STAKEHOLDERS AND SUSTAINABLE CORPORATE GOVERNANCE IN NIGERIA (CASE STUDY OF OGUN STATE LIASON OFFICE, ABUJANIGERIA

)

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 objectivity, management activities and with good business savvy,

accountability

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 wellbeing 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) (iii) What are the challenges of corporate governance in Nigeria? 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: in Nigeria.

Stakeholders significantly enhance corporate governance

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 The

Organization of the Study 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, also administered the or controlled. among Corporate the many

governance

includes

relationships

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. is a collective At and this level of

interpretation,

governance

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. iii. Up-skill and re-professionalize the public service; 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 process re-design and Information technology

right-sizing 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 bankbased 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 wellbeing 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 distributed 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 of the A questionnaire total of and 600 questionnaires questionnaires were were

equally.

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 and

stakeholders,

corporate

governance

mechanisms

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 Governance. will positively impact on Corporate

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 valuefree 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 reallife 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. iii. iv. The Armed Forces The Police and other security agencies. 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. iii. SERVICOM (Service Compact With All Nigerians) 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 intergovernmental 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
THE EXECUTIVE GOVERNOR

AUDIT COMMITT EE LIAISON OFFICER (ABJ) SPECIAL ASSISTANT (SA) ABJ EXTERNA L AUDITOR INTERNAL AUDIT UNIT

DIRECTOR GENERAL INTER-GOVERNMENTAL AFFAIRS (ABUJA)

SERVICO M CHARTER LIAISON OFFICER (LAG) SPECIAL ASSISTANT (SA) LAG

SPECIAL ASSISTANT (SA) 1&2 TO DG INTER GOVERNMENTAL AFFAIRS

ACCOUNTI NG UNIT TAX DESK

INVESTM ENT UNIT

MDGs UNIT

EDUCATIO N SCHOLARS HIP UNIT EMPOWERME NT UNIT

INFORMATI ON DIRECTORA TE

Figure 1: The Ogun State Liaison Office Abuja, org. structure
DRIVERS, SECURITY, Prior to the period under review, the Ogun State Liaison KITCHEN STAFFS, ALL GARDENER AND DIRECTORATES/UNITS Office like every had no OTHERS (ABUJA AND other liaison office in the countryANNEXES clearly LAGOS)

CORPORATE SECRETARIATE

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 wealthcreating 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 Presidenc each other).
The liaison office MGT Ogun state govt executive s and judiciary Fed. Ministrie s Tax Authority Political parties Donor Agencie s Suppliers/ Contractor s Civil Society Organisatio ns y
T he Medi a

The liaison office Staffs Financial Communit y

Regulatory bodies Non Government al Organisatio n State Ministries

OGUN STATE LIAISON OFFICE ABUJA Strategic Decision Making

Nigeria embassies abroad Internation al Embassies in Nigeria

Ogun state indigene s Potential investors Other liaison office s Other states’ govt

Go Pa vt rast . atal s

Other categorie 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!” I.I President Olusegun Obasanjo, June 2003

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 “figureheads” 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 changing Other weaknesses include inability to plan and respond to 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 II.IV A proactive and committed management team. 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 II.VIII There should be a definite management succession plan. 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 II.XIV Regular management reporting and monitoring system. 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 coordination 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 coordination 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 MALE 219 FEMALE 279 TOTAL 498 SOURCE: field work by researcher 2009 % TOTAL NUMBER 44% 56% 100%

Figure 1A: Sex Structure of the Respondents

TABLE 1B: Age structure of the respondents. AGE 20-29 30-39 40-49 50 and above Total Number 60 209 179 50 % Total 12% 42% 36% 10% 100%

Total 498 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 Ogun state office Abuja Presidency Ogun state Total liaison 60 33 govt. 51 %Total 12% 7% 10% 12% 12% 7% 9%

house, Abeokuta Ogun state governor’s 60 lodge, Abuja Ogun state liaison 60

office, Lagos Ministry of works and 35 housing Ministry information of 42

Ministry of education 45 Lagos state liaison 56 office, Abuja Kwara state liaison 56

9% 11% 11%

office, Abuja 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. Do Research Question One: 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 Option Number Percentage Yes 483 No 15 Total 498 SOURCE: field work by researcher 2009 97% 3% 100%

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: practices

Strenghthening of CG to inculcate good governance

Option Total Number Yes 443 No 55 Total 498 SOURCE: field work by researcher 2009

% Total 89% 11% 100%

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 Principle-based Regulations Both Number 114 95 289 Percentage 23% 19% 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 Yes No Total Total 428 70 498 % total 86% 14% 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 Inadequate independence Lack of respect for

175 148 the 175

35% 30% 35%

taxpayers 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 No Yes Undecided Total 59 374 65 % total 12% 75% 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 Yes No Undecided Total 75 359 64 % total 15% 72% 13%

Total 498 SOURCE: field work by researcher 2009

100%

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 Highly Total 60 %Total 12%

Proffessional 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 Room for improvement 364 Satisfactory 134 Total 498 SOURCE: field work conducted by researcher 2009 % total 73% 27% 100%

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. b. c. d. e. improvement in financial and other disclosures improvement in risk management and oversight processes enhancing the powers of independent directors separation of the position of chairman and CEO 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 Yes No Undecided Total 423 20 55 % total 85% 4% 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 Room Total for 209 % total 42%

improvement Yes No Total SOURCE: field work

244 49% 45 9% 498 100% 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. b. c. d. e. corporate governance specialist (eg SERVICOM) investors taxpayers board of directors Ogun state’s government

