CORPORATE GOVERNANCE AND ITS IMPACT ON THE MANAGEMENT OF AN ORGANIZATION
1.1 Background of the Research
In today’s global economy, the success of a nation’s economy rests on the competitiveness, transparency, and governance structure of the organizations that operate within its borders, as they are the entities that produce economic value (ICAN, 2009). Indeed, standard-setters from all over the world have been concerned about the need for trust and openness in the administration of corporate organizations. Clearly, this necessity has stimulated a resurgence of interest in the corporate governance procedures of contemporary firms, especially in regard to accountability and economic performance (ibid).
The aforementioned argument cannot be isolated from Nwachukwu’s (2007) assertion that excellent corporate governance has a favorable relationship with national economic growth and development. Corporate governance strengthens the level of confidence that company owners have in their managers. In the absence of corporate governance mechanisms, directors may construct a false picture of their company’s financial and economic success to entice investors. The fall of the energy company ENRON in 2001, which filed for bankruptcy after altering its accounts, prompted alarm in the U.S. regarding the use of such accounts (Demaki, 2011). WORLDCOM, GLOBAL CROSSING, and RANK XEROX are further U.S. corporations with comparable issues. The rising prevalence of corporate fraud including overstated and ephemeral reporting has refocused global attention on the need for strong corporate governance. CBN (2006) noted that despite the importance of effective corporate governance to national economic development and progress, corporate governance was still in its infancy, with only 40% of publicly traded enterprises, including banks, having acknowledged corporate governance in place. The separation of ownership and management in commercial organizations generates divergent interests among the stakeholders involved. Divergent interests between the company’s management and its owners have eroded investor confidence in the Board. Therefore, investors are interested in the Board of directors’ level of accountability. The uproar of investors and other stakeholders in response to management’s mishandling and poor financial disclosures has necessitated the implementation of solid corporate governance practices.
Corporate governance is all about operating a company in a manner that ensures its owners and other stakeholders receive a fair return on their investment. It is the process of a virtuous circle that connects the shareholders to the board, the management, the staff, the customer, and the larger community (Clarkson and Deck, 1997). They recognized that a corporation is a distinct legal entity that no one owns. Therefore, it can be inferred that stockholders do not own a corporation (Ofiafoh and Imoisili, 2010). Numerous owners with no management responsibilities and managers with no ownership stake define a typical business. Shareholders or equity owners are many, and the ordinary shareholder controls a minute amount of the company’s shares. This causes shareholders to have little interest in supervising managers, who are left to their own devices and may pursue interests that differ from those of equity owners. Corporate governance has found a solution to this issue, and a number of noteworthy studies have been done towards its resolution. Magdi and Nedareh (2002), for example, emphasize the need for organization managers to act in the best interests of the firm, its core stakeholders, and especially minority shareholders or investors, by ensuring that only actions that facilitate the delivery of optimal returns and other positive outcomes are taken at all times.
1.2 Description of the Problem
The failure connected with corporate governance has taken on multiple dimensions with repercussions, particularly for profit-driven business entities such as banks, and has reached worldwide significance. Individuals and organizations have an inexhaustible capacity to behave unethically. Unfortunately, this potential is realized too frequently. Unfortunately, unethical business tactics are alarmingly prevalent today. It is simple to characterize practices such as stealing customers’ money, charging excessive interest on loans and withdrawals, etc. Nonetheless, these and numerous other unethical activities are prevalent in numerous firms. The Nigerian economy has numerous obstacles. As an example, Nigerian businesspeople face a variety of ethical challenges. Corruption is a significant obstacle. Despite the actions conducted by volunteers (banks) in the areas surrounding their operations, there appears to be little or no evidence of Corporate Social Responsibility (CSR) initiatives aimed at creating employment and income for community residents. These measures may enhance the quality of life in the local community. It does not appear that any CSR initiatives are centered on increasing the value chain or social actions that could increase corporate competitiveness. Getting people to perform their best despite difficult conditions appears to be one of the most persistent and difficult difficulties managers face. This study focuses on the relationship between corporate governance and organizational performance in the Nigerian banking sector.
1.3 Objective of the Research
This study’s primary purpose is to investigate the effect of corporate governance on organizational performance in the Nigerian banking sector. Specifically, the research aims to:
Determine the impact of corporate governance practices on banking sector firm performance.
Assess the influence of corporate governance on the management of the Nigerian banking system.
3. Examine the difficulties of corporate governance in Nigeria
1.4 Investigative Question
What impact do corporate governance practices have on the performance of firms in the banking sector?
What impact does corporate governance have on the management of the Nigerian banking sector?
What are the obstacles to effective corporate governance in Nigeria?
1.5 Scientific Hypothesis
Ho: corporate governance has no substantial effect on the administration of the Nigerian banking system.
Hello: corporate governance has a huge impact on the operation of the Nigerian banking sector.
1.6 Importance of the Research
This study offers substantial practical value since its findings support the application of corporate governance policy formulations by suitable regulatory authorities such as the government, stock market, Nigeria security and Exchange commission, and financial organization. As a result, the study will be significant for these firms and regulatory bodies, particularly if they use the findings of this research to improve corporate governance policy formation within their organization. This study is significant because it provides new insights into the governance and performance of private sector organizations.
In addition to adding to the current body of information, the study will also provide an unique contribution to the field of corporate governance research. The report will also serve as a resource for future studies on corporate governance. As such, it will serve as a guide for students who wish to conduct comparable research.
1.7 Scope of the Research
Because the researcher was unable to cover the entire country of Nigeria. The researcher limited the investigation to a single LGA in Ogun state. This research on corporate governance in Nigeria will be conducted by GT bank in Ado Odo ota, Ogun state.
1.8 Limitations of the Research
Throughout the course of studies, financing the general research effort will be a struggle. However, it is anticipated that these limitations will be overcome by maximizing the use of available resources and devoting additional time to research. Therefore, it is strongly expected that despite these constraints, their impact on this research report will be small, allowing the study to achieve its purpose and significance.
1.9 Explanation of terms
Corporate Governance: Corporate governance is the system of rules, policies, and procedures used to direct and regulate a company.
Impact: a significant effect or influence on something or someone
Management is the process of controlling or dealing with objects or people.
Organization: a group of individuals organized for a certain purpose, such as a corporation or government agency.
CORPORATE GOVERNANCE AND ITS IMPACT ON THE MANAGEMENT OF AN ORGANIZATION