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

EXTERNAL

AUDITOR

INTERNAL AUDIT UNIT

AUDITCOMMITT

EE

THE EXECUTIVE GOVERNOR

DIRECTOR GENERAL INTER-GOVERNMENTAL

AFFAIRS(ABUJA) LIAISON OFFICER

(LAG)

SPECIAL ASSISTANT (SA) 1&2 TO DG

INTER GOVERNMENTAL

AFFAIRS

SPECIAL ASSISTANT

(SA) ABJ

SPECIAL ASSISTANT

(SA) LAG

DRIVERS, SECURITY, KITCHEN STAFFS, GARDENER AND

OTHERS (ABUJA AND LAGOS)

INVESTMENT UNIT

INFORMATION

DIRECTORATE

ACCOUNTING UNIT

MDGs UNIT

EDUCATION

SCHOLARSHIP UNIT

LIAISON OFFICER (ABJ)

ALL DIRECTORATES/UNITS

ANNEXES

SERVICOM

CHARTER

CORPORATE SECRETARIATE

TAX DESK EMPOWERMENT UNIT

Figure 1: The Ogun State Liaison Office Abuja, org. structure

Prior to the period under review, the Ogun State Liaison

Office like every other liaison office in the country had no

clearly 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 each other).

Other categorie

s

OGUN STATE LIAISON OFFICE ABUJA

Strategic Decision Making

Ogun state govt executive

s and judiciary

The liaison office MGT

Presidency

Fed. Ministrie

s

Donor Agencie

s

Financial Communit

y

The liaison office Staffs

Ogun state

indigenes

Other liaison office

s

Other states’ govt

Nigeria embassies

abroad

Regulatory bodies

Potential investors

Tax Authority

Political parties

Suppliers/Contractor

s

The Media

Civil Society

Organisations

International

Embassies in Nigeria

Non Government

al Organisation

State Ministries

Govt.Parastatal

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

Total

50

498

10%

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

office Abuja

60 12%

Presidency 33 7%

Ogun state govt.

house, Abeokuta

51 10%

Ogun state

governor’s lodge,

Abuja

60 12%

Ogun state liaison

office, Lagos

60 12%

Ministry of works

and housing

35 7%

Ministry of 42 9%

information

Ministry of

education

45 9%

Lagos state liaison

office, Abuja

56 11%

Kwara state liaison

office, Abuja

56 11%

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

OptionNumber 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

taxpayers

175 35%

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

Proffessional

60 12%

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

improvement

209 42%

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

specialist

234 47%

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

Certificate

42 20 62

NCE/OND 95 9 104

HND/Degree 120 26 146

Masters &

above

171 15 186

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

Certificate

42 53.2851 -11.2851 127.353

4

2.39

NCE/OND 95 89.3815 5.6149 31.5271 0.35

HND/Degree 120 124.598

4

-4.5984 21.1453 0.17

Masters &

above

171 159.855

4

11.1446 124.202

1

0.78

School

Certificate

20 8.7149 11.2851 127.353

4

14.61

NCE/OND 9 14.6185 -5.6149 31.5271 2.16

HND/Degree 26 20.5221 4.5984 21.1453 1.03

Masters &

above

15 26.1446 -11.1446 124.202

1

4.75

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 = ∑ (f e – 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 428498

fe = 53.2851

when f0 = 95

fe = 104 x 428498

fe = 89.3815

when f0 = 120

fe = 146 x 428498

fe = 124.5984

when f0 = 171

fe = 186 x 428498

fe = 159.8554

when f0 = 20

fe = 62 x 70498

fe = 8.7149

when f0 = 9

fe = 104 x 70498

fe = 14.6185

when f0 = 26

fe = 146 x 70498

fe = 20.5221

when f0 = 15

fe = 186 x 70498

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

Certificate

36 6 42

NCE/OND 82 16 98

HND/Degree 132 28 160

Masters &

above

188 10 198

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

Certificate

36 36.9398 -0.9398 0.8832 0.0239

NCE/OND 82 86.1928 -4.1928 17.5796 0.2040

HND/Degree 132 140.722

9

-8.7229 76.0890 0.5401

Masters &

above

188 174.144

6

13.8554 191.972

1

1.1023

School

Certificate

6 5.0602 0.9398 0.8832 0.1745

NCE/OND 16 11.8072 4.1928 17.5796 1.4889

HND/Degree 28 19.2771 8.7229 76.0890 3.9471

Masters &

above

10 23.8554 -13.8554 191.972

1

8.0473

Total 498 498 0 15.53

When f0 = 36

fe = 42 x 438498

fe = 36.9398

when f0 = 82

fe = 98 x438498

fe = 86.1928

when f0 = 132

fe = 160 x 438498

fe = 140.7229

when f0 = 188

fe = 198 x438498

fe = 174.1446

when f0 = 6

fe = 42 x 60498

fe = 5.0602

when f0 = 16

fe = 98 x 60498

fe = 11.8072

when f0 = 28

fe = 160 x 60498

fe = 19.2771

when f0 = 10

fe = 198 x 60498

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