
in that capacity from time to time.
II.XI Both the external and internal auditors must be of high
integrity, independence and competence.
II.XII Internal monitoring and enforcement of a well articulated
code of conduct/ethics for Directors/Liaison officers,
Management and staffs is of high necessity. SERVICOM (Service
Compact With All Nigerians) should be situated within the
structure.
II.XIII Regular management reporting and monitoring
system.
II.XIV Periodical written reports of compliance status with
the corporate Governance codes must be submitted to the
Executive governor through the audit committee.
III.0 DEFINITION OF RESPONSIBILITIES
A- THE BOARD OF DIRECTORS
1. RESPONSIBILITIES OF THE BOARD OF DIRECTORS
This Code may be cited as the;
(a) The Board of Directors should be responsible for the affairs
of the liaison office in a lawful and efficient manner in such a
way as to ensure that the liaison office is constantly improving
its value creation as much as possible.
(b) The Board should ensure that the value being created is
shared among the Ogun state indigenes and employees with
due regard to the interest of the other stakeholders of the
liaison office. The Board's functions should include but not be
limited to the following:
i. Strategic planning
ii. Selection, performance appraisal and compensation of senior
executives
iii. Succession planning
iv. Communication with Ogun state indigenes, presidency and
other important stakeholders
v. Ensuring the integrity of financial controls and reports
vi. Ensuring that ethical standards are maintained and that the
liaison office complies with the laws of Nigeria.
As much as possible, the Board should be composed in such a
way as to ensure diversity of experience without compromising
compatibility, integrity, availability, and independence.
(c) The Board should comprise of a mix of Executive including
the deputy governor, Directors of the liaison office including the
Director of intergovernmental affairs and Senior civil servants
of the state headed by a Chairman of the Board (executive
governor of Ogun state), so however as not to exceed 15
persons or be less than 5 persons in total.
(d) Other members of the Board should be individuals with
upright personal characteristics and relevant core
competences, preferably with a record of tangible
achievement, knowledge on board matters, a sense of
accountability, integrity, commitment to the task of good
governance and institution building, while also having an
entrepreneurial bias.
A Board should not be dominated by an individual.
Responsibilities at the top of the agency should be well defined.
(e) The position of the Chairman and Chief Executive Officer
should ideally be separated and held by different persons. The
politically elected governor as the Chairman and an appointed
officer as the Chief executive officer (need to create office of
Director General inter governmental affairs for this purpose). A
combination of the two positions in an individual represents an
undue concentration of power.
(f) In exceptional circumstances where the position of the
Chairman and Chief Executive Officer are combined in one
individual, there should be a strong non-executive independent
director as Vice Chairman of the Board.
(g) The Chairman's primary responsibility is to ensure effective
operation of the Board and should as far as possible maintain a
distance from the day-to-day operations of the liaison office,
which should be the primary responsibility of the Chief
Executive Officer (Director general intergovernmental affairs)
and the management team.
(h) To maintain effective control over the liaison office and
monitor the executive and management, the board should
meet regularly, and not less than once in a quarter with
sufficient notices, and have a formal schedule of matters
specifically reserved for its decision.
(i) The agency’s meetings should be conducted in such a
manner as to allow free flowing discussions. There should be
enough time allocated to indigenes to speak and to enable
them contribute effectively at the Annual General Meeting.
(j) The Board should have a formal schedule of matters
specifically reserved for it to ensure that the direction and
control of the liaison office is firmly in its hands.
(k) There should be an agreed procedure for directors in the
furtherance of their duties to take independent professional
training if necessary, and the liaison office should bear the
expense.
(l) All directors should have access to the advice and services of
the board secretary, who is appointed by the board and who is
responsible to the board for ensuring that board procedures are
followed and that applicable rules and regulations are complied
with. The removal of the board secretary should be a matter for
the Board.
B. REPORTING & CONTROL
(a) There is an overriding need to promote transparency in
financial and non-financial reporting.
(b) It is the management's duty to present a balanced,
reasonable and transparent assessment of the liaison office’s
position.
(c) The prime responsibility for good internal controls lies with
the Board.
(d) The Board should ensure that an objective and professional
relationship is maintained with the auditors. External Auditors
should not be involved in business relationships with the liaison
office.
(e) The Board should establish an audit committee of at least
three representatives from EFCC and also external auditors
with written terms of reference, which deal clearly with its
authority and duties.
The external auditors should report on the effectiveness of the
Liaison office's system of internal control in the Annual report.
C. THE TAXPAYERS
(a) The liaison office acting through the Directors should
ensure that indigenes’ general rights are protected at all times.
(b) Indigenes have right to question the steps taken by the
liaison office on certain matters that may affect them directly
and suggest ways of improvement.
(c) Innovative ideas are welcomed from the citizens.
(d) Notices of end of year meeting should be sent at least 21
days before the meeting with such details (including annual
reports and audited financial statements) and other information
as will enable them to know the level at which the liaison office
have served them.
(e) Indigenes are to be represented by their various interest
group leaders.
(f) The Board should ensure that decisions reached at the
general meetings are implemented.
(g) The Board should ensure that all interest groups are treated
equally; and that no interest group should be given preferential
treatment or superior access to information or other materials
on the basis of the political parties they belong to or other
yardsticks.
(h) Boards should use general meetings to communicate with
the indigenes through their representatives and encourage
their participation.
(i) The agency or the board should not discourage indigenes
activism or labour union. Organized interest groups should act
and influence the standard of corporate governance positively
and thereby optimize stakeholder value.
(j) All benefits accruing from the liaison office must be shared
among indigenes on equal basis and not by any other measure
such as majority or minority group, geographical size etc.
D1. COMPOSITION OF THE AUDIT COMMITTEE ART
(a) The liaison office board should welcome existence of Audit
Committee, with the key objective of raising standards of good
governance.
(b) The Audit Committees should not act as a barrier between
the auditors and the executive directors on the main board, or
encourage the main board to abdicate its responsibilities in
reviewing and approving the financial statements.
(c) The Audit Committee should not be under the influence of
any dominant personality on the main board, neither should
they get in the way and obstruct executive management.
Audit committees should be comprised of strong and
independent institution personnel of the EFCC.
(d) The Secretary of the Audit Committee should be the Liaison
office’s Secretary, Auditor or such other person nominated by
the Committee.
(e) Members of the Committee should understand basic
financial statements, and should be capable of making valuable
contributions to the Committee.
(f) Audit committee should review in details the Report of the
Internal Auditor.
(g) Members of the Committee should possess the following
qualities: (i) Integrity; (ii) Dedication; (iii) A thorough
understanding of government business, its products and
services; (iv) Inquisitiveness and dependable judgement and (v)
Ability to offer new or different perspectives and constructive
suggestions.
