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STAKEHOLDERS AND SUSTAINABLE CORPORATE

GOVERNANCE IN NIGERIA

(CASE STUDY OF OGUN STATE LIASON OFFICE, ABUJA-

NIGERIA)

BY:

BAMDUS BASTU

OCTOBER, 2009.
CHAPTER ONE: INTRODUCTION

1.1 Background to the Study

Corporate governance has become a topic of a worldwide political,

economic and business debate. A series of events over the last two

decades has placed corporate governance issues - including the

power and responsibilities of boards of directors or executive

council as the case may be, the rules governing takeovers, the role

and influence of institutional investors, and the compensation of

chief executives - as a top concern for both the international and

local corporate institutions. In Nigeria currently, there is an

increasing demand for a better organization of management,

supervision and accountability within corporations in all sectors.

International economic pressures have induced the country to adopt

a program of economic liberalization and deregulation. Advocates of

the reforms tout their potential not only for generating greater

economic growth, but also for contributing to more responsible

corporate governance.

In a Board Culture of Corporate Governance, business author

Gabrielle O'Donovan defines corporate governance as 'an internal

system encompassing policies, processes and people, which serves

the needs of shareholders and other stakeholders, by directing and

controlling management activities with good business savvy,

objectivity, accountability and integrity. Sound corporate


governance is reliant on external marketplace commitment and

legislation, plus a healthy board culture which safeguards policies

and processes.

It is concerned with ways in which all parties interested in the well-

being of the firm (the stakeholders) attempt to ensure that

managers and other insiders take measures or adopt mechanisms

that safeguard the interests of the stakeholders. Such measures

are necessitated by the separation of ownership from management,

an increasingly vital feature of the modern firm. A typical modern

firm is characterized by numerous owners having no management

function, and managers with no equity interest in the firm. Corporate

managers have long been concerned with ways to address the

problem that may arise from the incongruence of the interests of

the equity owners and managers.

Corporate governance is of great importance for national

development because it has a growing role in helping to increase the

flow of financial capital to firms in developing countries. Equally

important are the potential benefits of improved corporate

governance for overcoming barriers to achieving sustained

productivity growth, such as the actions of vested interest groups.

Improved corporate governance, however, cannot be considered in

isolation. In the financial sector, attention must also be given to

measures to strengthen the banking sector and a country’s financial

institutions as a whole. In the “real” sector, close attention must be


given to competition policy and sector–specific regulatory reform

(OECD, 2001).

Recent financial international scandals have generated hyped

interest in the area of corporate governance as a mean to mitigate

financial problems faced in developing nations (Tsamenyi et al. 2007,

Gugler et al. 2003, Reed 2002, Ahunwan 2002). The financial

problems faced by developing economies include weak and illiquid

stock markets, government interventions, economic uncertainties,

weak legal controls and investor protection, and frequent

government intervention. In addition, developing nations suffer from

poor performance, and large concentration of ownership (Tsamenyi

et al. 2007, Rabelo and Vasconcelos 2002).

Nigeria has adopted several far-reaching measures aimed at

improving the local investment environment. Among these measures,

Nigeria engaged in a number of activities aimed at improving its

corporate governance practices, in the late 1990s to date. It has

been recognized that if applied properly, corporate governance helps

countries to realize high and sustainable rates of growth. When

practiced widely, good practices in corporate governance disclosure

boost investor confidence in a country's economy, deepen capital

markets and increase the ability of a country to mobilize savings and

raise investment rates. Corporate governance disclosure facilitates

access to a wider pool of investors by helping to protect the rights

of minority shareholders and small investors. It also encourages the


growth of the private sector by supporting its competitive

capabilities, helping to secure financing for projects, generating

profits, and creating job opportunities (Fawzy 2003).

There is a need for understanding the interaction of corporate

governance in developing countries in general and Nigeria in

particular. Globalization, international trade, international

investment practices and public expenditure ethics calls for the

development of corporate governance in developing nations (Reed

2002). In addition, Mensah (2002) reports the presence of

differences between the factors giving rise to corporate governance

in developing nations than those in developed nations. Developing

nations are known to have different political and economic

environments than those of the developed nations. They usually

suffer from state ownership of companies, weak legal and judiciary

system, weak institutions, limited human resources capabilities, and

closed/family companies (Young et al. 2008).

It is incontrovertible that corporate governance is one of the most

critical issues in the business world today. With the failures of

corporations like Johnson Mathews Bank (JMB) Bank of Credit and

Commerce International (BCCI), Baring Brothers, Nomura Securities

of the 1980s and 1990s and the more recent Enron and World Com

debacles, corporate governance has taken a central stage in business

discuss. The new millennium presented citizens of the corporate

world -shareholders, executives, employees and others - with the


bankruptcies of Enron and other giants of the most developed

segment of the corporate world - the USA. Corporate America,

which was perceived before as an example to follow, showed the

corporate world citizens many disadvantages in the existing systems

and instruments of corporate governance. This rather deflated the

trust of shareholders in the existing principles and concepts of

corporate governance both in developed and developing countries.

The rise in interest in the subject of corporate governance could be

trace to the fact that there is now an increasingly clear separation

of ownership from management, which has come to define modern

corporations. This disconnection of ownership from management and

the insulation of the owners from the day to day operations of

business have raised the need to install an appropriate framework

for ensuring transparency and accountability in the Management of

corporate organizations. Also, the current wave of globalization and

the recent advancement in information and communication

technology (ICT) have greatly facilitates business across national

boundaries. This has necessitated the development of international

best practices in the management of business for the benefit of all

stakeholders. The existence of such standards would give comfort

to investors, creditors, regulatory agencies and other stakeholders

on the conduct of corporate organizations.

Corporate governance is directly related to financing and

investments. Making public officers disciplined by means of


corporate governance mechanisms results in an efficient allocation

of resources. For countries in transition it is doubly important: the

scarcity of domestic savings demands that capital be directed

towards the most profitable companies, which is possible only if

principles of corporate governance are given publicity, transparency

and monitoring; in addition, due to the imperfection of market

mechanisms, corporate governance presents an additional mechanism

for discipline and effective management control in corporations. We

can conclude that good corporate governance is an important factor

for the smooth functioning of a financial market, which leads to

efficient allocation of financial resources and is the key to economic

growth. The efficient financial market itself should promote better

practice of corporate governance, reinforcing market discipline for

corporate managers.

International capital flows enable companies to tap sources of

financing from a great number of investors. If countries want to

take full advantage of global capital markets and if they want to

attract long-term capital, they must follow clear standards of

corporate governance at the international level. The degree to which

corporations use basic principles for good corporate governance is a

relevant factor for investment decisions as well. It is especially

important when we talk about direct investments, which are of the

greatest benefit to countries in transition because they mean not

only capital, but the transfer of skills, technology and know-how as


well. Although direct investors exercise a lot of control, they also

pay considerable attention to the framework of corporate

governance. They request adapting to the global standards (of

transparency, accounting), in order not to be in an environment

where local companies may externalize their costs by means of

corruption and hidden government subsidies.

A number of issues come to play in analyzing corporate governance in

Nigeria and factors that have impeded the running of corporations.

Various efforts have been made by successive governments in

Nigeria and a very important one to be mentioned is that of the

Shagari administration which established Presidential liaison offices

in each of the 36 states of the Federation between 1979 and 1983,

to cater for the problem of intergovernmental relations. The main

purpose of the state Liaison offices was to serve as a localised

embassy or mission situated at the centre of government. Because

of the Federal system of government there was need for a liaison

between the 3 tiers of government to foster good economic, social

and political gains with a dual mandate to benefit both the state

government and federal government in the execution of their

administration of policies and programmes. This by extension

remains same for the local governments.

The Ogun State Government in line with the policies of the then

President Shehu Shagari administration established liaison offices

across the country with Abuja Office as the co-ordinating unit. The
Ogun State Liaison office, Abuja was created to assist indigenes of

Ogun state and potential investors both within and outside the

Nigeria. She offers protocol services and necessary hosting of

important dignitaries in and around Abuja. The liaison office

projects the resources of the state to the centre and its

constituent environs in order to increase internally generated

revenue. This is complemented by tax desk for remittance of taxes.

There are numerous other duties and functions of the liaison office

as may be directed by the Executive Governor of Ogun state at any

point in time. However, smooth functioning of the liaison office and

achievement of the purposes for which it was established lies

strongly on proper corporate governance model.

“It is expected that with the increased campaign for stakeholder’s

participation as a pre-requisite for good corporate governance both

in the private and public sector, this country will experience growth

and further development” (Iyiegbuniwe, 2004). In addition to this,

focus on public corporations is highly necessary as their private

counterparts depend a great deal on them. It is in view of this that

this dissertation seeks to advocate a management model which

allows for all stakeholders: all groups and individuals who are

seriously involved in the activities of the company (i.e the

stakeholder model) as a major drive to good corporate governance

and the strengthening of company/stakeholder relationship with


particular reference to Public corporation. It is hoped that this work

would fill a vacuum in academic literatures.

1.2 Statement of the Problem

Liaison offices in Nigeria and anywhere else are setup to act as local

embassy to intermediate between governments at various levels but

it’s observed that most of these liaison offices are not functioning

as expected in the direction for which they are established. This to

a large extent is due to lack of good corporate governance model or

non-existence of a model in some of the liaison offices. This problem

however is not limited to only the Liaison offices but covers the

entire public sector and even private sector.

Surprisingly, most articles and academic works have been silent on

public corporations when it comes to corporate governance as if it is

not relevant to them and also a great deal of attention is given in

most cases to shareholders (i.e the shareholder model) neglecting

other stakeholders as if they do not matter. This is a very big

problem that needs urgent attention. There is need to increase

awareness in this area and more academic works in this aspect is of

high necessity.

The Ogun State Liaison office, Abuja, Nigeria was chosen as case

study because it’s a State government’s executive agency and a

public corporation whose performance (corporate governance) in the

past few years is highly commendable. The paper will therefore

attempt to investigate into the organization’s corporate governance


model, find out its content and its relationship with the

organization’s recorded performance.

The recent experiences of some countries show that the assumption

that a strong system of corporate governance will appear

automatically as a result of ownership transformation is unrealistic.

Even in developed market economies, differences in the ownership

structure and level of concentration or dispersion of owners

influence the selection and adjustment of corporate control

mechanisms. For the countries in transition, the problem of good

corporate governance development becomes more complicated due to

the underdeveloped institutional infrastructure. For this reason

there is a need for a careful approach to governance restructuring

so that a private and public sector can be formed, powerful enough

to realize successful economic transformations towards a market

economy.

Many researchers have examined the status of corporate

governance in developed nations. However, developing nations have

not enjoyed such level of investigation. There is a need for

understanding the interaction of corporate governance in the

developing nations. Globalization, international trade, and

international investment practices calls for the development of

corporate governance in developing nations (Reed 2002). In addition,

Rabelo and Vasconncelos (2002) report the presence of differences

between the factors giving rise to corporate governance in


developing nations than those in developed nations. Developing

nations are known to have different political and economic

environments than those of the developed nations. They usually

suffer from state ownership of companies, weak legal and judiciary

system, weak institutions, limited human resources capabilities, and

closed/family companies (Mensah 2002, Young et al. 2008).

Rabelo and Vasconcelos (2002) observed that the special problems

faced by developing nations makes the type and degree of corporate

governance in developing nations significantly different from that in

developed nations. In addition, it is reported that special issues like

dominance of government ownership and/or family/closed companies

makes corporate governance implementation questionable and

difficult (Mensah 2002).

In addition, individual developing countries are very different

between themselves. There are major difference in the Middle East,

North Africa countries and sub-Saharan African countries

(Euromoney 2007, Fawzy 2004). Therefore, there is a need to study

corporate governance in each country separately.

Research in the area of corporate governance spans multiple

disciplines, including finance, strategic management, sociology and

political science. The state of current knowledge is such that we

need to have an interdisciplinary approach to studying the problem

of corporate governance. The study of corporate governance can

involve the problems of corporate decision making, strategic


management, leadership, organization theory, and the sociology of

elites. It can also be related to a whole range of other broader

subjects, including macroeconomic policy, the level of market

competition and political science.

The framework of corporate governance also depends on the legal

and regulatory environment. In addition, the factors of corporate

responsibility and ethics are significant aspects of the problem of

corporate governance. Thus one must first recognize the complexity

and interdisciplinary nature of corporate governance before

attempting to research its problems in a developing economy like

Nigeria.

The stakeholders some times are not able to direct management of

organization appropriately and prevent managerial opportunism and

agency conflicts development, destroying shareholders’ wealth.

Large shareholders, taking care of keeping their own interests, do

not care of keeping interests of all shareholders balanced. Under

such circumstances block shareholders will distort a system of

mechanisms of corporate governance to make it centered only at

their own interests. Therefore, interests of minority shareholders

are violated, that leads to conflict of interests among shareholders

and destroys shareholder wealth too. Absent of transparent

executive compensation system, decision system, monitoring system,

poor accountability and transparency has impeded corporate

governance in Nigeria. The managers of corporate institutions


especially public institutions are motivated to increase their own

wealth through well known unjustified high compensation and assets

tunneling.

The corporate governance failure in Nigeria over time had raised

some fundamental questions such as the efficiency and

effectiveness of managing public institutions, dependability on

information from these institutions, their level of administrative

independence, the role of regulators, conflict of interest and the

question of ethics and professionalism.

The Ogun state Liaison office despite its credible performance still

experience certain difficulties which have affected her corporate

governance performance. These include isolating major stakeholders

(citizens) and focusing more on the political well being of the

governor, beureaucracy and due process which tend to slow down

developmental activities, lack of proper orientation and general civil

service problems and finally existence of good corporate governance

codes but not documented.

The major task of this research work therefore is to call the

attention of the general public, the government and stakeholders to

these aspects and demonstrate practical solutions to the problems.

1.3 Objectives of the Study

The main objective of this study is to examines the relationship

between stakeholders, corporate governance mechanisms and


organizational performance in Ogun State Liaison office, Abuja,

Nigeria,

The specific objectives of the study are:

(i) Examine the stakeholders role in enhancing the performance of

corporate governance in Nigeria;

(ii) Ascertain the constraints of organization’s corporate

governance in Nigeria; and

(iii) To draw conclusion based on fundamental findings and give

recommendation on its applicability in corporate bodies (profit

making or not).

