SCHOOL OF MEDIA AND COMMUNICATION

The Practice and Prospects of Corporate Governance in Africa

Dr. Mike Okolo School of Media & Communication Pan-African University

Preamble

Over four decades of discussion Came to the front burner in the last decade and half In Africa, it has also taken the centre stage and continues to receive a high level of attention.

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Preamble cont

Valuable lessons have been learned from the series of corporate collapses that occurred in different parts of the world in the early part of this decade.

Africa is not left out of this trend Good corporate governance has therefore become a crucial issue in the agenda of executives, public institutions and communication practitioners.

Incidentally, these collapses seem to go on abated

Why???

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Definitions

No single one for corporate governance. ……prevention of theft…….. Ngaga

et al

., 2003 Refers to (Oman 2001) laws, regulation, and accepted business practice, which in a market economy govern the relationship between corporate managers and entrepreneurs (corporate Insiders) on the one hand and those who invest resources in corporations on the other hand.

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Definition

Some other prominent once however are by: – OECD: “a set of relationships between a company’s management, its board, its shareholders and other stakeholders, [which] also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined” – EU: “the system by which companies are directed and controlled”

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Definition

– Chris Ogbechie of Lagos Business School as: –

The manner in which the business and affairs are governed by boards of directors and senior management, which affects how they:

• • • •

Set corporate objectives Operate the firm’s business on a day-to-day basis Meet the obligation of accountability to their shareholders and take into account the interests of other stakeholders Align corporate activities and behavior with the expectation that firms will operate in a safe and sound manner, and in compliance with applicable laws and regulations

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CG in Africa

In Africa, there has been a historical record of bad governance Improving the governance environment has been given a central place in various initiatives in the African continent Some of these have created avenues that will lead to a path of sustainable development

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People Who Can Be Trusted

CNN/USA Today/Gallup Poll Most Can Be Trusted Can’t Be Too Careful With Them

SMEs CEOs of large corporation Car Dealer 75% 23% 15% 22% 73% 81%

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Public Thought on Perception of CG

Adapted fromThe American Survey, July 2002. PAN-AFRICAN UNIVERSITY

Experience from Past Failures

– Distinction between ownership from control – Intense corruption – Deliberate accounting fraud – Weak internal control – Activities of external auditors – Weak regulatory environment – Ineffective Board

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Why is CG still prevalent in Africa?

Prevalence of relationship-based institutions Feeble judicial systems Ownership still concentrated on a few dominant shareholders who directly control management Activities of corporate insiders and their allies etc

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Some Pertinent Questions

Do Top Executives of a Large Corporation Take Improper Actions to Help Themselves at the Expense of the Corporation?

Are employees observing any violation of Law or Company Standards?

Are regulatory agencies proactive about CG?

Etc

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The Importance of Good CG

If a country does not have a reputation for strong corporate governance practices,

capital will flow elsewhere

.

If investors are not confident with the level of disclosure,

capital will flow elsewhere

. If a country opts for lax accounting and reporting standards,

capital will flow elsewhere

.

All enterprises in that country – regardless of how steadfast a particular company’s practices may be – suffer the consequences.

Arthur Levitt, former Chair of the US Securities and Exchange Commission in December 2000

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• •

The Way Forward

Nolan Principles 1.

2.

3.

4.

5.

6.

7.

Selflessness Integrity Objectivity Accountability Openness Honesty Leadership Promotion of the culture of Self –Regulatory Organisation (SRO) Training - sharing of best practices through management exchange programmes, seminars and workshops Setting up independent control and compliance units or Chief Compliance Officer in the organisation Stricter auditing procedures Publication of annual compliance reports by an independent body

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Conclusion

“Economic performance of any country is shaped largely by the quality and effectiveness of the nation’s corporate governance”

Former Governor of the Central Bank of Nigeria

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Thank you for listening

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