The Committee should be given written terms of reference.
D2. TERMS OF REFERENCE FOR AN AUDIT COMMITTEE
The duties of the Audit Committee shall be: -
i To consider the appointment of the external auditor, set the
audit fee, and handle any questions of resignation or dismissal;
ii. To discuss with the external auditor (before the audit
commences) the nature and scope of the audit, and ensure co-
ordination where more than one audit firm is involved;
iii. To review the half-year and annual financial statements
before submission to the Board, focusing particularly on: -
a) Any change in accounting policies and practices
b) Major judgemental areas
c) Significant adjustments resulting from the audit
d) The going concern assumption
e) Compliance with accounting standards
f) Compliance with stock exchange and legal requirements.
iv. To discuss problems and reservations arising from the
interim and final audits, and any matters the auditor may wish
to discuss (in the absence of management where necessary);
v. To review the external auditor's management letter and
management's response;
vi. To review the Company's statement on internal control
system prior to endorsement by the Board;
vii. To also review the internal audit programme, ensure co-
ordination between the internal and external auditors, and
ensure that the internal audit function is adequately resourced
and has appropriate standing within the agency;
viii. To consider the major findings of internal investigations
and management’s response;
ix. To consider other topics, as defined by the board.
E. FINAL NOTE
The code of good governance as given in the
provisions above is still open for other inputs as may be
deemed necessary.
4.4 CHALLENGES OF CORPORATE GOVERNANCE IN
NIGERIA
• ESTABLISHING THE CODES
There is a popular saying that where there is no law, there
is no offence. For most institutions and professional bodies in
Nigeria, it is either that there is no code of conduct or the codes
are not being followed. Therefore, the first challenge in
ensuring good corporate governance must start from taking
appropriate steps to ensure that a code that will guide
stakeholders is put in place.
• The Challenge of Enlightenment
There is the need for mass enlightenment on corporate
governance. In this part of the world, corporate governance is
relatively a new concept and even some organisations’
directors are not fully aware of the onerous responsibilities of a
director. Under the principles of corporate governance, we say
that the rights of the shareholders or taxpayers as the case
may be must be protected. But the issue is how many of them
know their rights?
In a situation where the taxpayers and other stakeholders
do not know their rights, how can they know when there is
infringement on those rights? From the foregoing, the need for
appropriate enlightenment of all stakeholders on corporate
governance cannot be overemphasized.
• Emplacement of an Appropriate Institutional
Framework
One of the major challenges of corporate governance is
the emplacement of an appropriate institutional framework for
the realization of the objectives of good corporate governance.
In most corporations and business groups, there are no
clearly defined institutional channels through which any party
that is aggrieved could seek redress. It is common knowledge
that those who have suffered one form on their corporate
governance rights do not want to go to court. And in the
absence of any institutional arrangement to look into their
case, the affected parties either live with it or suffer deprivation
in silence.
In addition to installing an institutional framework, there is
also the need to put in place a mechanism for the enforcement
of the decision of the institutions. Where punishments are
meted out by the institution, it has to be enforced. If such
punishments or rewards cannot be enforced, it will not serve
the desires purpose.
The issue of education comes to play here. The
curriculum of our educational system needs to be modified to
accommodate such topics as the rights of taxpayers, corporate
governance and related issues. If people are educated on the
principles of corporate governance, it becomes easy for them
to know when and where their right are infringed upon.
• Value and Orientation
Corporate governance remains an ever-present challenge
for emerging market countries, such as Nigeria. In these
countries, businesses and regulators often contend with
corruption and lack of transparency. This is sequel to the
misplaced value system of our people, which encourages
corruption. Corporate governance is all about transparency and
accountability. A situation where the value system of the
people is such that ill-gotten wealth is not questioned,
corporate governance is threatened. For instance, a person
who is made a Minister or Commissioner begins to receive
congratulatory messages immediately from people who are
anticipating one form of favour on the other from him or her.
Today many agencies still see the current drive for the
enthronement of good corporate governance as a burden
imposed on them by the regulatory authorities. There is a need
for corporations to view good corporate governance as an issue
of their enlightened self interest.
• Poverty Trap
The prevailing vicious circle of poverty militates against
the attainment of good corporate governance. Accountability
and transparency cannot be easily realized where majority of
the masses are wallowing in abject poverty. Such a high level
of poverty makes people to compromise their moral values and
do many things that are unethical and unprofessional.
• The Inefficiencies of our Governance Bureaucracy
The inefficiency of the government bureaucratic process is
obviously a course for concern in the enthronement of good
corporate governance in the country. A situation where the tax
agencies, the Inland Revenue Office and related institutions
encourage government agencies and parastatals to engage in
corruption is, to say the least, deplorable and must not be
allowed to continue.
An agency may have a good intention to pay the correct
value of tax or land rate and the agencies involved exaggerate
figures and even discourage the corporate body from paying to
government. Such a practice, which is rampant, is a big
challenge to the attainment of transparency and accountability
within the ambit of good corporate governance.
CHAPTER FIVE
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
5.1 Introduction
In this chapter, the data collected for this study was
presented, analysed and discussed.
5.2 Presentation of Data
The data of this study which is basically of the primary
type was gathered for a period of two weeks. A total of six
hundred (600) questionnaires were administered and returned
under strict supervision to cover selected stakeholders of Ogun
state liaison office, Abuja Nigeria. However, only four hundred
and ninety eight (498) questionnaires were retrieved, that is 83
percent of the total administered. Hence intended sample size
of six hundred (600) respondents have been reduced to four
hundred and ninety eight (498) of the broad population size.
In this work, hypothesis were formed about the core
questions. It is from the responses of these questionnaires that
analysis and results were obtained. The responses from the
questionnaires were tabulated and analyzed in the following
manner.
5.2.1 Table Representation of the Questionnaire
Distribution
TABLE 1A: Sex Structure of the Respondents
Sex TOTAL NUMBER % TOTAL NUMBER
MALE 219 44%
FEMALE 279 56%
TOTAL 498 100%
SOURCE: field work by researcher 2009
Figure 1A: Sex Structure of the Respondents
TABLE 1B: Age structure of the respondents.