1.4 Research Questions

This study seeks to address the following research questions;

(i) What are the linkages between stakeholders, managers and

corporate governance in Nigeria?

(ii) What are the challenges of corporate governance in Nigeria?

(iii) How can good corporate governance be enhanced and sustained

in Nigeria?

1.5 Hypothesis of the Study

In line with the objectives of the study, the hypothesis to be tested

can be stated as follows:


(i) H0: There is no significant relationship between stakeholders,

corporate governance mechanisms and organizational performance in

Nigeria.

H1: There is significant relationship between stakeholders,

corporate governance mechanisms and organizational performance in

Nigeria.

(ii) H0: Stakeholders do not significantly enhance corporate

governance in Nigeria.

H1: Stakeholders significantly enhance corporate governance

in Nigeria.

1.6 Significance of the Study

Among the most important factors that must be present before an

organization is considered sound is effective corporate governance

principles. Without good corporate governance, organizations cannot

fulfill their main missions of service delivery making and contribution

to the social welfare with maximum effectiveness. Organizations

cannot operate successfully without adequate rules of governance

and the institutions that support them, or without the acceptance of


a culture of corporate governance among managers, owners and

other stakeholders.

It is important to provide organizations with information to recruit,

train and reward professional managers who can be held to high

standards of competency, ethics, and responsibility that are

fundamental in enshrining good corporate governance in Nigeria. This

study aims to provide insights into the relationship between

governance mechanisms and firm’s performance in Nigeria.

The study will provide important information on the cauldron of

policy as well as the practical administration of corporate

governance in Ogun state liaison office. This is more so, because of

the growing concern for the desire to entrench good corporate

governance in Ogun state liaison office in particular and Nigeria in

general. This project would serve as a guide to the principles to be

considered in formulating corporate governance models in any

organization. The data gathered from the study would yield valuable

information for public policy regarding the involvement of all

stakeholders in organization setup to achieve sustainable corporate

governance and hence objectives of organization.

It is hoped that it would also be of immense use to the private

sector, multi-lateral and bi-lateral organizations, development

partners and non-governmental organizations who wished to

intervene in the sector.


The findings of this study will provide information for stakeholders,

researchers and policy makers as to the desirability and extent of

good corporate governance in an organization like Ogun state liaison

office and recommend same for all other organizations.

1.7 Organization of the Study

The study examines the role of the stakeholders in the

sustainability of corporate governance performance using Ogun

state liaison office in Abuja as a case study.

This is with a view to explore the linkage between stakeholders and

corporate performance in the public sector. The scope of the study

is therefore, to focus on Ogun state liaison office as a public

institutions that aim at delivering services to the public.

To achieve the objective of this study, the study is structured into

five chapters. Apart from chapter one which this part concludes,

chapter two is literature review and theoretical framework. In this

part the related literature is reviewed, conceptual issues and

theoretical framework is discuss to establish the linkages between

stakeholders and corporate governance performance in Ogun state

liaison office.
Chapter three is research methodology and it discusses the

methodological foundation and data analysis technique including

scope/limitations. It seeks to discuss the series of data employed in

the study and the statistic model used will be outlined. Considering

the available option, the researcher chooses the use of primary data

as the best option suitable for this study. This approach is employed

to assess the corporate governance principles in the Ogun state

liaison office, Abuja-Nigeria.

Chapter four is presentation and analysis of data obtained from the

field survey including discussion of results. The data were collected

primarily from the field of five different locations including the

Ogun state Government house in Abeokuta, ogun state, the Ogun

state governor’s lodge in Abuja, the ogun state liaison office in

Abuja, three selected ministries in Abuja and the

presidency/national assembly.

Chapter five is summary of major findings, conclusion and policy

recommendations. Here the researcher made an attempt to point out

in few words the major issues relating to the subject of discussion.

She also went further to discuss the major findings and proffer

solutions that can help organizations attain a standard level of

corporate governance.
CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.0 INTRODUCTION

Corporate governance is the set of processes, customs,

policies, laws, and institutions affecting the way a corporation (or

agency) is directed, administered or controlled. Corporate

governance also includes the relationships among the many

stakeholders involved and the goals for which the corporation is

governed.

The Ogun state liaison office, Abuja is a not-for-profit making

organisation and a very strong state government agency with

multiple stakeholders. The principal stakeholders in the case of

Ogun state liaison office, Abuja are the executive governor of Ogun

state, the Ogun state citizens (or tax payers), management, and the

directors (executive and independent). Other stakeholders include

labour (the liaison office employees), regulators, the presidency, the

Ogun state executives and legislators, the financial community, civil

society, federal and state ministries, Nigerian embassies abroad,

international embassies in Nigeria and the community at large. For

Not-For-Profit Corporations or other membership Organizations like

the Ogun state liaison office "shareholders" are usually absent.

Corporate governance is a multi-faceted subject. An important

theme of corporate governance is to ensure the accountability of


certain individuals in an organization or agency through mechanisms

that try to reduce or eliminate the principal-agent problem.

This thread of discussions focuses on the impact of a

corporate governance system in Ogun state liaison office Abuja,

Nigeria with a strong emphasis on stakeholders' participation. There

are several aspects to the corporate governance subject discussed

in this section, such as the stakeholder theories, conceptual issues

on corporate governance, corporations and stakeholders etc.

2.1 CONCEPTUALISATION OF CORPORATE GOVERNANCE

‘Good governance’, a relatively newly celebrated concept in the

public sector in Nigeria has engaged the minds of scholars and

technocrats since the close of the last century, resulting in several

levels of interpretation and intellectual polemics. Ordinarily,

governance is associated with leadership and the process of

managing public affairs. The strong appeal of the concept which has

sustained the interest of scholars in recent time is not unconnected

to its centrality in the issues of public accountability, transparency

and efficiently in the conduct of government business.

Good governance is reduced “to simple concepts such as

efficiency and rationality in allocating resources, curbing corruption

which inhibits development and investment, guarantee to civil and

human rights and accountability to the people” (Johnson, 1991:396).


In the same vein, Olowu, (2005:2) observed that, governance

emphasizes leadership the manner in which (state) political leaders

manage, use (or misuse) power whether to promote social and

economic development or to pursue agendas that undermine such

goals”. Therefore, the governance debate which is gaining currency

in both the developed and developing countries is rooted in the

philosophy of welfares aimed at evaluating the capacity of the state

to deliver existential goods and services to the people. According to

adejumobi, governance transcends the state and it’s institutions to

accommodate the process of steering state and society towards the

realization of collective goals. It point to the dynamic but

problematic and often times contradictory relationship between the

state and society (Adejumobi, 2004:14).

Governance from public sector view could be conceptualized as

the manner in which power is exercised in the management of

economic and social resources for sustainable human development.

It addresses the leadership role in the institutional framework.

According to Kwakwa and Nzekwu (2003), governance is a ‘vital

ingredient in the maintenance of the dynamic balance between the

need for order and equality in society; promoting the efficient

production and delivery of goods and services; ensuring

accountability in the house of power and the protection of human

rights and freedoms’. Governance is, therefore, concerned with the

processes, systems, practices and procedures that govern


institutions, the manner in which these rules and regulations are

applied and followed, the relationships created by these rules and

nature of the relationships.

Thus, corporate governance is also concerned with the creation

of a balance between economic and social goals and between

individual and communal goals. To achieve this, there is the need to

encourage efficient use of resources, accountability in the use of

power, and, the alignment of the interest of the various

stakeholders, such as, individuals’ corporations and the society.

David Smith (2002), sees corporate governance as a “Culture

that has a common understanding of the roles of management and

the board” To him, “corporate governance is a culture of mutual

respect that both parties have for each other’s role”. It is a culture

of continuous open dialogue and communication. In rounding up his

views on corporate governance, Smith noted that it is about people.

“People doing not just what the rules say but about doing what is

right”.

“Corporate governance is about "the whole set” of legal,

cultural, and institutional arrangements that determine what public

agencies can do, who controls them, how that control is exercised,

and how the risks and return from the activities they undertake are

allocated.” (Margaret Blair, Professor of Law, Vanderbilt University

Law School).
“Corporate Governance is concerned with holding the balance

between economic and social goals and between individual and

communal goals. The corporate governance framework is there to

encourage the efficient use of resources and equally to require

accountability for the stewardship of those resources. The aim is to

align as nearly as possible the interests of individuals, corporations

and society.” (Adrian, 2000).

Contemporary articulation of the concept of good governance

has also engaged the attention of International Financial

Institutions like the World Bank and some other specialized

agencies of the United Nations. Governance is defined as “the

manner in which power is exercised in the management of a country’s

economic and social development” (World Bank, 1994). Also good

Governance is about promoting corporate fairness, transparency and

accountability (Woldensohn, 1999). Good governance implies the

efficient management of state institutions, which underscores the

need for a prudent application of the Commonwealth of a state to

improve the human condition. It emphasizes the virtues of financial

discipline. As Stoker noted, “governance is the acceptable face of

spending cuts” (Stoker, 1998:39).

Governance is also seen as “a process of social engagement

between the rules and the ruled in a political community. Its

component parts are rule making and standard setting, management

of regime structures and outcome and results of the social pact”


(UNECA, 1999). The United Nations Development Programmes

(UNDP) view governance as: the totality of the exercise of authority

in the management of a state’s affairs, comprising of the complex

mechanism, processes and institutions through which citizens and

groups articulate their interests, exercise their legal rights, and

mediate their differences (UNDP, 1997a:7).

Notwithstanding the variations in the definition of good

governance, scholars are in agreement that there are three actors

involved in the governance project. Thus Adejumobi (2004:14) noted

that “there is a consensus on the major actors or agency of the

governance project. These are the state, the civil society, and the

private sector”. It is in this sense that Kooiman, (1993:2) defined

governance as “forms in which public or private actors do not

separately but in conjunction, engage in problem solving together”.

From the foregoing clarification, another school has emerged

in the governance debate, the multi-organizational school (Kooiman,

1993; Ogendo, 1999; Strosberg and Gimbel, 2002; Olowu, 2005).

The multi-organizations school advocates a tripartite approach to

governance involving the synergy of the public sector, the private

sector and civil society organizations. At this level of

interpretation, governance is a collective and participatory

endeavour to serve the interest of the greatest number of people in

society. In the final analysis, governance is good when all the actors

involved in the process are guided by the principles, norms and


standards of the governance project as conceived by the society

(Mohideen, 1997).

From the foregoing, it is apparent that no matter the angle

from which corporate governance is viewed, there is always a

common consensus that corporate governance is concerned with

improving stakeholder value, and that governance and management

should be mutually reinforcing in working towards the realization of

that objective. However, understanding corporate governance as it

relates to the public sector cannot be completed without critically

examining the public sector reform.

2.2 PUBLIC SECTOR REFORM: NEW PUBLIC MANAGEMENT

This means a definition and redefinition of the role of the

government. In the advanced economies, government is being

remodelled to cope with citizens rising expectations. As Nunberg

observes that:

Governments have sought to reshape rigidly hierarchical,

nineteenth-century bureaucracies into more flexible, decentralized

client-responsive organizations, compatible with late twentieth

century technological, economic and political requirements (Nunberg,

1997:14).

The New Public Management (NPM) has brought about radical

reforms of the public sector. The United States has re-invented

government with a National Performance Review (NPR) meant to


“create a government that works better and costs less” based on the

four principles of putting customers (i.e stakeholders) first, cutting

red tapes, empowering employees, and cutting back basics

(Kamensky, 1997). In Britain and New Zealand, the Westminster

model of manageriallism seeks to radically transform the traditional

bureaucratic structures and revolutionalize the business of

government (Schick, 1996).

This wave of transformation made an inroad into the policy

arena of developing economies in the wake of the economic crisis of

the late 1970s and 1980s. The success of the market friendly

economies, the onslaught of globalization, and the unimpressive

performance of the institutions of governance in the Third World,

all combined to provide the need impetuses or redefine the role of

government in the development process. The central focus of this

new definition is to progressively withdraw the public sector from

direct production of goods and services, and entrench a new

orientation that will make government bureaucracies to adopt

private sector initiatives in the discharge of its statutory

responsibilities. As Vigoda (2002:7) observed, “premises originally

rooted in business management have become increasingly adjusted

and applied to the public sector”.

A limited government will ensure financial frugality designed to

meet the expectations of the International Financial Institution

(IFI) (Stokes 1998). This view was corroborated by the Breton


Woods Institutions when they reduced ‘good governance’ to

“institutional adaptability to achieve the goal of macro-economic

stability in a process, which allows for responsibility to the

creditors” (Odion, 2004:2).

In fact, this new orientation envisage a public sector that

remains the most potent for in the development process by creating

an enabling environment for private initiatives, by undertaking

appropriate policy reforms and the necessary legal and regulatory

framework.

The primacy of the government in development and social

progress of the society is underscored by the fact that: one; the

public sector alone can provide basic services that affect the living

standards of the poor, generally referred to as ‘public goods’, two; it

creates a climate conductive to private sector development (World

Bank, 2000a).

A review of the current reform agenda in Nigeria will suggest

that the initiatives are rooted in the philosophy of limited but

strong and pro-active government including performance review,

(that of course is pre-emptive and hasty for now), the writer is of

the opinion that the reform initiatives is a predictable response to

the imperative of globalization which calls for the creation of good

governance model in an emerging world order.

2.2.1 PUBLIC SECTOR REFORMS IN NIGERIA


The current public sector reforms in Nigeria is anchored on

the provisions of the charter for public service in Africa, which was

adopted at the 3rd Biennial Pan- African Conference of ministers of

Civil Service held in Windhock, Namibia on 5th , February, 2002.

Issues such as transparency, professionalism and ethical standards

and obligations of public service employees in the performance of

their duties were identified among others as the principles and rules

governing African public services.

i. Determine the appropriate structure and manning levels of

government ministries, agencies and parastatals;

ii. Up-skill and re-professionalize the public service;

iii. Re align and strengthen public institutions; and in particular,

transform these institutions to enhance their capacity in the

effectiveness of customer service delivery;

iv. Tackle corruption more vigorously by strengthening

transparency and accountability in the conduct of government

business; and

v. Reduce waste and improve the efficiency of government

expenditure through monetization of benefits, public procurement

reforms, pension reforms, privatization and liberalization.

