CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Corporate governance has become a global concern because of the rising frequency and widespread pattern of deliberate accounting deceits and frauds, as well as growing number of consequent corporate failures. Companies break the most basic rules of accounting, the worst being rebooking income that was earn and had earlier been taken to profit. The corporate failures that followed the discoveries were unprecedented magnitude of such unimaginable, unethical and outright unprofessional conduct that warranted public outcry and disbelief. The essence of good corporate governance is to bring companies to respect the rule of law, play by the rules guiding their business and hold ethics and professionalism in the highest esteem. Emanating from these would be a high sense of social responsibility. These boil down to the quality and reliability of accounting and other information that companies make available to their shareholders. Following good corporate governance closely in the growth and corporate performance matrix is transparency and accountability. They are at times treated as components of corporate governance.
Accountability arises from the agency theory that recognizes the management of business organization on one hand and the shareholders on the other hand. A perfect system of corporate governance would give the right incentives to make value maximizing investment and financial decisions and would assure that cash is paid out to investors when the company runs out of viable projects, that is, investment with positive NPVs. Statutory control of corporate governance has been with us for a long time and has increased overtime. While it is impossible to have a crime free society, the need to spell out the “rules of the game” cannot be overemphasized. Irrespective of the nature of the entity we are dealing with, the key issues of governance revolve around: 1. how things get done (or not done) 2. authority 3. leadership 4. the decision making process 5. accountability
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