AGE Total Number % Total
20-29 60 12%
30-39 209 42%
40-49 179 36%
50 and above
Total
50
498
10%
100%
SOURCE: field work by researcher 2009
FIGURE 1B: Age structure of the respondents
TABLE 1C: Education Qualification
Qualification Total % Total
School Cert. 50 10%
OND/NCE 100 20%
HND/Degree 159 32%
Masters and above 189 38%
Total 498 100%
SOURCE: field work conducted by researcher 2009
FIGURE 1C: Education Qualification
TABLE 1D: Place of Work
Classification Total %Total
Ogun state liaison
office Abuja
60 12%
Presidency 33 7%
Ogun state govt.
house, Abeokuta
51 10%
Ogun state
governor’s lodge,
Abuja
60 12%
Ogun state liaison
office, Lagos
60 12%
Ministry of works
and housing
35 7%
Ministry of 42 9%
information
Ministry of
education
45 9%
Lagos state liaison
office, Abuja
56 11%
Kwara state liaison
office, Abuja
56 11%
Total 498 100%
SOURCE: field work conducted by researcher 2009
FIGURE 1D: Place of Work
TABLE 1e: Years Of Experience On Current Employment
Years Total %Total
5-10 85 17%
11-20 164 33%
21-30 194 39%
31 and above 55 11%
Total 498 100%
SOURCE: field work conducted by researcher 2009
FIGURE 1e: Years Of Experience On Current Employment
5.3 Presentation/Analysis of Research Questions
(highlights of poll)
i. Research Question One:
Do you think there is significant relationship between
stakeholders, corporate governance mechanisms and
organizational performance of Ogun state liaison office, Abuja,
Nigeria?
TABLE 1: Relationship between stakeholders, CG and
organizational performance.
Option Number Percentage
Yes 428 86%
No 70 14%
Total 498 100%
SOURCE: field work conducted by researcher 2009
From the table and figure above in table 1 and figure 1
respectively, it is obvious and we can easily conclude that the
relationship between stakeholders corporate governance and
organisational performance is a very strong one. It can be
likened to a three legged chair that can not stand if the three
are not present. Since 86% of the respondents’ view is that the
three go together, we can then say that without stakeholders
active involvement, we cannot have sound corporate
governance and without sound corporate governance,
organisations’ performance will be very low.
ii. Research Question Two:
Do you see improvement in corporate governance following the
introduction of a new corporate governance codes for Ogun
state liaison office, Abuja, Nigeria?
TABLE 2: New corporate governance codes and improvement
of CG
OptionNumber Percentage
Yes 483 97%
No 15 3%
Total 498 100%
SOURCE: field work by researcher 2009
We asked respondents whether they see improvement in
corporate governance following the introduction of the new
corporate governance codes for Ogun state liaison office,
Abuja. While 97 percent of the respondents feel there has been
significant improvement, only 3% percent of the respondents
do not agree with that fact.
iii. Research Question three:
Can the new CG codes be strengthened to inculcate good
governance practices?
TABLE 3: Strenghthening of CG to inculcate good governance
practices
Option Total Number % Total
Yes 443 89%
No 55 11%
Total 498 100%
SOURCE: field work by researcher 2009
This question evoked a mixed response from respondents.
89 percent noted that the new corporate governance codes for
Ogun state liaison office may require a few changes and 11
percent noted that it is perfectly okay.
iv. Research Question four
Are penalty levels in Ogun state liaison office, Abuja to
discipline poor and unethical governance low?
TABLE 4: Penal Level On Poor CG in Banks
Responses Total number % Total
High 110 22%
Low 353 71%
Undecided 35 7%
Total 498 100%
SOURCE: field work conducted by researcher 2009
In comparison with developed countries that impose
stringent penal and criminal consequences for poor corporate
governance, penalty levels in Nigeria are considered to be
inadequate to enforce good governance.
71 percent of the respondents considered penalty levels
to discipline poor and unethical governance to be low. 7
percent of the respondents were either undecided or did not
know if the penalty levels are low. The remaining 22% are of
the opinion that it’s high.
v. Research Question Five:
Should corporate governance standards in Ogun state liaison
office, Abuja, Nigeria be enforced through regulations or should
they be principle-based?
TABLE 5: Prefered Method of Enforcing CG
Option Number Percentage
Principle-based 114 23%
Regulations 95 19%
Both 289 58%
Total 498 100%
SOURCE: field work conducted by researcher 2009
Ninety one percent of the respondents believe corporate
governance should be practiced through principle-based
standards and seventy seven percent are of the opinion that it
should be through regulations. Specifically, twenty three
percent voted for principle-based standards, nineteen percent
for regulations and fifty eight percent believe it should be
practiced through a mix of principle-based standards and
moderate regulations.
vi. Research Question Six:
Are there constraints to corporate governance of Ogun state
liaison office, Abuja?
TABLE 6: Constraints to CG of banks in Nigeria.
Options Total % total
Yes 428 86%
No 70 14%
Total 498 100%
SOURCE: field work conducted by researcher 2009
86% of respondents that participated in the poll are of the
opinion that there is existence of constraints to corporate
governance in Ogun state liaison office, Abuja while the
remaining 14% believe that all is well with the organisation as
far as corporate governance is concerned.
vii. Research Question Seven:
What among the following do you consider as the biggest risk
to corporate governance in Ogun state liaison office, Abuja,
Nigeria?
TABLE 7: Risk to CG
Options Total % total
mgt override 175 35%
Inadequate independence 148 30%
Lack of respect for the
taxpayers
175 35%
Total 520 100%
SOURCE: field work conducted by researcher 2009
Various factors pose challenges to effective corporate
governance in the Nigerian public sector. We asked the
respondents about the bigger risks to corporate governance in
Ogun state liaison office, Abuja and also key reasons for failures
in the sector. 35 percent of the respondents considered
management override to be the biggest risk. Inadequate
independence and lack of respect for the taxpayers were also
regarded as major risks by 30 percent and 35 percent
respectively.
viii. Research question eight:
Do you think stakeholders significantly enhance corporate
governance in Ogun state liaison office, Abuja, Nigeria?
TABLE 8: Stakeholders and enhancement of CG
Options Total % total
Yes 438 88%
No 60 12%
Total 498 100%
SOURCE: field work conducted by researcher 2009
FIGURE 8: Stakeholders and enhancement of CG
From the figure and table above, our correspondents
mostly support that stakeholders’ involvement significantly
enhance good corporate governance while very few think
otherwise. Those in support are 88% of the total respondents
while just 12% are against.
ix. Research Question Nine
Are concerns of taxpayers adequately addressed by Ogun state
liaison office, Abuja, Nigeria?
TABLE 9:Concerns of taxpayers
Options Total % total
No 59 12%
Yes 374 75%
Undecided 65 13%
Total 498 100%
SOURCE: field work conducted by researcher 2009
As noted earlier in chapter two “Corporate governance is
about owners and the managers operating as the trustees on
behalf of every shareholder–large or small.” Narayana (2008).
Here, in our case the taxpayers in place of shareholders. It’s
observed that most of the state’s liaison offices in Nigeria
operate as if they are only liable to the executive governor at
the expense of the taxpayers and other civil servants.