The Domain of Reforms Programme include

i Budget and Financial Management: Procurement system review,

Institutionalization of fiscal responsibility and Accounting reforms.


ii Accounting Issues: Installation of due process and

transparency, Establishment of services charter and Compliance

enforcement.

iii Human Resource Management: Clean-up of personnel record

and payroll, Review of stall cadres, Remodelling of recruitment and

promotion processes, Installation of a new performance management

scheme, Pay reform, Injection of competent personnel including

relevant Professionals and young bright people, Capacity

development and training and Organizational culture change.

iv. Operations and Systems: Organizational restructuring and

right-sizing process re-design and Information technology

applications

The goal of the current public sector reforms is to build a

better society where the state through high performance

institutions will ensure quality service delivery to a growing number

of citizens. To accomplish this goal, government is compelled to seek

the involvement of other institutional actors. First and foremost,

the reform agenda is emphatic on the increased responsibility of the

organized private sector. Civil society has come to be recognized as

the third sector in a multi organizational approach to good

governance. Strosberg and Gimbel (2002) have articulated an ‘Iron

triangle’ which accommodates (1) public administrators who manage

programs, and carry out policies (2) the private sector whose

initiatives and operation propels the engine of development, and (3)


Non-Governmental Organizations and interest groups who focus on

particular policy area. And interest groups who focus on particular

policy area.

The advent of civil society organizations (CSOs) into the

governance project has the primary aim of increasing the diffusion

of policy impact in the society. Being closer to the people, CSOs can

articulate and reflect the needs of society on an ongoing basis, and

channel these toward the public authority. The autonomy which

CSOs enjoy in terms of their relationship with the state,

underscores the credible contributions they are likely to make to

good governance from their numerous diverse constituencies. Their

legitimacy does not only derive from the support they receive from a

particular constituency, but also from their responsibility to

promote a wider public interest.

Comparatively, CSOs in developing economies is a novel

development as against the already vibrant and highly diffused CSOs

and the state is largely determined by the nature and character of

national government. Whereas in advanced democracies with a

tradition of tolerance and accommodation, CSOs operate in an

environment that permit healthy dialogue and robust engagement, in

most of the Third World states characterized by political instability

and authoritarian regime, CSOs is stifled and contained. As Aiyede

observed:
The consolidation of single parties, president-for-life,

extensive security establishment, widespread inequalities, and

personal rule necessarily involved the denying of the people’ right to

participate in the decision-making process… (Aiyede, 2002:2).

There has been the situation in Nigeria before the

commencement of the current democratic dispensation. However,

the efforts of a handful of CSOs in the vanguard of the democratic

struggle, which consequently led to a break with the authoritarian

military cabal, must be noted. The civil society has been

acknowledged not only as the engine of the transition to democracy

in Africa and elsewhere, but also as equally crucial to the vitality of

democracy (Aiyede 2002). Moreover, “the nurturing of civil society

is widely perceived as the most effective means of controlling

repeated abuses of state power, holding ruler accountable to their

citizens and establishing the foundation for a durable democratic

government” (Chazan, 1996:282). Durable or sustainable democratic

government as used here implies a responsible governance system

capable of meeting the yearnings and aspirations of the citizens.

2.3 CORPORATE GOVERNANCE AND ECONOMIC GROWTH

Corporate governance has been a central issue in developing

countries long before the recent spate of corporate scandals in

advanced economies made headlines. Indeed corporate governance

and economic development are intrinsically linked. Effective


corporate governance systems promote the development of strong

financial systems – irrespective of whether they are largely bank-

based or market-based – which, in turn, have an unmistakably

positive effect on economic growth and poverty reduction.

There are several channels through which the causality works.

Effective corporate governance enhances access to external

financing by firms, leading to greater investment, as well as higher

growth and employment. The proportion of private credit to GDP in

countries in the highest quartile of creditor right enactment and

enforcement is more than double that in the countries in the lowest

quartile. As for equity financing, the ratio of stock market

capitalization to GDP in the countries in the highest quartile of

shareholder right enactment and enforcement is about four times as

large as that for countries in the lowest quartile.

Poor corporate governance also hinders the creation and

development of new firms. Good corporate governance also lowers of

the cost of capital by reducing risk and creates higher firm valuation

once again boosting real investments. There is a variation of a factor

of 8 in the “control premium” (transaction price of shares in block

transfers signifying control transfer less the ordinary share price)

between countries with the highest level of equity rights protection

and those with the lowest.

Effective corporate governance mechanisms ensure better

resource allocation and management raising the return to capital.


The return on assets (ROA) is about twice as high in the countries

with the highest level of equity rights protection as in countries

with the lowest protection.

Good corporate governance can significantly reduce the risk of

nation-wide financial crises. There is a strong inverse relationship

between the quality of corporate governance and currency

depreciation.

Indeed poor transparency and corporate governance norms are

believed to be the key reasons behind the Asian Crisis of 1997. Such

financial crises have massive economic and social costs and can set a

country several years back in its path to development.

Finally, good corporate governance can remove mistrust between

different stakeholders, reduce legal costs and improve social and

labor relationships and external economies like environmental

protection. Shleifer and Vishny (1997), Claessens (2003), La Porta et

al (1997) and La Porta et al (2000).

2.4 THEORETICAL FRAMEWORK

The theoretical framework upon which this study is based is

the agency theory/model, which posits that in the presence of

information asymmetry the agent (in this case, the directors and

managers) is likely to pursue interests that may hurt the principal,

or shareholder (Ross, 1973; Fama, 1980). At first the theory was

applied to the relationship between managers and equity holders


with no explicit recognition of other parties interested in the well-

being of the firm.

Subsequent research efforts widened the scope to include not

just the equity holders but all other stakeholders, including

employees, creditors, government, etc. This approach, which

attempts to align the interests of managers and all stakeholders,

has come to be regarded as the stakeholder theory.

The stakeholder theory has been a subject of some

investigation. John and Senbet (1998) provide a comprehensive

review of corporate governance, with a particular focus on the

stakeholder theory. The authors note the presence of many parties

interested in the well-being of the firm and that these parties often

have competing interests. The review also emphasizes the role of

non market mechanisms, citing as an example the need to determine

an optimal size of the board of directors especially in view of the

tendency for board size to exhibit a negative correlation with firm

performance. Other non-market mechanisms reviewed by John and

Senbet include the need to design a committee structure in a way

that allows the setting up of specialized committees with different

membership on separate critical areas of operations of the firm.

Such a structure would allow, for example, productivity-oriented

committees and monitoring-oriented ones.

In an article extending the stakeholder theory, Jensen (2001)

also recognizes the multiplicity of stakeholders. He concurs with


John and Senbet that certain actions of management might have

conflicting effects on various classes of stakeholders. This implies

that the managers have a multiplicity of objective functions to

optimize, something that Jensen sees as an important weakness of

the stakeholder theory “because it violates the proposition that a

single-valued objective is a prerequisite for purposeful or rational

behaviour by any organisation” (Jensen, 2001: 10).

In search of a single valued objective function that conforms

to rationality, Jensen suggests a refinement of the stakeholder

theory – the enlightened stakeholder theory. For him, the

enlightened stakeholder theory offers at least two advantages.

First, unlike the earlier version with multiple objectives, the

modified form of the theory proposes only one objective that

managers should pursue: the maximization of the long-run value of

the firm. If the interest of any major stakeholder was not

protected, the objective of long-run value maximization would not be

achieved.

A second, related, appeal of the enlightened stakeholder

theory is that it offers a simple criterion to enable managers to

decide whether they are protecting the interests of all

stakeholders: invest a dollar of the firm’s resources as long as that

will increase by at least one dollar the long-term value of the firm.

There is an important caveat, however. Jensen himself cautions that


the criterion may be weakened by the presence of a monopoly

situation or externalities.

Despite its appeal, the stakeholder theory of the variety

proposed by Jensen has not been subjected to much empirical

evaluation. At least two factors might have contributed to the gap

between theory and evidence. The first, already alluded to, concerns

the prevalence of externalities and monopoly situation. The second is

the problem of measurement, especially in view of the problems

associated with getting an accurate measure of the long-term value

of the firm.
CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Scope of the Study

This research work has been narrowed to a particular area of

study. The study examines the relationship between stakeholders,

corporate governance mechanisms and organizational performance of

the Ogun state liaison office, Abuja in Nigeria. The study is set to

dwell specifically on the impact of stakeholders in attaining

sustainable corporate governance in corporations in Nigeria, focusing

more on the public sector. Therefore, for the purpose of this study,

Ogun state Liaison Office, Abuja, Nigeria is the case study so as to

reduce monotony of having to study all the corporate firms in the

country.

3.2 Sources of Data

Both primary and secondary data were used. The main sources

of data for the study were questionnaire, interview, textbooks,

journals and other relevant publications. To obtain the primary data

about the perception of all relevant stakeholders on the level of

corporate governance in Ogun state liaison office, Abuja and its role

on the agency’s performance, questionnaires were administered to

some of the stakeholders (internal and external) while the main

officials were interviewed.


3.3 Methods of Data Collection

(i) Questionnaires:

The data collection was through the use of questionnaires, to

collect information on stakeholders’ involvement and sustainable

corporate governance in Ogun state liaison office, Abuja-Nigeria.

The Liaison office is the type that has numerous stakeholders.

However, the researcher decided to group them so as to ease the

administration of the questionnaire and questionnaires were

distributed equally. A total of 600 questionnaires were

administered.

(ii) Interviews

Interviews were conducted with the Head of information

directorate, the executive Governor of Ogun state, chairman house

committee on intergovernmental affairs and other important

personnel.

(iii) Publications

Secondary data were collected from the mail records of the

Liaison office which indicated the rate of inflow and outflow of

correspondence between the Liaison office and selected

stakeholders. The draft copy of the new Ogun state liaison office’s

code of conduct was also examined. Also, information from

textbooks, journal articles and conference proceedings were used

which helped in the development of literature reviews relating to

the subject at hand.


(iv) Focus Group Discussion

It is also known as representative survey group: a small

group of representative people who are questioned about their

opinions as part of political or market research.

There are two types of research: qualitative and quantitative.

To gain a general impression of the market, consumers, or the

product, companies generally start with qualitative research. This

approach asks open-ended rather than yes or no questions in order

to enable people to explain their thoughts, feelings, or beliefs in

detail. One of the most common qualitative research techniques is

the focus group in which a moderator leads a discussion among a

small group of consumers who are typical of the target market. The

discussion usually involves a particular product, service, or marketing

situation. Focus groups can yield insights into consumer perceptions

and attitudes, but the findings cannot be applied to the whole

market, because the sample size is too small. Focus group results,

then, are suggestive rather than definitive.

The insights generated by a focus group are often explored

further through quantitative research, which provides reliable, hard

statistics. This type of research uses closed-ended questions,

enabling the researcher to determine the exact percentage of

people who answered yes or no to a question or who selected answer

a, b, c, or d on a questionnaire. One of the most common quantitative

research techniques is the survey in which researchers sample the


opinions of a large group of people. If the sample group is large

enough and is representative of a particular group, such as

executives who use cell phones, statisticians consider the findings

statistically valid, which means that if all consumers in that

particular category could be surveyed, the findings would still be the

same. This means that quantitative findings are conclusive in a way

that qualitative findings cannot be.

Here the focus group discussion was to support further the

responses recorded from interviews conducted. The bulk of analysis

of the data collected was dependent on the survey/poll through

questionnaires administered.

3.4 Sampling Techniques

Sampling is the process of selecting a part of a group under

study. A sample is part of a greater group from which it was drawn.

Sampling is the process through which it is decided who will be

observed. The aim of making inferences that will be applicable to the

greater group from which the sample is drawn still remains.

However, the confidence with which generalisations can be made

depends on the accuracy of the process of sampling.

This study adopted two types of probability sampling namely;

simple random sampling and the stratified sampling. Our decision is

influenced by the fact that the Ogun state Liaison Office is a multi

stakeholder organisation and analysis would be easier carried out


when they are all represented (stratified sample), hence samples

drawn from each stratum (simple random sampling).

The population of study is the total staffs of the Liaison

office in Abuja and other stakeholders broken down to different

strata. Where the population is relatively large, samples were drawn

from each stratum through the simple random sampling methods to

represent the entire population.

For this study, a total number of six hundred questionnaires

were administered but only four hundred and ninety eight (498)

questionnaires were retrieved, that is 83 percent.

3.5 Statement of Hypothesis

In line with the objectives of the study, the hypothesis

as stated in chapter one to be tested can be restated as

follows:

(i) H0: There is no significant relationship between

stakeholders, corporate governance mechanisms and

organizational performance in Nigeria.


H1: There is significant relationship between stakeholders,

corporate governance mechanisms and organizational

performance in Nigeria.

(ii) H0: Stakeholders do not significantly enhance corporate

governance in Nigeria.

H1: Stakeholders significantly enhance corporate

governance in Nigeria.

3.6 Model Specification

From the literature and other theoretical analysis, the model

specification is as follows:

CG = f (SH)

Where;

Dependent variable:

CG is Corporate Governance

Independent Variable:

SH is Stakeholders involvement/participation

The expected sign of the variable is that Stakeholders

involvement/participation will positively impact on Corporate

Governance.
3.7 Technique of Data Analysis

Descriptive statistics technique were used in analyzing the

data collected that is, frequency/ percentage tables, graphs and as

well as chi-square (X2) to test the hypothesis.

Specifically, the statistical techniques used for the purpose of

the data analysis were tabulation, simple percentages and bar

charts.

The chi-square (X2) test of independence used is given by the

following formula:

X2 = (fo - fe) 2
fe

Where X2 is the chi-square

fo is the observed frequency

fe is the expected frequency

Furthermore, the expected frequency can be expressed as,

fe = (rt) (ct)

gt

where fe is the expected frequency; rt is the row total; ct is the

column total; and gt is the grand total or total observations in the

study.
3.8 RESEARCH THEORY

The research theory adopted for this study is the positivist

epistemology with a deductive quantitative research approach. In its

broadest sense, positivism is a rejection of metaphysics. It is a

position that holds that the goal of knowledge is simply to describe

the phenomena that we experience. The purpose of science is simply

to stick to what we can observe and measure. Knowledge of anything

beyond that, a positivist would hold, is impossible. Since we can't

directly observe emotions, thoughts, etc. (although we may be able

to measure some of the physical and physiological accompaniments),

these were not legitimate topics for a scientific psychology. B.F.