TABLE 20: Monitoring of corporate governance practices Options corporate Total governance 234 %Total 47%

specialist 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 and

stakeholders,

corporate

governance

mechanisms

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 Yes No Total Number 428 70 498 Percentage 86% 14% 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 School Certificate NCE/OND HND/Degree Masters & above Column Total Yes 42 95 120 171 428 No 20 9 26 15 70 Row Total 62 104 146 186 498

Table 5.6.1b: Contingency table 2 Qualification School Certificate NCE/OND HND/Degree Masters & above School Certificate Fo 42 95 120 171 20 Fe 53.2851 89.3815 124.5984 159.8554 8.7149 Fo – Fe -11.2851 5.6149 -4.5984 11.1446 11.2851 (Fo – Fe)2 127.3534 31.5271 21.1453 124.2021 127.3534 (Fo Fe)2/Fe 2.39 0.35 0.17 0.78 14.61

NCE/OND HND/Degree Masters & above Total

9 26 15 498

14.6185 20.5221 26.1446 498

-5.6149 4.5984 -11.1446 0

31.5271 21.1453 124.2021

2.16 1.03 4.75 26.24

The process of estimation of X2c was followed as it was stated in chapter three of this work. X2c = ∑(fe – 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 428 498 fe = 53.2851

when f0 = 95

fe = 104 x 428 498

fe = 89.3815

when f0 = 120

fe = 146 x 428 498 fe = 124.5984

when f0 = 171

fe = 186 x 428 498 fe = 159.8554

when f0 = 20

fe = 62 x 70 498 fe = 8.7149

when f0 = 9

fe = 104 x 70 498 fe = 14.6185

when f0 = 26

fe = 146 x 70 498 fe = 20.5221

when f0 = 15

fe = 186 x 70 498 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 School Certificate NCE/OND HND/Degree Masters & above Column Total Yes 36 82 132 188 438 No 6 16 28 10 60 Row Total 42 98 160 198 498

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 School Certificate NCE/OND HND/Degree Masters & above School Certificate NCE/OND HND/Degree Masters & above Total Fo 36 82 132 188 6 16 28 10 498 Fe 36.9398 86.1928 140.7229 174.1446 5.0602 11.8072 19.2771 23.8554 498 Fo – Fe -0.9398 -4.1928 -8.7229 13.8554 0.9398 4.1928 8.7229 -13.8554 0 (Fo – Fe)2 0.8832 17.5796 76.0890 191.9721 0.8832 17.5796 76.0890 191.9721 (Fo Fe)2/Fe 0.0239 0.2040 0.5401 1.1023 0.1745 1.4889 3.9471 8.0473 15.53

When f0 = 36

fe = 42 x 438 498 fe = 36.9398

when f0 = 82

fe = 98 x438 498 fe = 86.1928

when f0 = 132

fe = 160 x 438 498 fe = 140.7229

when f0 = 188

fe = 198 x438 498 fe = 174.1446 when f0 = 6 fe = 42 x 60 498 fe = 5.0602

when f0 = 16

fe = 98 x 60 498 fe = 11.8072

when f0 = 28

fe = 160 x 60 498 fe = 19.2771

when f0 = 10

fe = 198 x 60 498 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 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. in which the organizations operate is gaining

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 inappropriations 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, redesign 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 corporate governance. direction of good

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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. b. Male Female () ()

2.

Please tick the box where your age bracket is relevant. a. b. c. d. 20-29 30-39 40-49 50 and above () () () ()

3.

Educational qualification a. b. School cert. OND/NCE () ()

c. d.

HND/degree M.Sc., M.BA etc

() ()

4.

Where among the following do you work? a. b. c. d. e. f. g. h.
i.

Ogun state liaison office, Abuja Presidency Ogun state Government house, Abeokuta Ogun state governor’s lodge, Abuja Ogun state liaison office, Lagos Ministry of Works and housing Ministry of Information Ministry of Education Lagos state liaison office, Abuja Kwara state liaison office, Abuja

() () () () () () () () () ()

j. 5.

Please tick the appropriate box relevant to your year of experience so far on current employment. a. b. c. d. 5-10 11-20 21-30 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? 3. Yes ( ) No ( )

Can the new CG codes be strengthened to inculcate good Yes ( ) No ( )

governance practices?

4.

Are penalty levels in Ogun state liaison office, Abuja to Yes ( ) No ( )

discipline poor and unethical governance low?

5.

Should corporate governance standards in Ogun state liaison

office, Abuja, Nigeria be enforced through regulations or should they be principle-based? a. b. c. Principle based ( ) Regulations Both () ()

6.

Are there constraints to corporate governance of Ogun state No ( )

liaison office, Abuja? Yes ( )

7.

What among the following do you consider as the biggest risk

to corporate governance in Ogun state liaison office, Abuja, Nigeria? a. b. c. management override Inadequate independence () () ()

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 Yes ( ) No ( )

corporate governance? 15.

Should boards be responsible for sustainability? a. b. c. fully responsible partly responsible 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. b. c. improvement in financial and other disclosures improvement in risk management and oversight processes enhancing the powers of independent directors

d. e.

separation of the position of chairman and CEO 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. b. c. d. e. corporate governance specialist (eg SERVICOM) investors taxpayers board of directors Ogun state’s government

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