75 percent of the respondents believe that significant
efforts are implemented to address the concerns of the
taxpayers in Ogun state. 12 percent of the respondents say
that taxpayers’ concerns are not addressed while the remaining
13% were indecisive.
x. Research Question Ten:
Do you think other Committees of boards aside from audit
committee in Ogun state liaison office, Abuja, Nigeria have high
effectiveness in ensuring sound corporate performance?
TABLE 10: Other committees and sound corporate governance
Options Total % total
Yes 75 15%
No 359 72%
Undecided 64 13%
Total 498 100%
SOURCE: field work by researcher 2009
A giant proportion of our respondents are of the opinion
that audit committee compared to other committee of board is
more important in comparism. Some of them even wrote that
there was no need for other committees on the board.
72% are of the opinion that other committees do not have
high effectiveness on corporate governance, 15% however
claims that they are equally impotant while the remaining 13%
were indecisive.
xi. Research Question eleven:
Do you think separation of management from ownership has
significant impact on promotion of corporate governance?
TABLE 11: Separation of management from
ownership and CG
Options Total % total
Yes 453 91%
No 45 9%
Total 498 100%
SOURCE: field work conducted by researcher 2009
Ninety one percent of the respondents that participated in
our poll believe that if mangement is not separated from
ownership, organisations cannot perform optimally while only
just nine percent think differently.
xii. Research Question Twelve:
How do you rate the skill-sets of the existing audit committees
of Ogun state liaison office’s board?
TABLE 12: skill-sets of the existing audit committees of Ogun state liaison
office’s board
Options Total %Total
Highly
Proffessional
60 12%
Satisfactory 254 51%
Low 184 37%
Total 498 100%
SOURCE: field work conducted by researcher 2009
The poll indicates a mixed opinion of respondents over the
skill-sets of audit committees. The largest proportion of 51%
are of the opinion that skill-sets of audit committee of Ogun
state liaison office’s board is satisfactory while 12% and 37%
believe that it is highly professional and low respectively.
xiii. Research Question Thirteen:
Is there any significant relationship between professionalism
and organizational performance in Ogun state liaison office,
Abuja, Nigeria?
TABLE 13: Relationship bet. Professionalism & org.
performance
Options Total % total
Yes 453 91%
No 45 9%
Total 498 100%
SOURCE: field work conducteds by researcher 2009
The relationship is indeed very high as 91 percent of the
respondents established that there is a strong relationship
between professionalism and organisational performance while
the remaining 9 percent think differently.
xiv. Research Question Fourteen:
Do you believe that sustainability is an important canon of
corporate governance?
TABLE 14: Sustainability and Corporate Governance
Options Total % total
Yes 438 88%
No 60 12%
Total 498 100%
SOURCE: field work conducted by researcher 2009
Majority of our respondents amounting to 88% are of the
opinion that sustainability is indeed an important canon of
corporate governance while only just 12% feel there are other
factors order than sustainability and are more important canon
to corporate governance than sustainability.
xv. Research Question Fifteen:
Should boards be responsible for sustainability?
TABLE 15: Boards and Sustainability
Option Total %Total
fully responsible 289 58%
partly responsible 154 31%
not responsible 55 11%
Total 498 100%
SOURCE: field work conducted by researcher 2009
58 percent of the respondents believe that boards are
fully responsible for triple bottom line sustainability in
profitability, people and environment. An additional 31 percent
of the respondents believe that boards are partly responsible
for sustainability. 11 percent of the respondents believe that
sustainability cannot be the responsibility of boards as it is a
factor of numerous uncontrollable events.
xvi. Research Question Sixteen:
How would you rate the current standards of risk management
practices (e.g e-payment) in Ogun state liaison office, Abuja,
Nigeria?
TABLE 16: Risk mgt. standards
Options Total % total
Room for
improvement
364 73%
Satisfactory 134 27%
Total 498 100%
SOURCE: field work conducted by researcher 2009
Seventy-three percent of the respondents believe that risk
management practices need to be improved while the
remaining twenty seven percent feel the practices is
satisfactory.
xvii. Research Question Seventeen:
Rate the following factors as it relates to improvement of
corporate governance practices in Ogun state liaison office,
Abuja, Nigeria.
a. improvement in financial and other disclosures
b. improvement in risk management and oversight
processes
c. enhancing the powers of independent directors
d. separation of the position of chairman and CEO
e. strengthening taxpayers’ rights
Respondents were asked to rate certain factors that may
result in improvement of corporate governance practices in
Ogun state liaison office, Abuja. The importance of all identified
factors (refer to graph above) were rated almost equally by the
respondents.
In order of importance, improvement in financial and other
disclosures and improvement in risk management and
oversight processes received highest votes (24 percent each).
These were followed by enhancing the powers of independent
directors (20 percent), separation of the position of chairman
and CEO (17percent) and strengthening taxpayers’ rights (15
percent), respectively.
xviii. Research Question Eighteen:
Should ruling political party be significantly linked to the
remarkable
performance of Ogun state liaison office, Abuja, Nigeria so far?
TABLE 18: Ruling party and corporate performance of Ogun
state liaison office, Abuja
Options Total % total
Yes 423 85%
No 20 4%
Undecided 55 11%
Total 498 100%
SOURCE: field work conducted by researcher 2009
As far as Ogun state liaison office is concerned, the ruling
party to a large extent is a contributory factor to her
remarkable recorded performance. 85 percent of the
respondents think that Ogun state liaison office’s performance
can be significantly linked to the ruling party in Ogun state.
4 percent of the respondents do not believe that the Ogun
state liaison office’s performance can be significantly linked to
the ruling party in Ogun state. 11 percent of the respondents
are either undecided or do not know if the Ogun state liaison
office’s performance can be significantly linked to the ruling
party in Ogun state or not.
xix. Research Question Nineteen:
Are integrity and ethical values given due importance by Ogun
state
liaison office, Abuja, Nigeria?
TABLE 19: Integrity and ethical values
Options Total % total
Room for
improvement
209 42%
Yes 244 49%
No 45 9%
Total 498 100%
SOURCE: field work conducted by researcher 2009
Ogun state liaison office has been focusing on code of
conduct and whistle blower mechanism as a fundamental of
good governance. Respondents were asked if similar
importance was given to integrity and ethical values.
Majority of the respondents say that although Ogun state
liaison office gives similar importance to integrity and ethical
values, significant scope exists to enhance integrity and ethical
values within the organization and the eco-system.
