DISTANCE LEARNING CENTRE

AHMADU BELLO UNIVERSITY

ZARIA, NIGERIA

MASTERS IN BUSINESS ADMINISTRATION

GROUP ASSIGNMENT ON BUAD 836 (BUSINESS POLICY AND STRATEGY)
E – TUTOR
DR. UMAR SALISU
PRESENTED BY
TEAM H

S/ NAMES REG. NOS PHONE No.

N
1. Tijani Saheed Oladele (Captain) ABUMBA2017014558 08034156770
2 Akinyosoye Omolade Oluwaseyi ABUMBA2017008932 07066602519
3 Liman Aisha ABUMBA2017010045 08033898336
4 Moses Sule Olayinka P18DLBA80054 08181044592
5 Nebeolisa Anastacia Chinelo ABUMBA2017013927 08032091673
6 Josephine Nneka Orji ABUMBA2017010826 08066526303
7 Obi Onyinye Gift ABUMBA2017013805 08130850885
8 Onuogu Ego Amina ABUMBA2017011030 08022227503
9 Okoro Chidiebere ABUMBA02015007563 08182355677
10 Enogie Stella Williams ABUMBA2017011063 07033747104

Question:

Corporate governance is the set of mechanisms used to manage the relationship among stakeholders
that is used to determine and control the strategic direction and performance of organizations. Explain
any five governance mechanism.

BUAD 836 ASSIGNMENT TEAM H Page 1

Suggested Solution:

Introduction

In line with the recent released by The Financial Reporting Council of Nigeria (FRCN) the Nigerian
Code of Corporate Governance ('the Code”) on January 15, 2019. Corporate Governance refers to the
way a corporation is governed. It is the technique by which companies are directed and managed. It
means carrying the business as per the stakeholders’ desires. It is actually conducted by the board of
Directors and the concerned committees for the company’s stakeholder’s benefit. It is all about
balancing individual and societal goals, as well as, economic and social goals.

Corporate Governance is the interaction between various participants (shareholders, board of

directors, and company’s management) in shaping corporation’s performance and the way it is
proceeding towards. The relationship between the owners and the managers in an organization must
be healthy and there should be no conflict between the two. The owners must see that individual’s
actual performance is according to the standard performance. These dimensions of corporate
governance should not be overlooked.

Corporate Governance deals with the manner the providers of finance guarantee themselves of getting
a fair return on their investment. Corporate Governance clearly distinguishes between the owners and
the managers. The managers are the deciding authority. In modern corporations, the functions/ tasks
of owners and managers should be clearly defined, rather, harmonizing.

Corporate Governance deals with determining ways to take effective strategic decisions. It gives
ultimate authority and complete responsibility to the Board of Directors. In today’s market- oriented
economy, the need for corporate governance arises. Also, efficiency as well as globalization are
significant factors urging corporate governance. Corporate Governance is essential to develop added
value to the stakeholders.

However, the following are the Mechanism of Corporate Governance;

1. Board of Directors
A board of directors protects the interests of a company’s shareholders. The shareholders use
the board to bridge the gap between them and company owners, directors and managers. The
board is often responsible for reviewing company management and removing individuals who

BUAD 836 ASSIGNMENT TEAM H Page 2

 don't improve the company’s overall financial performance. Shareholders often elect
individual board members at the corporation’s annual shareholder meeting or conference.
Large private organizations may use a board of directors, but their influence in the absence of
shareholders may diminish.

2. Statutory Audits
Audits are an independent review of a company’s business and financial operations. These
corporate governance mechanisms ensure that businesses or organizations follow national
accounting standards, regulations or other external guidelines. Shareholders, investors, banks
and the general public rely on this information to provide an objective assessment of an
organization. Audits also can improve an organization’s standing in the business environment.
Other companies may be more willing to work with a company that has a strong track record
of operations.

3. Balance of Power
Balancing power in an organization ensures that no one individual has the ability to
overextend resources. Segregating duties between board members, directors, managers and
other individuals ensures that each individual’s responsibility is well within reason for the
organization. Corporate governance also can separate the number of functions that one
division or department completes within an organization. Creating well-defined roles also
keep the organization flexible, ensuring that operational changes or new hires can be made
without interrupting current operations.

4. Disclosure and transparency

Organizations should clarify and make publicly known the roles and responsibilities of board
and management to provide shareholders with a level of accountability. They should also
implement procedures to independently verify and safeguard the integrity of the company's
financial reporting. Disclosure of material matters concerning the organization should be
timely and balanced to ensure that all investors have access to clear, factual information.
Disclosure and transparency questions used in this paper include the following elements:
(a) Company objectives;

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 (b) The financial and operating results;
(c)Major share ownership and voting rights;
(d) Board Members and senior management structure;
(e) Incentive structures (e.g. remuneration policies);
(f) Code of business conduct and/or ethics code;
(g) Policies relating to conflicts of interest & related party transactions;
(h) Material foreseeable risk factors; and
(i) Governance structures and policies.

5. Management Compensation
Management Compensation is the salary, bonuses, and long-term incentives to align
managers’ interests with shareholders’ interests. It may be in the form of cash or non-cash
payments such as shares and share options, superannuation or other benefits. Managerial
Compensation questions used in this paper includes the following elements:
(a) Managerial Ownership; and
(b) Performance-based remuneration and their effect of corporate performance.

Conclusions

Based on the above information and explanations provided on corporate governance. It is obvious
that, corporate governance serves to create value in the firm. Corporate governance mechanisms have
been devised to facilitate the control of management and groups of power in the firm and facilitate the
achievement of maximization of firm value. However, these corporate governance mechanisms are
far from perfect. Their efficiency is limited by tradeoffs between control of the firm and protection of
minority shareholders. Moreover, institutional differences in the broader corporate governance system
affect the relationship between the shareholder, the board of directors and managers. The two main
systems of corporate governance, the AngloSaxon system of market control, and the Continental
European system of large-shareholder control, have developed different ways to reduce the
limitations; that is, active institutional investors in the market control system and codes of good
governance in the large shareholder control system. However, an analysis of the effectiveness of the
Continental European system in dealing with the entrenchment of managers shows that the large
shareholder control system is limited in its ability to control core shareholders and managerial
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defences.

REFERENCES

1. Aguilera, R. and Cuervo-Cazurra, A. (2000) Codes of Good Governance Worldwide.

Working Paper no.00-105. Illinois: CIBER, University of Illinois at Urbana Champaign.
2. Juneja, P. (n.d.). Corporate governance-definition,scope and benefits. Retrieved April 10,
2020, from https://www.managementstudyguide.com/corporate-governance.htm
3. Jerab, Daoud Abdellatef, The Effect of Internal Corporate Governance Mechanisms on
Corporate Performance (May 19, 2011). Available at
SSRN: https://ssrn.com/abstract=1846628 or http://dx.doi.org/10.2139/ssrn.1846628
4. Barclay, M. J. and Holderness, C. G. (1989) Private Benefits from Control of Public
Corporations, Journal of Financial Economics, 25, 371–395.
5. Barclay, M. J., Holderness, C. G. and Pontiff, J.(1993) Private Benefits from Block
Ownership and Discounts on Closed-End Funds, Journal of
6. https://bizfluent.com/about-6630366-purpose-corporate-governance-.html
7. https://en.wikipedia.org/wiki/Corporate_governance

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