THE SIGNIFICANCE OF CORPORATE GOVERNANCE IN A

GLOBALISED ECONOMY

PRESENTED

BY

SCOTT ODIGIE

TO

COLLEGE OF SOCIAL AND

MANAGEMENT SCIENCES

STUDENTS WEEK

OF

ACHIEVERS UNIVERSITY, OWO

ON

27TH JUNE, 2012

OUTLINE

1. Definition: Corporate Governance2. Corporate governance as an integral

constituent of nature.3. Overview4. Principles of corporate governance5. Global economic significance of corporate

governance6. Conclusion

DEFINITION: Corporate Governance

Corporate governance is a term that refers broadly to the rules, processes or laws by which businesses are operated, regulated and controlled. The term can refer to internal factors defined by the officers, stockholders or constitution of a corporation, as well as to external factors such as consumer groups, clients and government regulations.

It could also be 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.

CORPORATE GOVERNANCE AS AN

INTEGRAL CONSTITUENT OF CREATION

Corporate governance is an indispensable integral constituent of creation for man’s success in all forms of endeavor. Lets take a look at some illustrations:

Human physiology: why do we think that there are anomalies, disorders and various medical symptoms in the human body? It is as a result certain breach in the principles for the effective and efficient function of the body system.

Personal success: why do we think some students are more productive than some? Most of it is due to the absence of certain principles of success that have been ignored. Why do we also think some personnel are more productive than some? More of it is due to lack of adherence to the laws of success.

Marital success: every marriage relationship that actually emerges a success, operates on corporate governance.

Economic classification: this classification is based on Gross Domestic Product. That is, the total value of goods and services produced in a country over a period of time. I have discovered that the most corrupt nations of the world are found in third world and in the sequence respectively. Third-world nations are found in Africa, Asia and the Caribbean. Examples of second world nations are: Malaysia, Indonesia etc. examples of first-world nations are: United States of America, United Kingdom, France, etc.

OVERVIEW

The significance of corporate governance is now recognized both for national development and as part of the international financial architecture and is neatly encapsulated in the words of the world bank that the proper governance of companies will become crucial to the world economy as the proper governance of countries. Research has shown also that good corporate governance can improve standards in business, encourage foreign investment and lead to improve performance by companies.

The relationship between the owners and the managers in an organization must be healthy and there should be no conflict between the two.

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.

Corporate governance ensures transparency which ensures strong and balanced economic development. This also ensures that the interests of all shareholders (majority as well as minority shareholders) are safe guarded. It ensures that all shareholders fully exercise their rights and that the organization fully recognizes their rights.

Much of the contemporary interest in corporate governance is concerned with mitigation of conflicts of interests between stakeholders. Ways of mitigation or preventing these conflicts of interests include the processes, customs, policies, laws, and institutions which have impact on the way a company is controlled. An important theme of corporate governance is the nature and extent of accountability of people in the business and mechanisms that try to decrease the principal agent problem.

Well defined and enforced corporate governance provides a structure that at least in theory,

works for the benefit of everyone concerned by ensuring that the enterprise adheres to accepted ethical standards and best practices as well as to formal laws. To this end, organizations have been formed at the regional, national and global levels.

In recent years, corporate governance has received increased attention because of high-profile scandals involving abuse of corporate power and in some cases, alleged criminal activity by corporate officers. An integral part of an effective corporate governance regime includes provisions for criminal prosecution of individuals who conduct unethical or illegal acts on the name of the enterprise.

PRINCIPLES OF CORPORATE GOVERNANCE

1

Rights and equitable treatment of shareholders: organizations should respect the rights of shareholders and help them to exercise their rights by openly and effectively communicating information and by encouraging shareholders to participate in general meetings.

2

Interest of other stakeholders: organizations should recognize that they have legal contractual, social, and market driven obligations to non-shareholder stakeholders, including employees, investors, creditors, suppliers, local communities, customers and policy makers.

3

Role and responsibilities of the board: the board needs sufficient relevant skills and understanding to review and challenge management performance. It also needs adequate size and appropriate levels of independence and commitment.

4

Integrity and ethical behavior: integrity should be a fundamental requirement in choosing corporate officers and board members. Organizations should develop a code of conduct for their directors and executives that promote ethical and responsible decision making.

5

Disclosure and transparency: organizations should clarify and make public know the roles and responsibilities of the board and management to provide stakeholders 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.

GLOBAL ECONOMIC SIGNIFICANCE

CONCLUSION

Corporate governance is not just one of the designs of mitigation of man for business efficiency and effectiveness, but an indispensable integral constituent of human existence in all works of life. Thank you for listening.