Specifically, 42% believe that there is room for
improvement, 49% think Ogun state liaison office, Abuja has
perfected in the area of integrity and ethical values. However,
9% were either indecisive or not interested in responding to the
question.
xx. Research Question Twenty:
Who should monitor effectiveness of corporate governance
practices at Ogun state liaison office, Abuja, Nigeria?
a. corporate governance specialist (eg SERVICOM)
b. investors
c. taxpayers
d. board of directors
e. Ogun state’s government
TABLE 20: Monitoring of corporate governance practices
Options Total %Total
corporate governance
specialist
234 47%
investors 129 26%
board of directors 75 15%
Ogun state’s government 60 12%
Total 498 100%
Source: Field work conducted by researcher 2009.
Monitoring the effectiveness of corporate governance
practices is also a key concept emerging in Ogun state liaison
office, Abuja. We asked respondents who should monitor the
effectiveness of corporate governance practices.
47 percent of the respondents believe that effectiveness
of corporate governance should be monitored by way of
corporate governance audits carried out by corporate
governance specialists.
26 percent of the respondents believe that it should be
monitored by the boards themselves through self-assessment
tools.
15 percent of the respondents believe that the monitoring
should be by way of investors having access to full information
and another 12 percent believed that the monitoring should be
through Ogun state’s government.
5.5 Research Hypothesis:
To test the hypotheses developed in chapter one which
are restated below:
(i) H0: There is no significant relationship between
stakeholders, corporate governance mechanisms and
organizational performance in Nigeria.
H1: There is significant relationship between
stakeholders, corporate governance mechanisms and
organizational performance in Nigeria.
(ii) H0: Stakeholders do not significantly enhance
corporate governance in Nigeria.
H1: Stakeholders significantly enhance corporate
governance in Nigeria.
5.6 Test Of Hypothesis/Discussion Of Results
The chi – square would be employed to test the two
established hypothesis. The two major questions would be used
from the questionnaire. The principles guiding this method is to
react to the Null hypothesis (HO) if the computed chi – square
(Xc2) is greater than the critical value (X2 0.05) from the table
at 5% level of significant. Otherwise, H0 will be accepted and H1
will be rejected.
5.6.1 Testing Of Hypothesis One
H0: There is no significant relationship between stakeholders,
corporate governance mechanisms and organizational
performance in the Nigeria banking industry.
H1: There is significant relationship between Stakeholders,
corporate governance mechanisms and organizational
performance in the Nigeria banking industry.
In testing hypothesis one we use the responses given in
table 1 above as restated below:
Do you think there is significant relationship between
stakeholders, corporate governance mechanisms and
organizational performance in Ogun state liaison office, Abuja,
Nigeria?
TABLE 1: Relationship between stakeholders, CG and
organizational performance.
Option Number Percentage
Yes 428 86%
No 70 14%
Total 498 100%
SOURCE: field work conducted by researcher 2009
The information or data presented in table 1 (through field
survey data) can be presented in a contingency table for
further analysis thus;
Table 5.6.1a: Contingency table 1
Qualification Yes No Row Total
School
Certificate
42 20 62
NCE/OND 95 9 104
HND/Degree 120 26 146
Masters &
above
171 15 186
Column Total 428 70 498
Table 5.6.1b: Contingency table 2
Qualification Fo Fe Fo – Fe (Fo –
Fe)2
(Fo -
Fe)2/Fe
School
Certificate
42 53.2851 -11.2851 127.353
4
2.39
NCE/OND 95 89.3815 5.6149 31.5271 0.35
HND/Degree 120 124.598
4
-4.5984 21.1453 0.17
Masters &
above
171 159.855
4
11.1446 124.202
1
0.78
School
Certificate
20 8.7149 11.2851 127.353
4
14.61
NCE/OND 9 14.6185 -5.6149 31.5271 2.16
HND/Degree 26 20.5221 4.5984 21.1453 1.03
Masters &
above
15 26.1446 -11.1446 124.202
1
4.75
Total 498 498 0 26.24
The process of estimation of X2c was followed as it was
stated in chapter three of this work.
X2c = ∑ (f e – fe) 2
Fe
Where:
F0 = Observed frequency
fe = Expected frequency
∑ = Summation
X2c = Estimated chi – square
fe = Row total X column total
Grand total
Thus;
When f0 = 42
fe = 62 x 428498
fe = 53.2851
when f0 = 95
fe = 104 x 428498
fe = 89.3815
when f0 = 120
fe = 146 x 428498
fe = 124.5984
when f0 = 171
fe = 186 x 428498
fe = 159.8554
when f0 = 20
fe = 62 x 70498
fe = 8.7149
when f0 = 9
fe = 104 x 70498
fe = 14.6185
when f0 = 26
fe = 146 x 70498
fe = 20.5221
when f0 = 15
fe = 186 x 70498
fe = 26.1446
The degree of freedom (df) is calculated using the formula
given below:
df = (r - 1) (c - 1)
Where df is the degree of freedom; r is row; c is column;
and 1 is a constant. Thus, our df is given as:
df = (4 - 1) (2 - 1)
= (3) (1)
= 3
Our degree of freedom is therefore 3.
The calculated chi-square value is 26.24 while from the
table the chi-square value is 7.815.
Decision Rules:
If the calculated chi-square (X2) value is greater than the
table value, then reject the null hypothesis (H0) and accept the
alternative hypothesis (H1) at the level of significance used. If
the calculated chi-square (X2) value is less than the table value
of a given degree of freedom, then we accept the null
hypothesis (H0) and reject the alternative hypothesis (H1).
Decision:
Therefore, the above comparison between the calculated
value of chi-square and the table value shows that the
calculated value of chi-square of 26.24 is greater than the
table value of 7.815. We therefore, reject the null hypothesis
(H0) and accept the alternative hypothesis (H1) at 5 percent
level of significance. That is to say that there is significant
relationship between stakeholders, corporate governance
mechanisms and organizational performance in Ogun state
liaison office, Abuja.
5.6.2 Testing of Hypothesis Two:
H0: Stakeholders do not significantly enhance
corporate governance in Nigeria.
H1: Stakeholders significantly enhance corporate
governance in Nigeria.
In testing hypothesis two we use the response given in
research question 8 and table 8 above as restated below:
Do you think stakeholders significantly enhance corporate
governance in Ogun state liaison office, Abuja, Nigeria?