Skinner argued that psychology needed to concentrate only on the

positive and negative re-inforcers of behaviour in order to predict

how people will behave -- everything else in between (like what the

person is thinking) is irrelevant because it can't be measured.

Positivism is guided by five principles:

1. The unity of the scientific method – i.e., the logic of inquiry is

the same across all sciences (social and natural).

2. The goal of inquiry is to explain and predict. Most positivists

would also say that the ultimate goal is to develop the law of

general understanding, by discovering necessary and sufficient

conditions for any phenomenon (creating a perfect model of it).


3. Scientific knowledge is testable. Research can be proved only

by empirical means, not argumentations. Research should be

mostly deductive, i.e. deductive logic is used to develop

statements that can be tested (theory leads to hypothesis

which in turn leads to discovery and/or study of evidence).

4. Science does not equal common sense. Researchers must be

careful not to let common sense bias their research.

5. The relation of theory to practice – science should be as value-

free as possible, and the ultimate goal of science is to produce

knowledge, regardless of any politics, morals, or values held by

those involved in the research.

In positivist epistemology we use deductive reasoning to

postulate theories that we can test. Based on the results of our

studies, we may learn that our theory doesn't fit the facts well and

so we need to revise our theory to better predict reality. The

positivist believed in empiricism -- the idea that observation and

measurement was the core of the scientific endeavour. The key

approach of the scientific method is the experiment, the attempt to

discern natural laws through direct manipulation and observation.

Considering the topic of discussion at hand which is clearly a

case study research, positivism is indeed an epistemology most

relevant. However, case study research can be positivist (Yin, 2002)

or even interpretive (Walsham, 1993). A case study is an empirical


inquiry that investigates a contemporary phenomenon within its real-

life context, especially when the boundaries between phenomenon

and context are not clearly evident (Yin 2002).

Typically, a case study researcher uses interviews and

documentary materials first and foremost and then followed by

participant observation. The distinguishing feature however, is that

the researcher spends a significant amount of time in the field. The

fieldwork notes and the experience become an important addition to

any other data gathering techniques that may be used.

In our case, in an attempt to establish linkage between

organisation’s performance and good governance using Ogun State

liaison office, Abuja, Nigeria as case study, we employed the use of

questionnaire as the main research instrument. However, the

responses expected due to the structure of questions contained

therein are both quantitative and qualitative in nature but all

qualitative responses have been quantified for easy analysis

(deductive quantitative research approach). Quantitative research is

"a formal, objective, systematic process in which numerical data are

utilised to obtain information about the world" (Burns and Grove

cited by Cormack 1991 p 140). Objectivity, deductiveness,

generalisability and numbers are features often associated with

quantitative research.
In addition, the proceedings from both study group and the

interviews conducted were presented and analysed using the

narrative approach.

3.9 LIMITATIONS OF THE STUDY

Time constraints, poor environmental facilities, inability of

much materials and low financial capacity on the side of the

researcher are all among the major constraints faced by this

research work. Some of these limitations are discussed in the

following paragraphs.

The respondents’ complaint of the bulky and sophisticated

nature of the questionnaires vis-à-vis the short period of time given

to fill them. As a result of this, some potential respondents adopted

non-challant attitude towards filling them. Appeals by the research

assistants and the researcher eventually led to the acceptance of

the questionnaires by the few. However, some of the operators still

returned the questionnaires uncompleted.

Granting of interview by the interviewees was another major

threat to the complete conceptualization of the subject matter and

assessment of Ogun state’s corporate governance model. However,

with persistency and patience some of the intending interviewee

turned in.

In the same vein another problem encountered in the field had

to do with the operators’ reluctance to cooperate due to (i) suspicion


that disclosing information may be used against the agency, (ii)

apathy towards government’s gesture to properly manage public

institutions.

As it is in all researches that finance is critical, undertaking

this research work was constraint by insufficient funds as may be

necessary to carry out a thorough work. The time constraint was

another challenge. Due to unforeseen circumstances like unstable

power supply, the timeframe proposed as can be found in the

research proposal was a little bit exceeded.

The study is bedevilled by materials and data constraints.

Some of the data that should have aid the research work could not

be accessed. This problem has come to be associated with developing

economies including Nigeria where non-availability of data has come

to be one of the major impediments in research. In the Liaison

office in particular, unavailability of data was largely caused by

military intervention in Government, a time of fear when nobody has

the right to complain or allowed to think straight. Documentations

were mostly seen as threat to the Government administration.

The myriad of problems encountered during the field work

emanating from suspicion, lack of confidence in governance, capital

and time requirement, and the non-challant attitudes displayed by

some respondents were resolved through persuasion, better planning

and proper use of time. Therefore, with these measures put in place

the data gathered from the field is reliable and has significantly
eliminated or at least minimized the potential negative consequences

of the constraints pointed above.

CHAPTER FOUR

BACKGROUND OF THE STUDY AREA

4.1 AN OVERVIEW OF OGUN STATE LIAISON OFFICE

We can say that the Ogun state liaison office is a state’s

agency which makes it to fall within the category of public sector. It

is one of the agencies through which Ogun state government

executes her public administration.


Public sector is the domain of public administration, and “a

country’s public administration system comprises the civil service,

special purpose bodies, and local authorities” (Olowu, 2002:123).

Accordingly to Ahmed, (2005) define Public service as an

agglomeration of all organizations that exist as part of government

machinery which are established by government for the delivery of

services. He divides the public sector into four broad categories;

i. The civil service The Career Personnel of the Presidency, the

ministries, the Extra-ministerial Departments and the services of

the national assembly and the Judiciary.

ii. The Armed Forces

iii. The Police and other security agencies.

iv. The Parastatals including social services / infrastructure

agencies, regulatory Agencies, Educational Institutions, Research

institutes etc.

By this classification, public sector contrast sharply from

private sector in the sense that “Goods and Services that require

exclusion, jointness of use or consumption, and not easily divisible

are regarded as ‘public’ goods and services” (Olowu, 2002:123).

Given the above classification, the Ogun state liaison office

fall under the fourth category and hence discussion of corporate

governance as relating to Ogun state Liaison office will take a

different dimension from the everyday conceptualisation of

corporate governance as used in the business world, which represent


sharply the private sector. Hence, corporate governance in the

business world is synonymous to good governance in the public sector

or the “government business world.”

The Ogun state liaison office, Abuja was established by the

then Governor of Ogun State under the directives of the then Head

of state; Alhaji Sheu Shagari alongside other Liaison offices of all

states in Nigeria is situated in one of the glorious section of the

Federal Capital Territory (FCT); Central District Area, Abuja and

complemented by the Ogun state Governor’s lodge at Jorse Marti

Street, Asokoro. Specifically, the liaison office is located at 74,

Ralph Sodeinde Street.

The Liaison office operates from a dual location of both the

Liaison office and the golden edifice of the governor’s lodge unveiled

just one month to return of democracy, 27th April, 1999 under the

Military administrator of the state; Navy Captain Kayode Luke

Olofin Moyin.

The office was established to among other purpose midwife

between the state government on one side and the Federal

Government of Nigeria, Ogun indigenes and other Stakeholders on

the other side. It was to serve as a localised embassy or mission

situated at the centre of government, Lagos initially but Abuja the

new federal capital territory ultimately. Apart from the above

purpose the state liaison office was also created to assist indigenes

of the state and potential investor both within and outside the
country. She also offered protocol services and necessary hosting of

important dignitaries in and around Abuja. However, there are

numerous other duties and functions of the liaison office as may be

directed by the Executive Governor of the state at any point in

time.

It can be described as a State Government’s agency in all

ramifications. Because Nigeria practice Federal system of

government, there was need for a liaison between the 3 tiers of

government to foster good economic, social and political gains with a

dual mandate to benefit both the state government and federal

government in the execution of their administration of policies and

programmes. This by extension remains same for the local

governments. However, it was discovered that Ogun state liaison

office has other unique features distinct from the everyday

understanding that an average Nigerian is made to conceive of a

Government agency. These unique features have generated so much

discussion about its performance over the years.

4.1.1 CORPORATE GOVERNANCE IN OGUN STATE

LIAISON OFFICE

Governance issues on the Ogun State Liaison office are as old

as the Liaison office herself. At first, the structure and mode of

her operation was not known to anyone but its existence was quite

known. Studies have shown that it was due largely to the fact that it
was new and secondly because there were no structures to awaken

people’s awareness of governance and what it ought to be. Aside

from the reason just mentioned, the transition from civil to military

rule which continued from 1983 through 1999 was another reason

for this; a time when citizens had no right to question the authority

of the Government.

However, the issues of good governance in all sectors of the

economy generated so much heat following the return of Democracy

in 1999 when the then President of the Federal Republic of Nigeria;

Rtd. General Olusegun Obasanjo introduced series of structural

reform program to sanitise the system (both public and private

sector). Moral and Ethical values, accountability and transparency

etc in all sectors of the economy were the order of the day. This

trend continued throughout his 1st and 2nd term and the

instruments used by his administration are still in place till today. It

is however observed that public officers have relaxed since the

beginning of the Yar’adua’s administration in May 2007.

The case of Ogun State Liaison Office, Abuja is however very

distinct compared to other Liaison Offices in Nigeria as this period

marked the continual increase of a new look in the administration of

the Liaison office. A turning point to say, when the activities of the

Liaison office were made more formal and accountability through

good governance were the watchwords.


The new Liaison Officer; Otegbola Lola (Mrs) at the

assumption of office in 2003 initiated a formidable team led by her

Special Adviser (S.A) to investigate the activities of the liaison

office in the past, the Federal Government’s reform programs and

there relevancies to the Liaison office, the standards of the code of

conduct bureau, the code of conduct in other sectors and draw up

modalities for how the Liaison office is to be administered.

The committee came back with their report which was later

metamorphosed into “Code of Best Practice for Ogun State Liaison

Office” after gaining approval from the Executive Governor; His

Excellency Chief Otunba Gbenga Daniel.

The reformation programs considered and which greatly

influenced this initiative were:

i. The NEEDS (National Economic Empowerment and

Development Strategy) and SEEDS (State Economic Empowerment

and Development Strategy)

ii. SERVICOM (Service Compact With All Nigerians)

iii. Review of EFCC (Economic and Financial Crime Commision) and

ICPC’s (Independent Corrupt Practices and other related matters

Commission) activities.

iv. The joint CBN and CAC code of corporate governance

formulated for private sector

v. Other Public sector reforms Policies


Aside from the above mentioned policies, the major factor

that influenced this remarkable revolution was the desire on the

part of the Liaison Officer to really serve her people optimally. This

singular event and other efforts made her status to be upgraded by

the Governor of the state; Otunba Gbenga Daniel from Liaison

Officer to Director General, Inter-governmental Relations (DIR) in

2004 to among other functions, supervise the Ogun state liaison

office both in Abuja and Lagos and also to supervise all other inter-

governmental related matters.

In addition and to complement her efforts, The Governor of

Ogun State, Otunba Gbenga Daniel, in his determination to open up

the state to other parts of the country, also upgraded the

information directorate of the state's Liaison office in Abuja. The

directorate is now to be headed by the Governor's Personal

Assistant on Information and strategy, Mr. Fela Oliyide. A

statement from the maiden director of Intergovernmental affairs in

the liaison office said the idea behind the upgrading was to, among

others, project the political and economic ideologies of Daniel to a

larger population and assist the administration in its socio-economic

acceleration drive of the State.

The Directorate is also to adequately cover the governor's

activities, build cordial relationship between the State and the

media and foster a healthy and profitable inter-state partnership


among its various publics. The head of the new directorate was the

political editor of City People Magazine.

In addition to that, other offices were created which include

the investment office, education scholarship office, poverty

eradication unit, empowerment unit, internal audit unit, budget unit,

Millennium Development Goals (MDGs) unit, SERVICOM charter and

whole lots of others.

The liaison office from records has discovered lots of talents

through its various empowerment programs and scholarship

programs. This to a large extent contributed to the accelerated

growth of the state. A cross section with Ogun state students at

the University of Abuja also revealed to us that Ogun state liaison

office is living beyond expectation in building intellectual capacity in

the youths.

In a statement issued by the director of intergovernmental

affairs; Ogun state liaison office is determined to be at the fore

front of eradicating poverty in Nigeria starting with Ogun state

indigene. This made the agency to establish millennium development

Goals MDGs unit and empowerment unit within its structure.

Worthy of mentioning is the innovative Investment unit

through which the liaison office projects the resources of the state

to the centre and its constituent environs in order to increase

internally generated revenue. A number of profitable individual

initiatives have been financed by the liaison office. In addition, lots


of Multinationals which is typical of Ogun state were established

through the support of the liaison office. Aside from sourcing for

investors which help the state generates lots of revenue, there is

yet another structure in place; the tax desk for remittance of

taxes.

In order to ensure quality of service delivery, public

procurement and good governance within the agency, the director of

intergovernmental affairs called for the establishment of

SERVICOM charter within the structure and completely embrace all

its provisions. Moral and ethical values have since been redefined in

the agency. For the first time in the history of the Ogun state

liaison office, the liaison office is mandated to publish its annual

report in the annual news bulletin of the state which just kicked off

at about the same time the governance model were enacted.

