IMPACT OF CORPORATE GOVERNANCE ON THE MANAGEMENT OF AN ORGANIZATION
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IMPACT OF CORPORATE GOVERNANCE ON THE MANAGEMENT OF AN ORGANIZATION
Chapter one
INTRODUCTION
1.1 Background of the Study.
In today’s global economy, the success of a national economy is dependent on the competitiveness, transparency, and governance structure of the organisations that operate within its borders, because organisations are the entities that generate economic value (ICAN, 2009).
Indeed, standard setters around the world have expressed concern about the need for trust and openness in corporate governance. This need has undoubtedly sparked fresh interest in modern firms’ corporate governance procedures, notably in terms of accountability and economic performance (ibid).
The preceding stance could not be separated from Nwachukwu’s (2007) prior submission, which emphasised the emerging consensus that effective corporate governance has a beneficial link to national economic growth and development.
Corporate governance increases the level of trust that company owners place in their managers. Directors that lack a corporate governance structure may present deceptive images of their company’s financial and economic performance to entice naive investors.
Such window-dressed accounting sparked concern in the United States when the energy giant ENRON declared bankruptcy in 2001 after modifying its accounts (Demaki, 2011). Other companies in the United States, including WORLDCOM, GLOBAL CROSSING, and RANK XEROX, are dealing with similar issues.
The growing frequency of corporate fraud including overstated and transitory reporting has reinforced the rising global emphasis on the importance of effective corporate governance.
According to CBN (2006), despite the importance of effective corporate governance to national economic development and progress, corporate governance was still in its early stages, with only 40% of publicly traded enterprises, including banks, recognising the need for corporate governance.
The separation of ownership from management in corporate organisations causes a conflict of interest among the partners. The difference of interests between management and its shareholders has eroded investors’ trust in the board. Consequently, investors are interested in the level of accountability demonstrated by the Board of Directors.
Investors and other stakeholders have expressed concern over mismanagement and inadequate financial disclosures provided by management, prompting the establishment of strong corporate governance systems.
Corporate governance is the process of governing an organisation in such a way that its owners, or stakeholders, receive a fair return on investment. It is a virtuous cycle approach that connects shareholders to the board, management, employees, customers, and the larger community (Clarkson and Deck, 1997).
They noted that a firm is a separate legal entity that no one owns. It follows that shareholders do not own a corporation (Ofiafoh and Imoisili, 2010). A typical organisation is distinguished by several owners who have no management responsibilities and managers who have no ownership stake in the company.
Shareholders or equity owners are many, and the ordinary shareholder controls only a small percentage of the firm’s shares. As a result, shareholders lose interest in supervising managers, who are left to their own devices and may pursue interests other than those of equity owners.
Corporate governance has identified a solution to this problem, and a number of notable studies have been done to solve it. For example, Magdi and Nedareh (2002) emphasise the importance of organisational managers acting in the best interests of the firm, core stakeholders
particularly minority shareholders or investors, by taking only actions that facilitate the delivery of optimum returns and other favourable outcomes at all times.
1.2 Statement of Problem
The failure of corporate governance has taken on numerous dimensions with far-reaching consequences, particularly for profit-driven businesses such as banks, and has become a global concern. Individuals and organisations have an unlimited capacity for immoral behaviour. Unfortunately, this promise is too often realised.
Unfortunately, unethical organisational methods are shockingly prevalent today. Such actions are easily defined as scamming consumers’ finances, overcharging interest on loans and withdrawals, and so on.
However, these and other unethical activities are almost routine in many organisations. Nigerian businesses face a lot of obstacles. For example, there are certain ethical problems that Nigerian businesspeople must address. Corruption represents a significant challenge.
Despite the actions carried out by volunteers (banks) in the areas surrounding their operations, there appears to be little or no evidence of any Corporate Social Responsibility (CSR) projects aimed at creating jobs and income for local residents. Such measures may improve the quality of life in the local community.
No CSR programmes appear to be centred on improving the value chain or social actions that could boost business competitiveness. Getting people to do their best work, especially in difficult conditions, appears to be one of managers’ most difficult and tricky issues.
The purpose of this research is to investigate the impact of corporate governance on organisational performance in the Nigerian banking industry.
1.3 Object of the Study
The primary goal of this research is to investigate the effect of corporate governance on organisational performance in the Nigerian banking industry. Specifically, the study intends to
1. Determine the impact of corporate governance practices on business performance in the banking sector.
2. Examine the impact of corporate governance on management in the Nigerian banking sector.
3. Examine the difficulties of corporate governance in Nigeria.
1.4 Research question
1. How do corporate governance practices affect firm performance in the banking sector?
2. How does corporate governance affect the administration of Nigeria’s banking sector?
3. What are the problems for corporate governance in Nigeria?
1.5 Research Hypothesis.
Ho: Corporate governance has no significant impact on the administration of Nigeria’s banking system.
Hello: Corporate governance has a substantial impact on the operation of Nigeria’s banking sector.
1.6 Significance of the Study
This study has significant practical implications because its findings support the use of appropriate regulatory agencies such as the central bank, the stock exchange, the Nigeria Securities and Exchange Commission, and financial organisations in their various corporate governance policy formulations.
As a result, the study will be important to these organisations and regulatory bodies, particularly as they use the findings of this research to improve policy formation about corporate governance in their organisation. This study is significant because it offers new insights into the governance and performance of private-sector organisations.
The study will also add to existing information while providing a unique contribution to the field of corporate governance. The report will also serve as a reference for future studies on corporate governance. As such, it will serve as a springboard for students who want to conduct comparable studies.
1.7 Scope of Study
Because the researcher was unable to cover all of Nigeria. The researcher focused the investigation on a single LGA in Ogun state. GT bank will conduct this study on corporate governance in Nigeria in the Ado Odo ota local government area of Ogun.
1.8 Limitations of the Study
The financial problem for general research effort will be a challenge throughout the programme. However, it is hoped that these limits will be addressed by making the best use of existing materials and devoting more time to study.
As a result, it is strongly thought that despite these constraints, their impact on this research report will be small, allowing the study’s purpose and significance to be achieved.
1.9 Definition of Terms
Corporate governance refers to the set of rules, policies, and processes that guide and control a business.
Impact is a significant impact or effect on something or someone.
Management is the process of interacting with or controlling objects or people.
An organisation is a group of people who work together to achieve a common goal, such as a business or government department.
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