TABLE 8: Stakeholders and enhancement of CG
Options Total % total
Yes 438 88%
No 60 12%
Total 498 100%
SOURCE: field work conducted by researcher 2009
The information or data presented in table 8 (through field
survey data) can be presented in a contingency table for
further analysis. Thus,
Table 8: Contingency table 1
Qualification Yes No Row Total
School
Certificate
36 6 42
NCE/OND 82 16 98
HND/Degree 132 28 160
Masters &
above
188 10 198
Column Total 438 60 498
The chi-square value is computed using the same
formula as stated above to arrived at the expected
frequency values in table 8
Table 8: Contingency table 2
Qualification Fo Fe Fo – Fe (Fo –
Fe)2
(Fo -
Fe)2/Fe
School
Certificate
36 36.9398 -0.9398 0.8832 0.0239
NCE/OND 82 86.1928 -4.1928 17.5796 0.2040
HND/Degree 132 140.722
9
-8.7229 76.0890 0.5401
Masters &
above
188 174.144
6
13.8554 191.972
1
1.1023
School
Certificate
6 5.0602 0.9398 0.8832 0.1745
NCE/OND 16 11.8072 4.1928 17.5796 1.4889
HND/Degree 28 19.2771 8.7229 76.0890 3.9471
Masters &
above
10 23.8554 -13.8554 191.972
1
8.0473
Total 498 498 0 15.53
When f0 = 36
fe = 42 x 438498
fe = 36.9398
when f0 = 82
fe = 98 x438498
fe = 86.1928
when f0 = 132
fe = 160 x 438498
fe = 140.7229
when f0 = 188
fe = 198 x438498
fe = 174.1446
when f0 = 6
fe = 42 x 60498
fe = 5.0602
when f0 = 16
fe = 98 x 60498
fe = 11.8072
when f0 = 28
fe = 160 x 60498
fe = 19.2771
when f0 = 10
fe = 198 x 60498
fe = 23.8554
df = (4 - 1) (2 - 1)
= (3) (1)
= 3
Our degree of freedom is therefore 3.
The calculated chi-square value is 15.53 while from the table,
the chi-square value is 7.815.
Decision:
Following the stated decision rules above, our decision for
hypothesis two can be taking. Therefore, from the above
comparison between the calculated value of chi-square and the
table value shows that the calculated value of chi-square of
15.53 is higher than the table value of 7.815. We therefore,
reject the null hypothesis (H0) and accept the alternative
hypothesis (H1) at 5 percent level of significance. That is to say
that, stakeholders significantly enhance corporate governance
in the Nigeria banking industry.
5.7 Discussion Of Findings
From the various outcomes of the two tests to the
hypothesis, it can be concluded that standard corporate
governance codes and practices is an important canon of
corporate performance.Without this, an organiastion has no
direction in terms of competition, productivity and growth. All
the results derived above actually validate all our hypothesis
stated earlier in chapter one and restated in this section.
It will not be a mistake to say that the study revealed
senior management as the major violators of corporate
governance practices in most cases. Analysis of the various
responses gathered through questionnaires suggested that.
Specifically, we can discuss the findings sectionally as
follow;
We discovered in the course of research that prior to the
recent events in Ogun state liaison office; the organization as
well as other liaison offices’ activities were not known by the
general public. There has been an implicit assumption amongst
boards that senior managers know their job and have the best
interests of companies they manage at heart. This has
sometimes resulted in boards refraining from asking the
difficult questions to senior managers when the organization
has been performing well or until there is a crisis. The selection
of independent directors who are known to promoter directors
has further compounded the problem. Therefore, Independent
directors need significant empowerment. They are to
checkmate the activities of their respective organizations and
raise alarm when unscrupulous attempts are made by the
senior management or board instead of allowing the corporate
governance specialist (eg SERVICOM, ICPC and EFCC) to
discover such acts themselves as the case presently in Nigeria.
There is a need for establishing a framework around the
functioning of committees of boards so that their effectiveness
is demonstrated.
It was discovered that independent directors often hold
other C-level positions in other organizations and this, coupled
with a packed board meeting calendar, may leave them with
very little time to devote to the affairs of their boards leading to
violation of standard corporate governance practices.
Increasingly, in Nigeria, boards are being made
responsible for sustainability of the organizations they govern.
The results of the research stressed further that the need to
ensure a high degree of sustainability in earnings, values,
human and other resources and the environment in which the
organizations operate is gaining importance.
Our poll highlighted that risk management is the top
oversight priority for audit committee members. The survey
highlighted that audit committee members felt more confident
in their "traditional" areas of oversight—accounting judgments
and estimates, and internal controls.
A problem known is a problem solved. Having identified
various issues relating to corporate governance practices and
likely problems therein, solutions were discovered from the
various literatures and experiences of the developed nations
including developmental policies implemented to curb the
problems and standardise it over there. This however, did not
negate or render the inputs of the researcher irrelevant.
CHAPTER SIX
SUMMARY, CONCLUSION AND RECOMMENDATIONS
6.1 SUMMARY
This study was undertaken to analyze the state of
corporate governance in Ogun state liaison office unfolding the
most current events in the public sector. A general background
of the topic and statement of problem were stated to guide the
research.
The review of literature highlighted the means through
which less standard corporate governance practices can be
eliminated and also diffuse signals of improvement lever for all
users of this research ranging from regulatory authorities to the
Ogun state liaison office as well as her numerous stakeholders
and other relevant users. These were supported by the agency
theory of corporate governance which advocates the strong
involvement of all stakeholders whether major or minor.
Although, any personnel can violate the provisions of corporate
governance but the highest degree of violation lies in the senior
or executive personnel and that explains the reason why most
of the literature centered on the board of directors, committee
of boards and other senior high rank officers.
In order to empirically diagnose the true state of corporate
governance in Ogun state liaison office, the researcher made
use of questionnaires which were carefully administered and
rigorously analyzed. The results of the analysis gave the true
nature, level and standards of corporate governance practices
in Ogun state liaison office with improvement levers expatiated
in the policy recommendations section of this write-up.
6.2 CONCLUSION
This research study has so far examined the issues,
problems and prospect in corporate governance practices of
Ogun state liaison office, Abuja, Nigeria with specific focus on
its impact on her performance. Special attention was
particularly paid to the issues that concern transparency,
accountability and ethical values. There is no doubt that good
corporate governance principles have high level impact on
corporate performance of Ogun state liaison office, Abuja,
Nigeria and world over.
Empirical data drawn from sentinel Survey conducted by
the researcher indicates that (1) there is significant relationship
between Stakeholders, corporate governance mechanisms and
organizational performance in Ogun state liaison office, Abuja,
Nigeria and (2) Stakeholders significantly enhance corporate
governance in the same.
Furthermore, it is apparent from the various literatures
that good corporate governance is of utmost importance and
necessarily defined in every organisation. The effect of its
absence is usually very suicidal as the resultant effects include
high degree of in-appropriations leading to fraud, loss records
and more deadly, “fold ups.”
We discovered that good corporate governance helps an
organization achieve several objectives and some of the more
important ones include:
• Developing appropriate strategies that result in the
achievement of stakeholder objectives.
• Attracting, motivating and retaining talent.
• Creating a secured and prosperous operating environment
and improving operational performance.
• Managing and mitigating risk and protecting and enhancing
the organization’s reputation.