Most recently, the function of the Ogun state liaison office

was felt by the Ogun state executive council, lawmakers and the

National assembly as it played an active role in bringing down the

Ogun State political imbroglio earlier this year; April 14, 2009.
4.1.2 OGUN STATE LIAISON OFFICE’S ORG. STRUCTURE
THE EXECUTIVE
GOVERNOR

SERVICO
AUDIT
M
COMMITT DIRECTOR GENERAL CHARTER
EE INTER-GOVERNMENTAL
AFFAIRS
LIAISON OFFICER (ABUJA) LIAISON OFFICER
(ABJ) (LAG)

SPECIAL ASSISTANT SPECIAL


SPECIAL
(SA) 1&2 TO DG ASSISTANT
ASSISTANT
INTER (SA) LAG
(SA) ABJ
GOVERNMENTAL
AFFAIRS
EXTERNA
L
AUDITOR

EDUCATIO
INTERNAL INFORMATI
ACCOUNTI INVESTM MDGs N
AUDIT ON
NG UNIT ENT UNIT UNIT SCHOLARS
UNIT DIRECTORA
HIP UNIT
TE
EMPOWERME
TAX DESK
CORPORATE NT UNIT
SECRETARIATE
Figure 1: The Ogun State Liaison Office Abuja, org. structure
DRIVERS, SECURITY,
PriorSTAFFS,
KITCHEN to the period under review, the Ogun State ALL
Liaison
GARDENER AND DIRECTORATES/UNITS
Office like every
OTHERS (ABUJA AND other liaison office in the countryANNEXES
had no clearly
LAGOS)
defined structures. However, following the remarkable inputs of the

new liaison officer, presently director of intergovernmental affairs,

a clearly defined structure can be described as seen above.

The executive governor is at the top of the chart as the

principal officer. The next to him is the director of

intergovernmental affairs who reports directly to the executive

governor on the activities of the liaison offices (Lagos and Abuja).


She also receives special directives from the governor that can

make her perform beyond her duty limit. However, her major task is

to put all machineries in place to see that intergovernmental

activities of the state are carried out successfully. She does this by

co-ordinating both the human and material resources available.

As clearly indicated in the chart above, the liaison officers

both in Abuja and Lagos including her special assistant and all other

directors work closely with her in order to see that the objectives

of the agency are achieved optimally. In the area of maintenance and

other administration lie the low level employees of the Liaison office

such as the cleaners, drivers, gardeners etc.

Accountability and transparency are of utmost importance in

any organisation and of course the reverse can kill the smooth

running of an organisation. The liaison office for the first time apart

from the internal audit unit is subjected to the external auditors

made up of representatives from independent auditing firm; it’s also

complemented by audit committee made up the EFCC

representatives with the Liaison office’s secretary as the secretary

of the committee. The committee’s duty is to supervise the

activities of both the internal and external auditors in relations to

their audit report, submit findings to the executive governor of the

state and if necessary probe unethical attitudes of the public

officers in relation to mismanagement of funds or any other corrupt

act. This relationship is clearly shown in the organogram above.


SERVICOM is yet another watchdog within the structure of

Ogun state liaison office. As we can see from the organogram, it has

link with all the various units of the organisation. It ensures that

service delivery is carried out in such a manner that meets up the

standard and provisions of SERVICOM. The charter is also open to

indigenes and other stakeholders through which they can file

petitions when they are been marginalised in any form.

The agency secretariat, another strategic unit of the liaison

office is at the centre to handle all secretarial related activities of

the Ogun state liaison office. It’s also charged with the

responsibility of keeping records and publishing of the Ogun state

annual news bulletin. The secretariat headed by a highly skilled and

certified agency secretary is also among other functions serve as

the secretary of the board of directors (BOD) and the external

audit committee.

It should be noted as shown from the chart that all

units/organ through which the liaison office operates have annexes

in Lagos which carry out the same functions as that of Abuja.

However, the organogram shown above represents a summarised

structure of the liaison office as the actual staff strength is not

featured therein. The staff strength as at the time of this research

is estimated at five hundred and twenty three (523) representing

statistics for Lagos and Abuja.


4.2 THE STAKEHOLDER MODEL (CASE OF OGUN STATE

LIAISON OFFICE)

Post, et. al., (2002), in their theory called Stakeholder view,

use the following definition of the term "stakeholder": "The

stakeholders in a corporation are the individuals and constituencies

that contribute, either voluntarily or involuntarily, to its wealth-

creating capacity and activities, and that are therefore its potential

beneficiaries and/or risk bearers." This definition differs from the

older definition of the term stakeholder in Stakeholder theory

(Freeman, 1984) that also includes competitors as stakeholders of a

corporation. Robert Phillips provides a moral foundation for

stakeholder theory in Stakeholder Theory and Organizational

Ethics. There he defends a "principle of stakeholder fairness" based

on the work of John Rawls, as well as a distinction between

normatively and derivatively legitimate stakeholders.

At this moment we observed that the internal members as

seen in the structural graph claims a stronger position and

insufficient light is shed on the position of other stakeholders in the

corporate governance debate. While in the past few years, we

seemed to be gradually moving towards a stakeholder economy, an

economy which allows for the influence and the interest of all

parties concerned.

However the next few paragraphs will reveal the level of

stakeholders’ involvement in governance in the Ogun state liaison


office, Abuja. Our choice, our plea/recommendation of the

stakeholder model is based on the following principles of good

management in the Ogun state liaison office, Abuja:

• Decision making in consultation

• A broad and responsible weight of interest

• Countervailing power and competition of ideas

• A certain/minimum balance of power in relations

• Ability and power to learn, creating adaptability and flexibility

• Not only short time problem solving but also longer time

orientation

• Durable commitment

• Shared responsibilities

• Societal legitimacy

• Visions and values based on debate

• Performance measurement and ethical auditing

All based on the public sector reforms discussed earlier.

Because of these principles, we plea for and recommend an active

role and involvement of the stakeholders in all organisations and in

the public sector in particular.

The stakeholder model as presented below considers the

interest and possible contributions of all relevant stakeholders in

strategic decision making at corporate level in the Ogun state liaison

office. In this model, we define strategic decision making as a

continuous and cyclic planning process: a process of analysing


external and internal key factors, making strategic choices, drawing

up policy plans, implementation , testing and if necessary, adjusting

plans. Stakeholders must be able to participate in the decision

making (each from his position and responsibilities and in relation to


Presidenc
Civil y
each other). T he
Society
Medi
Organisatio a
ns The
The liaison
liaison office
office Staffs
MGT
Financial
Ogun
Communit
state govt
y
executive
s and
judiciary
Regulatory
bodies
Fed.
Ministrie
s Non
Government
Tax al
Authority Organisatio
OGUN STATE LIAISON n

Political OFFICE ABUJA


Strategic Decision Making State
parties
Ministries

Donor
Agencie
s
Pa vt.
r
Go
s
a stata

Suppliers/
l

Contractor
s
Ogun
state
indigene
Nigeria s
embassies
abroad
Potential
Internation investors
al
Embassies Other
in Nigeria Other states’
liaison Other govt
office categorie
s s
Figure 2: The Stakeholder Model of Ogun State Liaison Office

4.3 CODE OF CORPORATE GOVERNANCE IN OGUN STATE

LIAISON OFFICE

Long before the highly publicized corporate scandals and

failures worldwide, the global community has shown increasing

concern on the issues of corporate governance. The reason for this

trend is not far to seek. There is growing consensus that corporate

governance, which has been defined as the way and manner in which

the affairs of companies are conducted by those charged with the

responsibility, has a positive link to national growth and development.

Little wonder therefore that several studies and initiatives

have been undertaken by countries and International Institutions on

the subject “Corporate Governance”. As a result of the foregoing,

several Codes of Corporate Practices and Conduct have been

fashioned out and are in use in various jurisdictions.

The importance of effective corporate governance to

corporate and economic performance cannot be over-emphasised in

today's global market place. Companies perceived as adopting

international best corporate governance practices are more likely to

attract international investors than those whose practices are

perceived to be below international standards. However, in our case

in Ogun state liaison office, there exist verbal/oral codes of

corporate governance which are not known by staffs and some

principal officers not to talk of abiding by its provisions. It is even


worst that our survey revealed to us that there are no codes of good

governance at all in other liaison offices.

This realisation prompted the Director of intergovernmental

affairs Ogun state in conjunction with the liaison officer of the

agency in Lagos to inaugurated a five (5) member Committee on Good

Governance of Ogun state liaison office (“the Committee”) on June

15, 2003. The Committee was carefully constituted to include major

management staffs of the agency headed by Special adviser to the

Liaison officer now director general of intergovernmental affairs.

The Committee headed by Mr Kehinde, had the following terms

of reference:

• To identify weaknesses in the current corporate governance

practices in Nigeria with respect to public agencies and the Ogun

state liaison office in particular.

* To examine practices in other jurisdictions with a view to the

adoption of international best practices in corporate governance in

the liaison office.

* To make recommendations on necessary changes to current

practices.

* To examine any other issue relating to good governance in the

liaison office.

The Committee set about its task by establishing the

corporate governance practices already prevalent in Ogun state,

Nigeria. This they did by preparing a detailed questionnaire on


agency operations and these were circulated to various state

ministries and other public agency throughout the length and

breadth of Ogun state. Thereafter they proceeded to make a

comparative analysis of Good Governance practices around other

jurisdictions and markets with particular emphasis on emerging

markets and countries like the U. K. which had similar statutes.

Recall that we have stated earlier in this debate that the whole idea

of public sector reform was to inculcate the private business

principles in government businesses. With the results of their

findings, they set about crafting a Code of Best Practices for Ogun

state liaison office putting into consideration its multiple

stakeholders.

The Committee submitted a draft Code, which was forwarded

to the executive governor through the then liaison officer now

director of intergovernmental affairs. It was further reviewed by

selected members of the state house of assembly and the executive

council. This extensive exposure was designed to elicit stakeholders

input before the Code was finalized. Subsequently, the final report

was ratified and approved by the executive governor, Chief Otunba

Gbenga Daniel for compliance.

The board of directors and the management of the liaison

office are convinced that the adoption of this Code will no doubt

enhance corporate discipline, transparency and accountability.


Although the main target of the Code is the Board of

Directors and the management as leaders of the agency, the

responsibilities of other stakeholders including Ogun indigenes and

regulatory authorities were equally given due attention. We believe

that one of the ways to improve the standard of corporate

governance is to ensure that all stakeholders have a clear

understanding of their roles. This is aptly provided for by this Code.

Experience from other jurisdictions has shown that answers to

enforcement or compliance with a Code of this nature are not easily

found. While voluntary compliance is generally encouraged,

appropriate sanctions are applied when it becomes necessary and

applicable. We therefore like to encourage all stakeholders to

comply with the Code which is contained herein.

PART I: NEED FOR A NEW CODE OF CORPORATE

GOVERNANCE IN OGUN STATE LIAISON OFFICE

I.0 Introduction

“Service is what we offer ourselves for. And service is what the

people are entitled to expect from us.”

- President Olusegun Obasanjo


“Nigerians have for too long been feeling short changed by the

quality of public services. Our public offices have for too long been

showcases for the combined evils of inefficiency and corruption,

whilst being impediments to effective implementation of government

policies. Nigerians deserve better. We will ensure they get what is

better!”

- President Olusegun Obasanjo, June 2003

I.I Address by His Excellency President Olusegun Obasanjo at the

opening of the Special Presidential Retreat on Service Delivery in

Abuja 19th – 21st March 2004 had once again informed the need for

the practice of good corporate governance, which is a system by

which corporations are governed and controlled with a view to

increasing and meeting the expectations of the stakeholders.

I.II For the Ogun state Liaison office, the retention of public

confidence through the enthronement of good governance remains

of utmost importance given the role of the office in the maintenance

of intergovernmental relationship between the State (Ogun State)

and its various stakeholders in Nigeria and the Diaspora, especially

the Presidency, Ogun indigenes worldwide, other states and Nigeria

embassies worldwide.

I.III A survey, by the corporate governance committee setup

by me (Ogun State Liaison Officer, Abuja; Mrs Lola Otegbola),

reported in June 2004, showed that corporate governance was at a


rudimentary Stage, as no single Liaison office in Nigeria had

recognized codes of corporate governance in place. Even the so

called Ogun State Liaison office only had verbal and non written

corporate governance principles.

I.IV Yet, the on-going reformation by the President

Obasanjo’s SERVICOM (Service Compact With All Nigerians)

committee is likely to pose additional corporate governance

challenges arising from integration of processes and culture.

Research had shown that almost all Government agencies are

influenced from outside, the heads are reduced to ordinary “figure-

heads” and the decisions they make mostly are not their own and not

in the best interest of the stakeholders. This, to a large extent has

made corruption a strong culture in the public sector. However, a

well-defined code of corporate governance practices should help

these agencies overcome such difficulties.

I.V Since 1979 when the Sheu Shagari administration established

Liaison offices for all states, there had been a large gap between

the actual objectives and what the Liaison offices do in reality.

I.VI Other weaknesses include inability to plan and respond to

changing circumstances in government business, ineffective

management information system (MIS), inadequate Management

Capacity, high Level Malpractices and inadequate Operational and

Financial Controls to mention but few.


I.VII The above mentioned reasons, however, necessitated a

review of the existing code for the Ogun state Liaison office. This

new code therefore is developed to complement the earlier ones

(the verbal/unwritten codes) and enhance their effectiveness for

the Ogun state Liaison office.

I.VIII Compliance with the provisions of this Code is mandatory.

PART II: CODE OF BEST PRACTICES ON CORPORATE

GOVERNANCE IN OGUN STATE LIAISON

II.0 Principles and Practices that Promote Good Governance

The watch words are:

CONVICTIONS

That Nigeria can only realise its full potentials if citizens receive

prompt and efficient services from the State

RENEWAL

Of commitment to the service of the Nigerian Nation

CONSIDERATION

For the needs and rights of all Nigerians to enjoy social and

economic advancement

AVOWAL

To deliver quality based services based upon the needs of the

citizens

DEDICATION
To providing the basic services to which each citizen is entitled in a

timely, fair, honest, effective and transparent manner

II.I The establishment of strategic objectives and a set of

governance values, clear lines of responsibility and accountability.

II.II Installation of committed and focused Directors which

will exercise its oversight functions with a high degree of

independence from external influence.

II.III A proactive and committed management team.

II.IV There is a well-defined and acceptable division of

responsibilities among various cadres within the structure of the

Liaison office.

II.V There is balance of power and authority so that no individual or

coalition of individuals has unfettered powers of decision making.

II.VI All Directors or liaison officers as the case may be

should be knowledgeable in government business and also possess the

requisite experience.

II.VII There should be a definite management succession plan.

II.VIII The staffs and other internal stakeholders need to be

responsive, responsible, enlightened and carried along.

