EFFECT OF CORPORATE GOVERNANCE ON THE PERFORMANCE OF AN ORGANIZATION
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EFFECT OF CORPORATE GOVERNANCE ON THE PERFORMANCE OF AN ORGANIZATION
Background of The Study
Corporate governance is a collection of processes, customers, policies, laws, and institutions that influence how a corporation is managed. The nature and level of accountability of persons in company, as well as procedures that attempt to reduce the primary agent problem, are major themes of corporate governance (Wikipedia, 2011).
Corporate Governance also encompasses the interactions between the many stakeholders and the aims for which the organisation is controlled. Shareholders, debt holders, trade creditors, suppliers, customers, and communities affected by the corporation’s activity are the primary external stakeholder groups in modern business corporations.
The board of directors, executives, and other staff are examples of informal stakeholders. It ensures that an enterprise is directed and governed in a responsible, competent, and transparent manner in order to ensure long-term success. It is meant to strengthen the confidence of shareholders and capital market investors.
According to the World Bank (2009), corporate governance consists of two mechanisms: internal and external corporate governance. Internal corporate governance was used by the board of directors to monitor senior management, with a focus on shareholder interests.
External corporate governance, on the other hand, monitors and supervises managers’ behaviours through external regulations and force, involving various parties such as suppliers, debtors (stakeholders), accountants, lawyers, loan providers, and investment banks.
In the past, many corporate organisations have been caught engaging in unethical practises, such as the discovery of a financial scam by the Central Bank of Nigeria following the consolidation exercise, involving seven top bank executives in Nigeria,
which calls into question the credibility of their corporate image, further shocking investors’ confidence. As a result, the corporate governance process has become a critical subject that has been revisited.
In light of this, the researcher considers corporate governance and its impact on the management of Forte Oil Nigeria Plc, Kaduna to be a topic worth investigating.
Statement of the Problem
Many organisations in Nigeria have been implicated in unethical practises in the past, undermining the credibility of their business image. As a result, Forte Oil Nigerria Limited, like other oil companies, has been constrained by concerns stemming from consumer complaints of worker exploitation by using contract labour rather than direct engagement of workers who would be remunerated according to their conditions of service.
Previous studies on the subject have revealed the inadequate administration of many organisations with indebted accounts in the Nigerian economy. Their accounting systems did not accurately represent the company’s financial situation. A typical example is the financial hoax perpetrated by Oceanic and Intercontinental Bank following their merger.
The majority of such enterprises’ management was not accountable to the companies’ stakeholders. Furthermore, the counts and regulatory authorities lacked jurisdiction, and corruption and kickbacks were commonplace in the enterprises.
Many Nigerian companies have failed as a result of weak governance practises. As a result, there is a need to investigate corporate governance and its impact on the management of Forte Oil Nigeria Plc Kaduna.
The Purpose of the Research
The study’s major goal is to investigate corporate governance and its impact on Forte Oil Nigeria Plc’s management. The precise goals are as follows:
To investigate the impact of corporate governance on Forte Oil Nigeria Plc’s performance.
To investigate Forte Oil Nigeria Plc’s internal and external corporate governance control mechanisms.
To discover Forte Oil Nigeria Plc’s systemic corporate governance issues.
To propose practical solutions to Forte Oil Nigeria Plc’s identified corporate governance concern.
The Significance of the Research
The study will be relevant to Forte Oil Nigeria Plc, especially if the findings are used to improve policy governance in their organisation. The study will also contribute to existing knowledge on the subject and serve as a resource for future corporate governance research.
Research Questions
The fundamental research question is: What effect does corporate governance have on Forte Oil Nigeria Plc’s management? The specific questions are as follows:
How does corporate governance impact Forte Oil Nigeria Plc’s performance?
What internal and external corporate governance control mechanisms does Forte Oil Nigeria Plc have in place?
What are the structural issues threatening corporate governance at Forte Oil Nigeria Plc?
What are the solutions to these issues?
RESEARCH THEORY
H0: Corporate governance has no effect on an organization’s performance.
H1: Corporate governance has an impact on an organization’s performance.
Scope of The Study
The research looks into the impact of corporate governance on Forte Oil Nigeria Plc. The empirical data collection is limited to the Forte Oil Nigeria Plc Kaduna main office. The study spans the years 2006 to 2011.
1.7 Limitations of The Study
The limitations of this study stem from flaws in the research design, data collection tool, and respondents’ nonchalant attitude. Because the survey study was utilised, it is unknown whether alternative research designs, such as the descriptive design, historical design, or ex-post design, would provide the same results.
It is also unknown whether the same results would be reached if an other type of data gathering instrument other than the questionnaire was used to collect data.
Furthermore, respondents’ nonchalant attitude and over exaggeration or understatement of their comments when scoring the items in the questionnaire may impair the validity of their responses. Other researchers undertaking comparable studies should be aware of these limitations.
Definition of Terms
Corporate Governance: This is the relationship that exists between the many actors and defines the firm’s direction.
Corporation: A corporate entity or a body that acquires funds for the purpose of investing in assets that produce goods and services.
Shareholders: Individuals who have invested in a firm by purchasing its shares.
Management at the top is comprised of a board of directors.
Shareholders and directors make up the ownership structure.
CEO is an abbreviation for Chief Executive Officer.
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