In final analysis, the existing codes of corporate
governance for Ogun state liaison office, Abuja, Nigeria
(though, there are loopholes to be filled) do cover the
fundamentals of effective corporate governance and this
compares favorably with most other organisation of developed
sectors in Nigeria as far as the adequacy of corporate
governance regulations are concerned.
Improved corporate governance, however, does not solely
rest on control through increased regulations. What is required
is a principle-based approach developed on fundamentals,
preventing moral fragility that is enforced through pragmatic
levels of regulations.
“Typically a ‘principle-based approach’ means circulation
of a cogent set of principles and preferred practices which
companies are asked to adopt as they see most appropriate to
their particular circumstance.” Jane Diplock.
6.3 RECOMMENDATIONS
Based on the findings derived so far, the following
recommendations emerge from this study which is discussed in
sectional style from particular to general;
INDEPENDENT DIRECTORS
From a governance standpoint, boards should address the
following key areas specifically concerning independent
directors:
• Adoption of a formal and transparent process for director
appointments. The conflict of interest involved in managements
appointing independent directors should be tackled through
nomination committees (comprising independent directors) for
identification of directorial candidates.
• Alignment of needs of the company to the skills required in
the boardroom.
• Segregation of the roles of CEO and chairman of the board of
directors. The concept of CEO and board chair separation is well
accepted in Europe and is being steadily adopted in the US. The
chairman of the board should be an independent director who
plays a key role in setting the priorities of the board
• Planning for CEO and board succession in different scenarios
• Formal evaluation of the CEO and senior management team’s
performance at least annually. CEO performance evaluation
process should be introduced when the company is performing
well. Evaluation of CEO performance sends a clear message
that the CEO is accountable to the board and introduces a
healthy balance of power.
• Peer evaluation of independent directors should be adopted.
This would enable independent directors to openly discuss
amongst their group how they are performing and take tangible
steps to improve their individual and collective functioning.
• Independent directors should take steps to make themselves
aware of their rights, responsibilities and liabilities.
STAKEHOLDERS
In the context of meeting expectations of stakeholders
beyond the minority shareholders (eg. employees, customers,
vendors etc.) a number of initiatives need to be embraced such
as:
• Openness and transparency in dialogue with all stakeholders
and taxpayers.
• Objective and transparent whistle blower policies that are
available to key stakeholders (employees, customers and
vendors) and provide adequate safeguards against
victimization of whistle blowers.
AUDIT COMMITTEE
The Ogun state liaison office and other organizations in
Nigeria should address the challenges that their audit
committees face and focus on enhancing skills in some of the
most important areas listed below:
• Better understanding of risk, strategy and business models
• Understanding implications of the external environment on
financial forecasts and performance
• Comprehend complex accounting policies and practices – how
their application impacts results
• Monitoring fraud risk especially relating to senior
management override of internal controls
• Monitoring “tone at the top” in difficult times
• Effective oversight of internal and external auditors
• Ensuring that the board’s strategic direction is in the best
interest of all including minority shareholders
• Evaluation of audit committee and its members based on an
established framework for its functioning.
• Independent directors need to spend significant time in
understanding the various business operations, organization’s
control environment, culture and the impact of these elements
on the financial numbers
• The conduct of board meetings needs introspection in terms
of frequency and duration, information needs, balance between
presentation and discussion, interaction outside the boardroom
and most importantly, consultation when in doubt
• Board chairs should actively monitor how individual directors
are proactively identifying and fulfilling their knowledge and
competency needs.
• Independent directors need to conduct various exclusive
sessions on a one-on-one basis with management, internal
auditors and external auditors
• As part of its annual evaluation process, the board should
review the quality of information it receives and consider how it
can be improved.
Boards
• Boards should demand and obtain a holistic view of risks both
on and off the balance sheet, their ownership and how they are
mitigated.
• Diversity of skills on the board is fundamental to effective risk
management.
• Boards should have a clear understanding with senior
management regarding their risk appetite in various areas and
help ensure that these are articulated and considered in design
of controls, policies and procedures.
• Boards should consider the risks inherent in strategic choices
and whether these are acceptable.
• Evaluate evolving risks – what impact changes to strategy
have on the suite of operational, financial and compliance risks
and whether this is consistent with the company’s risk
appetite?
Senior Management
• The standing of risk management in the organization should
be elevated and should figure predominantly in business
decision making.
Risk management should not be viewed as a support
function.
• Risk professionals should have appropriate authority in the
organization and should have the powers to curb risk taking by
business units.
• Risk management must be defined as being the role of senior
management, usually the chief executive. The chief executive,
as the "owner" of risk in the organization, must be seen to
elevate the authority of risk management, and his or her focus
on risk must filter through the organization.
• Senior management should set aside time to discuss potential
economic scenarios and consider the impact of these outcomes
on the business. Senior management should seek a range of
views and perspectives in order to test its assumptions.
• Executive management should have complete visibility of the
processes to identify risks, their severity, potential impact and
procedures to address them. The board through its committees
should be periodically monitoring the results.
INTEGRITY AND ETHICAL VALUES
Some of the improvement levers on integrity and ethical values
include:
• Striving to ensure that the code of conduct is understood and
adhered to by all members of the organization
• The performance management system should recognize and
reward ethical behavior
• Extensive background checks should be performed on the
senior employees joining the organization
• Companies should screen third parties (customers, vendors,
JV partners) with whom it does business for their commitment
and adherence to ethical practices.
• The scope of whistle blower policies should be extended to
the wider stakeholder group.
• Chairman of the audit committee should have direct oversight
of whistle blower incidents.
• Investors, lenders, analysts should pro-actively
question/challenge management on areas pertaining to
corporate governance comprising protecting minority interests,
management compensation, government dealings and risk
management practices, related party transactions, fraud risk
management and CSR.
SOME OF THE ASPECTS THAT MAY REQUIRE
REGULATORY CHANGE:
• Board and audit committee evaluations should be mandatory.
• Current limits on independent directorships need to be
revisited.
• The CEO and board chair roles should be segregated.
• Stricter penalties for non-compliance.
• Transparent CEO evaluation process including disclosure of
performance criteria.
• Role of nomination committees to drive independent director
selection process.
• Codes of conduct and whistle blower policies are important,
but more important are how they are communicated and
practiced. It is vital for board members and senior management
to lead by example
• The concept of having independent directors is a good one in
theory but more important is the process underlying selection
of independent directors – is this process rigorous, transparent
and objective and is it aligned to the company’s needs?
• It is important to focus on not just earnings but on the
sustainability of business models. Focus on not just “How
much?” but on “How?”, “At what cost?” and “At whose
expense?”