II.IX There should be a strong rigid culture of compliance with

rules and regulations herein.

II.X Effective and efficient Audit Committee should be set up by

the Executive Governor to checkmate activities. In addition to that,

there should also be existence of external auditors and the internal


ones that would be part of the structure and serve in that capacity

from time to time.

II.XI Both the external and internal auditors must be of high

integrity, independence and competence.

II.XII Internal monitoring and enforcement of a well articulated

code of conduct/ethics for Directors/Liaison officers, Management

and staffs is of high necessity. SERVICOM (Service Compact With

All Nigerians) should be situated within the structure.

II.XIII Regular management reporting and monitoring system.

II.XIV Periodical written reports of compliance status with the

corporate Governance codes must be submitted to the Executive

governor through the audit committee.

III.0 DEFINITION OF RESPONSIBILITIES

A- THE BOARD OF DIRECTORS

1. RESPONSIBILITIES OF THE BOARD OF DIRECTORS

This Code may be cited as the;

(a) The Board of Directors should be responsible for the affairs

of the liaison office in a lawful and efficient manner in such a way as

to ensure that the liaison office is constantly improving its value

creation as much as possible.

(b) The Board should ensure that the value being created is shared

among the Ogun state indigenes and employees with due regard to
the interest of the other stakeholders of the liaison office. The

Board's functions should include but not be limited to the following:

i. Strategic planning

ii. Selection, performance appraisal and compensation of senior

executives

iii. Succession planning

iv. Communication with Ogun state indigenes, presidency and other

important stakeholders

v. Ensuring the integrity of financial controls and reports

vi. Ensuring that ethical standards are maintained and that the

liaison office complies with the laws of Nigeria.

As much as possible, the Board should be composed in such a way as

to ensure diversity of experience without compromising

compatibility, integrity, availability, and independence.

(c) The Board should comprise of a mix of Executive including the

deputy governor, Directors of the liaison office including the

Director of intergovernmental affairs and Senior civil servants of

the state headed by a Chairman of the Board (executive governor of

Ogun state), so however as not to exceed 15 persons or be less than

5 persons in total.

(d) Other members of the Board should be individuals with upright

personal characteristics and relevant core competences, preferably

with a record of tangible achievement, knowledge on board matters,


a sense of accountability, integrity, commitment to the task of good

governance and institution building, while also having an

entrepreneurial bias.

A Board should not be dominated by an individual. Responsibilities at

the top of the agency should be well defined.

(e) The position of the Chairman and Chief Executive Officer should

ideally be separated and held by different persons. The politically

elected governor as the Chairman and an appointed officer as the

Chief executive officer (need to create office of Director General

inter governmental affairs for this purpose). A combination of the

two positions in an individual represents an undue concentration of

power.

(f) In exceptional circumstances where the position of the Chairman

and Chief Executive Officer are combined in one individual, there

should be a strong non-executive independent director as Vice

Chairman of the Board.

(g) The Chairman's primary responsibility is to ensure effective

operation of the Board and should as far as possible maintain a

distance from the day-to-day operations of the liaison office, which

should be the primary responsibility of the Chief Executive Officer

(Director general intergovernmental affairs) and the management

team.

(h) To maintain effective control over the liaison office and

monitor the executive and management, the board should meet


regularly, and not less than once in a quarter with sufficient notices,

and have a formal schedule of matters specifically reserved for its

decision.

(i) The agency’s meetings should be conducted in such a manner as to

allow free flowing discussions. There should be enough time

allocated to indigenes to speak and to enable them contribute

effectively at the Annual General Meeting.

(j) The Board should have a formal schedule of matters specifically

reserved for it to ensure that the direction and control of the

liaison office is firmly in its hands.

(k) There should be an agreed procedure for directors in the

furtherance of their duties to take independent professional

training if necessary, and the liaison office should bear the expense.

(l) All directors should have access to the advice and services of the

board secretary, who is appointed by the board and who is

responsible to the board for ensuring that board procedures are

followed and that applicable rules and regulations are complied with.

The removal of the board secretary should be a matter for the

Board.

B. REPORTING & CONTROL

(a) There is an overriding need to promote transparency in financial

and non-financial reporting.


(b) It is the management's duty to present a balanced, reasonable

and transparent assessment of the liaison office’s position.

(c) The prime responsibility for good internal controls lies with the

Board.

(d) The Board should ensure that an objective and professional

relationship is maintained with the auditors. External Auditors

should not be involved in business relationships with the liaison

office.

(e) The Board should establish an audit committee of at least three

representatives from EFCC and also external auditors with written

terms of reference, which deal clearly with its authority and duties.

The external auditors should report on the effectiveness of the

Liaison office's system of internal control in the Annual report.

C. THE TAXPAYERS

(a) The liaison office acting through the Directors should ensure

that indigenes’ general rights are protected at all times.

(b) Indigenes have right to question the steps taken by the liaison

office on certain matters that may affect them directly and suggest

ways of improvement.

(c) Innovative ideas are welcomed from the citizens.

(d) Notices of end of year meeting should be sent at least 21 days

before the meeting with such details (including annual reports and
audited financial statements) and other information as will enable

them to know the level at which the liaison office have served them.

(e) Indigenes are to be represented by their various interest group

leaders.

(f) The Board should ensure that decisions reached at the general

meetings are implemented.

(g) The Board should ensure that all interest groups are treated

equally; and that no interest group should be given preferential

treatment or superior access to information or other materials on

the basis of the political parties they belong to or other yardsticks.

(h) Boards should use general meetings to communicate with the

indigenes through their representatives and encourage their

participation.

(i) The agency or the board should not discourage indigenes activism

or labour union. Organized interest groups should act and influence

the standard of corporate governance positively and thereby

optimize stakeholder value.

(j) All benefits accruing from the liaison office must be shared

among indigenes on equal basis and not by any other measure such as

majority or minority group, geographical size etc.

D1. COMPOSITION OF THE AUDIT COMMITTEE ART


(a) The liaison office board should welcome existence of Audit

Committee, with the key objective of raising standards of good

governance.

(b) The Audit Committees should not act as a barrier between the

auditors and the executive directors on the main board, or

encourage the main board to abdicate its responsibilities in

reviewing and approving the financial statements.

(c) The Audit Committee should not be under the influence of any

dominant personality on the main board, neither should they get in

the way and obstruct executive management.

Audit committees should be comprised of strong and independent

institution personnel of the EFCC.

(d) The Secretary of the Audit Committee should be the Liaison

office’s Secretary, Auditor or such other person nominated by the

Committee.

(e) Members of the Committee should understand basic financial

statements, and should be capable of making valuable contributions

to the Committee.

(f) Audit committee should review in details the Report of the

Internal Auditor.

(g) Members of the Committee should possess the following

qualities: (i) Integrity; (ii) Dedication; (iii) A thorough understanding

of government business, its products and services; (iv)


Inquisitiveness and dependable judgement and (v) Ability to offer

new or different perspectives and constructive suggestions.

The Committee should be given written terms of reference.

D2. TERMS OF REFERENCE FOR AN AUDIT COMMITTEE

The duties of the Audit Committee shall be: -

i To consider the appointment of the external auditor, set the audit

fee, and handle any questions of resignation or dismissal;

ii. To discuss with the external auditor (before the audit

commences) the nature and scope of the audit, and ensure co-

ordination where more than one audit firm is involved;

iii. To review the half-year and annual financial statements before

submission to the Board, focusing particularly on: -

a) Any change in accounting policies and practices

b) Major judgemental areas

c) Significant adjustments resulting from the audit

d) The going concern assumption

e) Compliance with accounting standards

f) Compliance with stock exchange and legal requirements.

iv. To discuss problems and reservations arising from the interim and

final audits, and any matters the auditor may wish to discuss (in the

absence of management where necessary);

v. To review the external auditor's management letter and

management's response;
vi. To review the Company's statement on internal control system

prior to endorsement by the Board;

vii. To also review the internal audit programme, ensure co-

ordination between the internal and external auditors, and ensure

that the internal audit function is adequately resourced and has

appropriate standing within the agency;

viii. To consider the major findings of internal investigations and

management’s response;

ix. To consider other topics, as defined by the board.

E. FINAL NOTE

The code of good governance as given in the provisions

above is still open for other inputs as may be deemed necessary.

4.4 CHALLENGES OF CORPORATE GOVERNANCE IN NIGERIA

• ESTABLISHING THE CODES

There is a popular saying that where there is no law, there is

no offence. For most institutions and professional bodies in Nigeria,

it is either that there is no code of conduct or the codes are not

being followed. Therefore, the first challenge in ensuring good

corporate governance must start from taking appropriate steps to

ensure that a code that will guide stakeholders is put in place.

• The Challenge of Enlightenment


There is the need for mass enlightenment on corporate

governance. In this part of the world, corporate governance is

relatively a new concept and even some organisations’ directors are

not fully aware of the onerous responsibilities of a director. Under

the principles of corporate governance, we say that the rights of

the shareholders or taxpayers as the case may be must be

protected. But the issue is how many of them know their rights?

In a situation where the taxpayers and other stakeholders do

not know their rights, how can they know when there is infringement

on those rights? From the foregoing, the need for appropriate

enlightenment of all stakeholders on corporate governance cannot be

overemphasized.

• Emplacement of an Appropriate Institutional Framework

One of the major challenges of corporate governance is the

emplacement of an appropriate institutional framework for the

realization of the objectives of good corporate governance.

In most corporations and business groups, there are no clearly

defined institutional channels through which any party that is

aggrieved could seek redress. It is common knowledge that those

who have suffered one form on their corporate governance rights do

not want to go to court. And in the absence of any institutional

arrangement to look into their case, the affected parties either live

with it or suffer deprivation in silence.


In addition to installing an institutional framework, there is

also the need to put in place a mechanism for the enforcement of

the decision of the institutions. Where punishments are meted out

by the institution, it has to be enforced. If such punishments or

rewards cannot be enforced, it will not serve the desires purpose.

The issue of education comes to play here. The curriculum of

our educational system needs to be modified to accommodate such

topics as the rights of taxpayers, corporate governance and related

issues. If people are educated on the principles of corporate

governance, it becomes easy for them to know when and where their

right are infringed upon.

• Value and Orientation

Corporate governance remains an ever-present challenge for

emerging market countries, such as Nigeria. In these countries,

businesses and regulators often contend with corruption and lack of

transparency. This is sequel to the misplaced value system of our

people, which encourages corruption. Corporate governance is all

about transparency and accountability. A situation where the value

system of the people is such that ill-gotten wealth is not questioned,

corporate governance is threatened. For instance, a person who is

made a Minister or Commissioner begins to receive congratulatory

messages immediately from people who are anticipating one form of

favour on the other from him or her.


Today many agencies still see the current drive for the

enthronement of good corporate governance as a burden imposed on

them by the regulatory authorities. There is a need for

corporations to view good corporate governance as an issue of their

enlightened self interest.

• Poverty Trap

The prevailing vicious circle of poverty militates against the

attainment of good corporate governance. Accountability and

transparency cannot be easily realized where majority of the masses

are wallowing in abject poverty. Such a high level of poverty makes

people to compromise their moral values and do many things that are

unethical and unprofessional.

• The Inefficiencies of our Governance Bureaucracy

The inefficiency of the government bureaucratic process is

obviously a course for concern in the enthronement of good

corporate governance in the country. A situation where the tax

agencies, the Inland Revenue Office and related institutions

encourage government agencies and parastatals to engage in

corruption is, to say the least, deplorable and must not be allowed to

continue.

An agency may have a good intention to pay the correct value

of tax or land rate and the agencies involved exaggerate figures and

even discourage the corporate body from paying to government.

Such a practice, which is rampant, is a big challenge to the


attainment of transparency and accountability within the ambit of

good corporate governance.


CHAPTER FIVE

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

5.1 Introduction

In this chapter, the data collected for this study was

presented, analysed and discussed.

5.2 Presentation of Data

The data of this study which is basically of the primary type

was gathered for a period of two weeks. A total of six hundred

(600) questionnaires were administered and returned under strict

supervision to cover selected stakeholders of Ogun state liaison

office, Abuja Nigeria. However, only four hundred and ninety eight

(498) questionnaires were retrieved, that is 83 percent of the total

administered. Hence intended sample size of six hundred (600)

respondents have been reduced to four hundred and ninety eight

(498) of the broad population size.

In this work, hypothesis were formed about the core

questions. It is from the responses of these questionnaires that

analysis and results were obtained. The responses from the

questionnaires were tabulated and analyzed in the following manner.


5.2.1 Table Representation of the Questionnaire Distribution

TABLE 1A: Sex Structure of the Respondents

Sex TOTAL NUMBER % TOTAL NUMBER


MALE 219 44%
FEMALE 279 56%
TOTAL 498 100%
SOURCE: field work by researcher 2009

Figure 1A: Sex Structure of the Respondents

TABLE 1B: Age structure of the respondents.

AGE Total Number % Total


20-29 60 12%
30-39 209 42%
40-49 179 36%
50 and above 50 10%

Total 498 100%


SOURCE: field work by researcher 2009
FIGURE 1B: Age structure of the respondents

TABLE 1C: Education Qualification

Qualification Total % Total


School Cert. 50 10%
OND/NCE 100 20%
HND/Degree 159 32%
Masters and above 189 38%
Total 498 100%
SOURCE: field work conducted by researcher 2009
FIGURE 1C: Education Qualification

TABLE 1D: Place of Work

Classification Total %Total


Ogun state liaison 60 12%

office Abuja
Presidency 33 7%

Ogun state govt. 51 10%

house, Abeokuta
Ogun state governor’s 60 12%

lodge, Abuja
Ogun state liaison 60 12%

office, Lagos
Ministry of works and 35 7%

housing
Ministry of 42 9%

information
Ministry of education 45 9%
Lagos state liaison 56 11%

office, Abuja
Kwara state liaison 56 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. Research Question One:

Do you think there is significant relationship between

stakeholders, corporate governance mechanisms and organizational

performance of Ogun state liaison office, Abuja, Nigeria?

TABLE 1: Relationship between stakeholders, CG and organizational

performance.