• Rating agencies need to develop criteria that focus on
substance rather than the form of governance.
• Compensation of executive directors should flow from an
objective performance evaluation process conducted by the
board.
• Greater transparency and disclosure of executive
performance criteria are required which should include financial
and non-financial measures.
• Regulators should send clear signals that they shall be
proactive in imposing substantial penalties for non-compliance,
so that compliance is strictly adhered to.
There is a need for establishing a framework around the
functioning of committees of boards so that their
effectiveness is demonstrated.
As stated earlier that our recommendations are discussed
from particular to general, below are some of the general
policy recommendations.
1. Need for capacity building and skills acquisition
The regulatory agencies and various organizations
should focus on capacity building, training and retraining.
The aim is not just to get big. The economics of large scale
should reach the entire economy.
Organizations require good staff to be able to cope
with the challenges of a burgeoning market.
2. Regular retreat for board members and top
management staff.
The Board members and top management staff
should go for retreat regularly (once every two years), to
review, re-design appraise and set out broad policies and
strategies. (a board out of sync with the times will be
grossly ineffective).
3. Organizations skills / insight.
Each organization should devise its own programme
to expose board and top management to requisite
insight / skills / know how, in line with the dynamics of the
markets.
4. Taxpayers, particularly investors have their own role to
play.
5. Auditors have to be independent in every form, to be able
to work effectively.
6. Business journalists must themselves be trained so they
can sensitize the investing public. There is need for
business journalist to exercise caution in the
dissemination of information on organizations.
Finally in the words of alan greenspan (2002) “rules
cannot substitute for character. In virtually all transactions,
whether with customers or with colleagues, we rely on the
words of those with whom we do business.”
I believe strongly that good corporate governance hinges
critically on a value system that is based on high ethical
standards. With the recent event in Ogun state liaison office
now exported gradually to other liaison offices and the entire
public sector, Nigeria may yet be moving in the desired
direction of good corporate governance.
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APPENDIX I
RESEARCH QUESTIONNAIRE
Dear sir/ madam,
I am a postgraduate student of the department of
corporate governance, faculty of business law, leeds
metropolitan university, bronte hall, united kingdom who is
seeking your cooperation in writing this research work. The
work aims at conducting a research on the topic
STAKEHOLDERS AND SUSTAINABLE CORPORATE
GOVERNANCE with Ogun state liaison office, Abuja, Nigeria as
a case study.
Your humble consent is strongly solicited to make this
work a success.
Your responses will be treated confidentially for academic
purpose.
Thanks.
Yours faithfully,
_____________________
OTEGBOLA, O. A.
(ID NUMBER: c7069562)
SECTION ONE
1. Your sex please.
a. Male ( )
b. Female ( )
2. Please tick the box where your age bracket is relevant.
a. 20-29 ( )
b. 30-39 ( )
c. 40-49 ( )
d. 50 and above ( )
3. Educational qualification
a. School cert. ( )
b. OND/NCE ( )
c. HND/degree ( )
d. M.Sc., M.BA etc ( )
4. Where among the following do you work?
a. Ogun state liaison office, Abuja ( )
b. Presidency ( )
c. Ogun state Government house, Abeokuta ( )
d. Ogun state governor’s lodge, Abuja ( )
e. Ogun state liaison office, Lagos ( )
f. Ministry of Works and housing ( )
g. Ministry of Information ( )
h. Ministry of Education ( )
i. Lagos state liaison office, Abuja ( )
j. Kwara state liaison office, Abuja ( )
5. Please tick the appropriate box relevant to your year of
experience so far on current employment.
a. 5-10 ( )
b. 11-20 ( )
c. 21-30 ( )
d. 31 and above ( )
SECTION TWO
1. Do you think there is significant relationship between
stakeholders, corporate governance mechanisms and
organizational performance of Ogun state liaison office, Abuja,
Nigeria?
Yes ( ) No ( )
2. Do you see improvement in corporate governance
following the introduction of a new corporate governance codes
for Ogun state liaison office, Abuja, Nigeria? Yes ( ) No ( )
3. Can the new CG codes be strengthened to inculcate good
governance practices? Yes ( ) No ( )
4. Are penalty levels in Ogun state liaison office, Abuja to
discipline poor and unethical governance low? Yes ( ) No
( )
5. Should corporate governance standards in Ogun state
liaison office, Abuja, Nigeria be enforced through regulations or
should they be principle-based?
a. Principle based( )
b. Regulations ( )
c. Both ( )
6. Are there constraints to corporate governance of Ogun
state liaison office, Abuja? Yes ( ) No ( )
7. What among the following do you consider as the biggest
risk to corporate governance in Ogun state liaison office, Abuja,
Nigeria?
a. management override ( )
b. Inadequate independence ( )
c. lack of respect for the taxpayers community ( )
8. Do you think stakeholders significantly enhance corporate
governance in Ogun state liaison office, Abuja, Nigeria? Yes ( )
No ( )
9. Are concerns of taxpayers adequately addressed by Ogun
state liaison office, Abuja, Nigeria?
10. Do you think other Committees of boards aside from audit
committee in Ogun state liaison office, Abuja, Nigeria have high
effectiveness in ensuring sound corporate performance?
11. Do you think separation of management from ownership
has significant impact on promotion of corporate governance?
Yes ( ) No ( )
12. How do you rate the skill-sets of the existing audit
committees of Ogun state liaison office’s board?
a. Highly Professional ( )
b. Satisfactory ( )
C. Low ( )
13. Is there any significant relationship between
professionalism and organizational performance in Ogun state
liaison office, Abuja, Nigeria?
Yes ( ) No ( )
14. Do you believe that sustainability is an important canon of
corporate governance? Yes ( ) No ( )
15. Should boards be responsible for sustainability?
a. fully responsible ( )
b. partly responsible ( )
c. not responsible ( )
16. How would you rate the current standards of risk
management practices (e.g e-payment) in Ogun state liaison
office, Abuja, Nigeria?
17. Rate the following factors as it relates to improvement of
corporate governance practices in Ogun state liaison office,
Abuja, Nigeria.
a. improvement in financial and other disclosures
b. improvement in risk management and oversight
processes
c. enhancing the powers of independent directors
d. separation of the position of chairman and CEO
e. strengthening taxpayers’ rights
18. Should ruling political party be significantly linked to the
remarkable performance of Ogun state liaison office,
Abuja, Nigeria so far?
19. Are integrity and ethical values given due importance by
Ogun state liaison office, Abuja, Nigeria?
20. Who should monitor effectiveness of corporate
governance practices at Ogun state liaison office, Abuja,
Nigeria?
a. corporate governance specialist (eg SERVICOM)
b. investors
c. taxpayers
d. board of directors
e. Ogun state’s government