Option Number Percentage


Yes 428 86%
No 70 14%
Total 498 100%
SOURCE: field work conducted by researcher 2009
From the table and figure above in table 1 and figure 1

respectively, it is obvious and we can easily conclude that the

relationship between stakeholders corporate governance and

organisational performance is a very strong one. It can be likened to

a three legged chair that can not stand if the three are not present.

Since 86% of the respondents’ view is that the three go together,

we can then say that without stakeholders active involvement, we

cannot have sound corporate governance and without sound

corporate governance, organisations’ performance will be very low.

ii. Research Question Two:


Do you see improvement in corporate governance following the

introduction of a new corporate governance codes for Ogun state

liaison office, Abuja, Nigeria?

TABLE 2: New corporate governance codes and improvement of CG

Option

Number Percentage
Yes 483 97%
No 15 3%
Total 498 100%
SOURCE: field work by researcher 2009

We asked respondents whether they see improvement in

corporate governance following the introduction of the new

corporate governance codes for Ogun state liaison office, Abuja.

While 97 percent of the respondents feel there has been significant


improvement, only 3% percent of the respondents do not agree with

that fact.

iii. Research Question three:

Can the new CG codes be strengthened to inculcate good governance

practices?

TABLE 3: Strenghthening of CG to inculcate good governance

practices

Option Total Number % Total


Yes 443 89%
No 55 11%
Total 498 100%
SOURCE: field work by researcher 2009

This question evoked a mixed response from respondents. 89

percent noted that the new corporate governance codes for Ogun
state liaison office may require a few changes and 11 percent noted

that it is perfectly okay.

iv. Research Question four

Are penalty levels in Ogun state liaison office, Abuja to discipline

poor and unethical governance low?

TABLE 4: Penal Level On Poor CG in Banks

Responses Total number % Total


High 110 22%
Low 353 71%
Undecided 35 7%
Total 498 100%
SOURCE: field work conducted by researcher 2009

In comparison with developed countries that impose stringent

penal and criminal consequences for poor corporate governance,


penalty levels in Nigeria are considered to be inadequate to enforce

good governance.

71 percent of the respondents considered penalty levels to

discipline poor and unethical governance to be low. 7 percent of the

respondents were either undecided or did not know if the penalty

levels are low. The remaining 22% are of the opinion that it’s high.

v. Research Question Five:

Should corporate governance standards in Ogun state liaison office,

Abuja, Nigeria be enforced through regulations or should they be

principle-based?

TABLE 5: Prefered Method of Enforcing CG

Option Number Percentage


Principle-based 114 23%
Regulations 95 19%
Both 289 58%

Total 498 100%


SOURCE: field work conducted by researcher 2009
Ninety one percent of the respondents believe corporate

governance should be practiced through principle-based standards

and seventy seven percent are of the opinion that it should be

through regulations. Specifically, twenty three percent voted for

principle-based standards, nineteen percent for regulations and

fifty eight percent believe it should be practiced through a mix of

principle-based standards and moderate regulations.

vi. Research Question Six:

Are there constraints to corporate governance of Ogun state liaison

office, Abuja?

TABLE 6: Constraints to CG of banks in Nigeria.

Options Total % total


Yes 428 86%
No 70 14%
Total 498 100%
SOURCE: field work conducted by researcher 2009

86% of respondents that participated in the poll are of the

opinion that there is existence of constraints to corporate

governance in Ogun state liaison office, Abuja while the remaining

14% believe that all is well with the organisation as far as corporate

governance is concerned.

vii. Research Question Seven:

What among the following do you consider as the biggest risk to

corporate governance in Ogun state liaison office, Abuja, Nigeria?

TABLE 7: Risk to CG

Options Total % total


mgt override 175 35%

Inadequate independence 148 30%

Lack of respect for the 175 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 Total % total


No 59 12%
Yes 374 75%
Undecided 65 13%

Total 498 100%


SOURCE: field work conducted by researcher 2009
As noted earlier in chapter two “Corporate governance is about

owners and the managers operating as the trustees on behalf of

every shareholder–large or small.” Narayana (2008). Here, in our

case the taxpayers in place of shareholders. It’s observed that most

of the state’s liaison offices in Nigeria operate as if they are only

liable to the executive governor at the expense of the taxpayers

and other civil servants.

75 percent of the respondents believe that significant efforts

are implemented to address the concerns of the taxpayers in Ogun

state. 12 percent of the respondents say that taxpayers’ concerns

are not addressed while the remaining 13% were indecisive.

x. Research Question Ten:

Do you think other Committees of boards aside from audit

committee in Ogun state liaison office, Abuja, Nigeria have high

effectiveness in ensuring sound corporate performance?

TABLE 10: Other committees and sound corporate governance

Options Total % total


Yes 75 15%
No 359 72%
Undecided 64 13%
Total 498 100%
SOURCE: field work by researcher 2009

A giant proportion of our respondents are of the opinion that

audit committee compared to other committee of board is more

important in comparism. Some of them even wrote that there was no

need for other committees on the board.

72% are of the opinion that other committees do not have high

effectiveness on corporate governance, 15% however claims that

they are equally impotant while the remaining 13% were indecisive.

xi. Research Question eleven:

Do you think separation of management from ownership has

significant impact on promotion of corporate governance?


TABLE 11: Separation of management from ownership and CG

Options Total % total


Yes 453 91%
No 45 9%
Total 498 100%
SOURCE: field work conducted by researcher 2009

Ninety one percent of the respondents that participated in our

poll believe that if mangement is not separated from ownership,

organisations cannot perform optimally while only just nine percent

think differently.

xii. Research Question Twelve:

How do you rate the skill-sets of the existing audit committees of

Ogun state liaison office’s board?


TABLE 12: skill-sets of the existing audit committees of Ogun state

liaison office’s board

Options Total %Total


Highly 60 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 % total


Room for improvement 364 73%
Satisfactory 134 27%
Total 498 100%
SOURCE: field work conducted by researcher 2009
Seventy-three percent of the respondents believe that risk

management practices need to be improved while the remaining

twenty seven percent feel the practices is satisfactory.

xvii. Research Question Seventeen:

Rate the following factors as it relates to improvement of corporate

governance practices in Ogun state liaison office, Abuja, Nigeria.

a. improvement in financial and other disclosures

b. improvement in risk management and oversight processes

c. enhancing the powers of independent directors

d. separation of the position of chairman and CEO

e. strengthening taxpayers’ rights

Respondents were asked to rate certain factors that may

result in improvement of corporate governance practices in Ogun


state liaison office, Abuja. The importance of all identified factors

(refer to graph above) were rated almost equally by the

respondents.

In order of importance, improvement in financial and other

disclosures and improvement in risk management and oversight

processes received highest votes (24 percent each). These were

followed by enhancing the powers of independent directors (20

percent), separation of the position of chairman and CEO

(17percent) and strengthening taxpayers’ rights (15 percent),

respectively.

xviii. Research Question Eighteen:

Should ruling political party be significantly linked to the remarkable

performance of Ogun state liaison office, Abuja, Nigeria so far?

TABLE 18: Ruling party and corporate performance of Ogun

state liaison office, Abuja

Options Total % total


Yes 423 85%
No 20 4%
Undecided 55 11%

Total 498 100%


SOURCE: field work conducted by researcher 2009
As far as Ogun state liaison office is concerned, the ruling

party to a large extent is a contributory factor to her remarkable

recorded performance. 85 percent of the respondents think that

Ogun state liaison office’s performance can be significantly linked to

the ruling party in Ogun state.

4 percent of the respondents do not believe that the Ogun

state liaison office’s performance can be significantly linked to the

ruling party in Ogun state. 11 percent of the respondents are either

undecided or do not know if the Ogun state liaison office’s

performance can be significantly linked to the ruling party in Ogun

state or not.

xix. Research Question Nineteen:

Are integrity and ethical values given due importance by Ogun state

liaison office, Abuja, Nigeria?


TABLE 19: Integrity and ethical values

Options Total % total


Room for 209 42%

improvement
Yes 244 49%
No 45 9%
Total 498 100%
SOURCE: field work conducted by researcher 2009

Ogun state liaison office has been focusing on code of conduct

and whistle blower mechanism as a fundamental of good governance.

Respondents were asked if similar importance was given to integrity

and ethical values.

Majority of the respondents say that although Ogun state

liaison office gives similar importance to integrity and ethical values,

significant scope exists to enhance integrity and ethical values

within the organization and the eco-system.


Specifically, 42% believe that there is room for improvement,

49% think Ogun state liaison office, Abuja has perfected in the area

of integrity and ethical values. However, 9% were either indecisive

or not interested in responding to the question.

xx. Research Question Twenty:

Who should monitor effectiveness of corporate governance

practices at Ogun state liaison office, Abuja, Nigeria?

a. corporate governance specialist (eg SERVICOM)

b. investors

c. taxpayers

d. board of directors

e. Ogun state’s government

TABLE 20: Monitoring of corporate governance practices

Options Total %Total


corporate governance 234 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

stakeholders, corporate governance mechanisms and

organizational performance in Nigeria.

H1: There is significant relationship between stakeholders,

corporate governance mechanisms and organizational

performance in Nigeria.

(ii) H0: Stakeholders do not significantly enhance corporate

governance in Nigeria.

H1: Stakeholders significantly enhance corporate

governance in Nigeria.

5.6 Test Of Hypothesis/Discussion Of Results

The chi – square would be employed to test the two established

hypothesis. The two major questions would be used from the

questionnaire. The principles guiding this method is to react to the

Null hypothesis (HO) if the computed chi – square (Xc2) is greater


than the critical value (X2 0.05) from the table at 5% level of

significant. Otherwise, H0 will be accepted and H1 will be rejected.

5.6.1 Testing Of Hypothesis One

H0: There is no significant relationship between stakeholders,

corporate governance mechanisms and organizational performance in

the Nigeria banking industry.

H1: There is significant relationship between Stakeholders,

corporate governance mechanisms and organizational performance in

the Nigeria banking industry.

In testing hypothesis one we use the responses given in table 1

above as restated below:

Do you think there is significant relationship between

stakeholders, corporate governance mechanisms and organizational

performance in Ogun state liaison office, Abuja, Nigeria?

TABLE 1: Relationship between stakeholders, CG and organizational

performance.

Option Number Percentage


Yes 428 86%
No 70 14%
Total 498 100%
SOURCE: field work conducted by researcher 2009

The information or data presented in table 1 (through field

survey data) can be presented in a contingency table for further

analysis thus;

Table 5.6.1a: Contingency table 1

Qualification Yes No Row Total


School 42 20 62

Certificate
NCE/OND 95 9 104
HND/Degree 120 26 146
Masters & 171 15 186

above
Column Total 428 70 498

Table 5.6.1b: Contingency table 2

Qualification Fo Fe Fo – Fe (Fo – Fe)2 (Fo -

Fe)2/Fe
School 42 53.2851 -11.2851 127.3534 2.39

Certificate
NCE/OND 95 89.3815 5.6149 31.5271 0.35
HND/Degree 120 124.5984 -4.5984 21.1453 0.17
Masters & 171 159.8554 11.1446 124.2021 0.78

above
School 20 8.7149 11.2851 127.3534 14.61

Certificate
NCE/OND 9 14.6185 -5.6149 31.5271 2.16
HND/Degree 26 20.5221 4.5984 21.1453 1.03
Masters & 15 26.1446 -11.1446 124.2021 4.75

above
Total 498 498 0 26.24

The process of estimation of X2c was followed as it was stated

in chapter three of this work.

X2c = ∑(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 Yes No Row Total


School 36 6 42

Certificate
NCE/OND 82 16 98
HND/Degree 132 28 160
Masters & 188 10 198

above
Column Total 438 60 498
The chi-square value is computed using the same formula

as stated above to arrived at the expected frequency values in

table 8

Table 8: Contingency table 2

Qualification Fo Fe Fo – Fe (Fo – Fe)2 (Fo -

Fe)2/Fe
School 36 36.9398 -0.9398 0.8832 0.0239

Certificate
NCE/OND 82 86.1928 -4.1928 17.5796 0.2040
HND/Degree 132 140.7229 -8.7229 76.0890 0.5401
Masters & 188 174.1446 13.8554 191.9721 1.1023

above
School 6 5.0602 0.9398 0.8832 0.1745

Certificate
NCE/OND 16 11.8072 4.1928 17.5796 1.4889
HND/Degree 28 19.2771 8.7229 76.0890 3.9471
Masters & 10 23.8554 -13.8554 191.9721 8.0473

above
Total 498 498 0 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 in which the organizations operate is gaining

importance.

Our poll highlighted that risk management is the top oversight

priority for audit committee members. The survey highlighted that

audit committee members felt more confident in their "traditional"

areas of oversight—accounting judgments and estimates, and

internal controls.
A problem known is a problem solved. Having identified various

issues relating to corporate governance practices and likely problems

therein, solutions were discovered from the various literatures and

experiences of the developed nations including developmental

policies implemented to curb the problems and standardise it over

there. This however, did not negate or render the inputs of the

researcher irrelevant.

CHAPTER SIX

SUMMARY, CONCLUSION AND RECOMMENDATIONS

6.1 SUMMARY

This study was undertaken to analyze the state of corporate

governance in Ogun state liaison office unfolding the most current

events in the public sector. A general background of the topic and

statement of problem were stated to guide the research.

The review of literature highlighted the means through which

less standard corporate governance practices can be eliminated and

also diffuse signals of improvement lever for all users of this


research ranging from regulatory authorities to the Ogun state

liaison office as well as her numerous stakeholders and other

relevant users. These were supported by the agency theory of

corporate governance which advocates the strong involvement of all

stakeholders whether major or minor. Although, any personnel can

violate the provisions of corporate governance but the highest

degree of violation lies in the senior or executive personnel and that

explains the reason why most of the literature centered on the

board of directors, committee of boards and other senior high rank

officers.

In order to empirically diagnose the true state of corporate

governance in Ogun state liaison office, the researcher made use of

questionnaires which were carefully administered and rigorously

analyzed. The results of the analysis gave the true nature, level and

standards of corporate governance practices in Ogun state liaison

office with improvement levers expatiated in the policy

recommendations section of this write-up.


6.2 CONCLUSION

This research study has so far examined the issues, problems

and prospect in corporate governance practices of Ogun state liaison

office, Abuja, Nigeria with specific focus on its impact on her

performance. Special attention was particularly paid to the issues

that concern transparency, accountability and ethical values. There

is no doubt that good corporate governance principles have high level

impact on corporate performance of Ogun state liaison office,

Abuja, Nigeria and world over.

Empirical data drawn from sentinel Survey conducted by the

researcher indicates that (1) there is significant relationship

between Stakeholders, corporate governance mechanisms and

organizational performance in Ogun state liaison office, Abuja,

Nigeria and (2) Stakeholders significantly enhance corporate

governance in the same.

Furthermore, it is apparent from the various literatures that

good corporate governance is of utmost importance and necessarily

defined in every organisation. The effect of its absence is usually

very suicidal as the resultant effects include high degree of in-

appropriations leading to fraud, loss records and more deadly, “fold

ups.”
We discovered that good corporate governance helps an

organization achieve several objectives and some of the more

important ones include:

• Developing appropriate strategies that result in the achievement

of stakeholder objectives.

• Attracting, motivating and retaining talent.

• Creating a secured and prosperous operating environment and

improving operational performance.

• Managing and mitigating risk and protecting and enhancing the

organization’s reputation.

In final analysis, the existing codes of corporate governance

for Ogun state liaison office, Abuja, Nigeria (though, there are

loopholes to be filled) do cover the fundamentals of effective

corporate governance and this compares favorably with most other

organisation of developed sectors in Nigeria as far as the adequacy

of corporate governance regulations are concerned.

Improved corporate governance, however, does not solely rest

on control through increased regulations. What is required is a

principle-based approach developed on fundamentals, preventing

moral fragility that is enforced through pragmatic levels of

regulations.

“Typically a ‘principle-based approach’ means circulation of a

cogent set of principles and preferred practices which companies


are asked to adopt as they see most appropriate to their particular

circumstance.” Jane Diplock.

6.3 RECOMMENDATIONS

Based on the findings derived so far, the following

recommendations emerge from this study which is discussed in

sectional style from particular to general;

INDEPENDENT DIRECTORS

From a governance standpoint, boards should address the

following key areas specifically concerning independent directors:

• Adoption of a formal and transparent process for director

appointments. The conflict of interest involved in managements

appointing independent directors should be tackled through

nomination committees (comprising independent directors) for

identification of directorial candidates.

• Alignment of needs of the company to the skills required in the

boardroom.

• Segregation of the roles of CEO and chairman of the board of

directors. The concept of CEO and board chair separation is well

accepted in Europe and is being steadily adopted in the US. The

chairman of the board should be an independent director who plays a

key role in setting the priorities of the board


• Planning for CEO and board succession in different scenarios

• Formal evaluation of the CEO and senior management team’s

performance at least annually. CEO performance evaluation process

should be introduced when the company is performing well.

Evaluation of CEO performance sends a clear message that the CEO

is accountable to the board and introduces a healthy balance of

power.

• Peer evaluation of independent directors should be adopted. This

would enable independent directors to openly discuss amongst their

group how they are performing and take tangible steps to improve

their individual and collective functioning.

• Independent directors should take steps to make themselves

aware of their rights, responsibilities and liabilities.

STAKEHOLDERS

In the context of meeting expectations of stakeholders

beyond the minority shareholders (eg. employees, customers,

vendors etc.) a number of initiatives need to be embraced such as:

• Openness and transparency in dialogue with all stakeholders and

taxpayers.

• Objective and transparent whistle blower policies that are

available to key stakeholders (employees, customers and vendors)

and provide adequate safeguards against victimization of whistle

blowers.
AUDIT COMMITTEE

The Ogun state liaison office and other organizations in

Nigeria should address the challenges that their audit committees

face and focus on enhancing skills in some of the most important

areas listed below:

• Better understanding of risk, strategy and business models

• Understanding implications of the external environment on

financial forecasts and performance

• Comprehend complex accounting policies and practices – how their

application impacts results

• Monitoring fraud risk especially relating to senior management

override of internal controls

• Monitoring “tone at the top” in difficult times

• Effective oversight of internal and external auditors

• Ensuring that the board’s strategic direction is in the best interest

of all including minority shareholders

• Evaluation of audit committee and its members based on an

established framework for its functioning.

• Independent directors need to spend significant time in

understanding the various business operations, organization’s control

environment, culture and the impact of these elements on the

financial numbers
• The conduct of board meetings needs introspection in terms of

frequency and duration, information needs, balance between

presentation and discussion, interaction outside the boardroom and

most importantly, consultation when in doubt

• Board chairs should actively monitor how individual directors are

proactively identifying and fulfilling their knowledge and competency

needs.

• Independent directors need to conduct various exclusive sessions

on a one-on-one basis with management, internal auditors and

external auditors

• As part of its annual evaluation process, the board should review

the quality of information it receives and consider how it can be

improved.

Boards

• Boards should demand and obtain a holistic view of risks both on

and off the balance sheet, their ownership and how they are

mitigated.

• Diversity of skills on the board is fundamental to effective risk

management.

• Boards should have a clear understanding with senior management

regarding their risk appetite in various areas and help ensure that
these are articulated and considered in design of controls, policies

and procedures.

• Boards should consider the risks inherent in strategic choices and

whether these are acceptable.

• Evaluate evolving risks – what impact changes to strategy have on

the suite of operational, financial and compliance risks and whether

this is consistent with the company’s risk appetite?

Senior Management

• The standing of risk management in the organization should be

elevated and should figure predominantly in business decision

making.

 Risk management should not be viewed as a support function.

• Risk professionals should have appropriate authority in the

organization and should have the powers to curb risk taking by

business units.

• Risk management must be defined as being the role of senior

management, usually the chief executive. The chief executive, as the

"owner" of risk in the organization, must be seen to elevate the

authority of risk management, and his or her focus on risk must

filter through the organization.

• Senior management should set aside time to discuss potential

economic scenarios and consider the impact of these outcomes on


the business. Senior management should seek a range of views and

perspectives in order to test its assumptions.

• Executive management should have complete visibility of the

processes to identify risks, their severity, potential impact and

procedures to address them. The board through its committees

should be periodically monitoring the results.

INTEGRITY AND ETHICAL VALUES

Some of the improvement levers on integrity and ethical values

include:

• Striving to ensure that the code of conduct is understood and

adhered to by all members of the organization

• The performance management system should recognize and reward

ethical behavior

• Extensive background checks should be performed on the senior

employees joining the organization

• Companies should screen third parties (customers, vendors, JV

partners) with whom it does business for their commitment and

adherence to ethical practices.

• The scope of whistle blower policies should be extended to the

wider stakeholder group.


• Chairman of the audit committee should have direct oversight of

whistle blower incidents.

• Investors, lenders, analysts should pro-actively question/challenge

management on areas pertaining to corporate governance comprising

protecting minority interests, management compensation,

government dealings and risk management practices, related party

transactions, fraud risk management and CSR.

SOME OF THE ASPECTS THAT MAY REQUIRE REGULATORY

CHANGE:

• Board and audit committee evaluations should be mandatory.

• Current limits on independent directorships need to be revisited.

• The CEO and board chair roles should be segregated.

• Stricter penalties for non-compliance.

• Transparent CEO evaluation process including disclosure of

performance criteria.

• Role of nomination committees to drive independent director

selection process.

• Codes of conduct and whistle blower policies are important, but

more important are how they are communicated and practiced. It is

vital for board members and senior management to lead by example

• The concept of having independent directors is a good one in

theory but more important is the process underlying selection of


independent directors – is this process rigorous, transparent and

objective and is it aligned to the company’s needs?

• It is important to focus on not just earnings but on the

sustainability of business models. Focus on not just “How much?” but

on “How?”, “At what cost?” and “At whose expense?”

• Rating agencies need to develop criteria that focus on substance

rather than the form of governance.

• Compensation of executive directors should flow from an objective

performance evaluation process conducted by the board.

• Greater transparency and disclosure of executive performance

criteria are required which should include financial and non-financial

measures.

• Regulators should send clear signals that they shall be proactive in

imposing substantial penalties for non-compliance, so that compliance

is strictly adhered to.

 There is a need for establishing a framework around the

functioning of committees of boards so that their

effectiveness is demonstrated.

As stated earlier that our recommendations are discussed

from particular to general, below are some of the general policy

recommendations.

1. Need for capacity building and skills acquisition


 The regulatory agencies and various organizations should focus

on capacity building, training and retraining. The aim is not

just to get big. The economics of large scale should reach the

entire economy.

 Organizations require good staff to be able to cope with the

challenges of a burgeoning market.

2. Regular retreat for board members and top management

staff.

 The Board members and top management staff should go for

retreat regularly (once every two years), to review, re-

design appraise and set out broad policies and strategies. (a

board out of sync with the times will be grossly ineffective).

3. Organizations skills / insight.

 Each organization should devise its own programme to expose

board and top management to requisite insight / skills / know

how, in line with the dynamics of the markets.

4. Taxpayers, particularly investors have their own role to play.

5. Auditors have to be independent in every form, to be able to

work effectively.
6. Business journalists must themselves be trained so they can

sensitize the investing public. There is need for business

journalist to exercise caution in the dissemination of

information on organizations.

Finally in the words of alan greenspan (2002) “rules cannot

substitute for character. In virtually all transactions, whether with

customers or with colleagues, we rely on the words of those with

whom we do business.”

I believe strongly that good corporate governance hinges

critically on a value system that is based on high ethical standards.

With the recent event in Ogun state liaison office now exported

gradually to other liaison offices and the entire public sector,

Nigeria may yet be moving in the desired direction of good

corporate governance.
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APPENDIX I

RESEARCH QUESTIONNAIRE

Dear sir/ madam,

I am a postgraduate student of the department of corporate

governance, faculty of business law, leeds metropolitan university,

bronte hall, united kingdom who is seeking your cooperation in

writing this research work. The work aims at conducting a research

on the topic STAKEHOLDERS AND SUSTAINABLE CORPORATE

GOVERNANCE with Ogun state liaison office, Abuja, Nigeria as a

case study.

Your humble consent is strongly solicited to make this work a

success.
Your responses will be treated confidentially for academic

purpose.

Thanks.

Yours faithfully,

_____________________

OTEGBOLA, O. A.

(ID NUMBER: c7069562)

SECTION ONE

1. Your sex please.

a. Male ()

b. Female ()

2. Please tick the box where your age bracket is relevant.

a. 20-29 ()

b. 30-39 ()

c. 40-49 ()

d. 50 and above ()

3. Educational qualification

a. School cert. ()

b. OND/NCE ()
c. HND/degree ()

d. M.Sc., M.BA etc ()

4. Where among the following do you work?

a. Ogun state liaison office, Abuja ()

b. Presidency ()

c. Ogun state Government house, Abeokuta ()

d. Ogun state governor’s lodge, Abuja ()

e. Ogun state liaison office, Lagos ()

f. Ministry of Works and housing ()

g. Ministry of Information ()

h. Ministry of Education ()

i. Lagos state liaison office, Abuja ()

j. Kwara state liaison office, Abuja ()

5. Please tick the appropriate box relevant to your year of

experience so far on current employment.

a. 5-10 ()

b. 11-20 ()

c. 21-30 ()

d. 31 and above ()
SECTION TWO

1. Do you think there is significant relationship between

stakeholders, corporate governance mechanisms and organizational

performance of Ogun state liaison office, Abuja, Nigeria?

Yes ( ) No ( )

2. Do you see improvement in corporate governance following the

introduction of a new corporate governance codes for Ogun state

liaison office, Abuja, Nigeria? Yes ( ) No ( )

3. Can the new CG codes be strengthened to inculcate good

governance practices? Yes ( ) No ( )

4. Are penalty levels in Ogun state liaison office, Abuja to

discipline poor and unethical governance low? Yes ( ) No ( )

5. Should corporate governance standards in Ogun state liaison

office, Abuja, Nigeria be enforced through regulations or should

they be principle-based?

a. Principle based ( )

b. Regulations ()

c. Both ()

6. Are there constraints to corporate governance of Ogun state

liaison office, Abuja? Yes ( ) No ( )


7. What among the following do you consider as the biggest risk

to corporate governance in Ogun state liaison office, Abuja, Nigeria?

a. management override ()

b. Inadequate independence ()

c. lack of respect for the taxpayers community ()

8. Do you think stakeholders significantly enhance corporate

governance in Ogun state liaison office, Abuja, Nigeria? Yes ( ) No ( )

9. Are concerns of taxpayers adequately addressed by Ogun

state liaison office, Abuja, Nigeria?

10. Do you think other Committees of boards aside from audit

committee in Ogun state liaison office, Abuja, Nigeria have high

effectiveness in ensuring sound corporate performance?

11. Do you think separation of management from ownership has

significant impact on promotion of corporate governance?

Yes ( ) No ( )

12. How do you rate the skill-sets of the existing audit committees

of Ogun state liaison office’s board?

a. Highly Professional ()

b. Satisfactory ()
C. Low ()

13. Is there any significant relationship between professionalism

and organizational performance in Ogun state liaison office, Abuja,

Nigeria?

Yes ( ) No ( )

14. Do you believe that sustainability is an important canon of

corporate governance? Yes ( ) No ( )

15. Should boards be responsible for sustainability?

a. fully responsible ()

b. partly responsible ()

c. not responsible ()

16. How would you rate the current standards of risk management

practices (e.g e-payment) in Ogun state liaison office, Abuja,

Nigeria?

17. Rate the following factors as it relates to improvement of

corporate governance practices in Ogun state liaison office, Abuja,

Nigeria.

a. improvement in financial and other disclosures

b. improvement in risk management and oversight processes

c. enhancing the powers of independent directors


d. separation of the position of chairman and CEO

e. strengthening taxpayers’ rights

18. Should ruling political party be significantly linked to the

remarkable performance of Ogun state liaison office, Abuja,

Nigeria so far?

19. Are integrity and ethical values given due importance by Ogun

state liaison office, Abuja, Nigeria?

20. Who should monitor effectiveness of corporate governance

practices at Ogun state liaison office, Abuja, Nigeria?

a. corporate governance specialist (eg SERVICOM)

b. investors

c. taxpayers

d. board of directors

e. Ogun state’s government