58 Ethics is undoubtedly a fundamental ingredient for business success in the 21st century. With the recent financial scandals in Nigeria‘s banking industry, the question may be asked, were those scandals a direct result of corporate greed and collusion, or were companies driven by market forces which they were unable or unwilling to resist? If the answer to this is in the affirmative, do we need a radical overhaul of corporate governance and codes or can companies be relied upon to regulate themselves? If the answer to this latter question is good enough to diffuse passion, prejudice, pride and self interest of corporate leaders, then effective corporate governance is a civilizing force in bringing about justice and best ethical practices in the business world. Thus, we may conclude this section of the work in the words of Nancy .C. Agha
Corporate governance is much more than the accuracy of the balance sheets.
Indeed, except in cases of rudimentary fraud, the balance sheet is just an output of manifold structural and strategic decision across the entire company, from stock options to risk management structures, from the composition of board of directors to the decentralization of decision making powers. It is concerned with holding the balance between economic and social goals, so as to align as nearly as possible the interest of individual, corporations and society at large. It also requires judicious and prudent management of resources, the preservation of the assets of the corporation firm, maintenance of official and potential standards and pursuit of corporate objectives in an efficient manner165
59 predicated in the dominance of the Anglo-Saxon model of the state, the market and of civil society.166 Thus, from cultural perspective, business dealings rather than conducted on the basis of purely rational-legal financial considerations, ‗transactions are conducted on the basis of mutual trust and confidence sustained by stable, preferential, particularistic, mutual obligated, and legally non-enforceable relationship.‘167
They may be kept together either by value consensus or resource dependency, that is through
‗culture and community‘ or through dominant units imposing dependence on others.168 Often, company‘s main target is to become global while at the same time remaining sustainable as a means to get competitive power. Good governance is therefore extended in meaning and this work is concerned with the extension of that meaning and implications for the operating of a company in an increasing global environment. It demands an understanding of the cultural and community context in which a firm is operating and there are considerable regional differences which is important to understand.169 It need be re-emphasized here that good corporate governance in the sense of global and community perspective, as depicted through the concept of stewardship, has been extended in meaning; and that corporate firms must also consider, alongside the stewardship of its own resources, the stewardship of both societal resources and of environmental resources located external to the organization. This of course implies changes to operational practice as well as changes to governance requirement across different countries, continental and regional jurisdictions of the globe.
166 G. Aras and D. Crowther, Global Perspectives on Corporate Governance and Corporate Social Responsibility, cited in C. Mallin, Corporate Governance, (Oxford: Oxford University Press, 2004).
167 T. Clarke and M.D. Rama, Fundamentals of Corporate Governance, (London: SAGE Publication, 2008) p.
6.
168 J.R. Hollingsworth et al,Capitalism Sectors Institutions and Performance, in J.R. Hollingsworth et el (eds), Governing Capitalist Economics, (New York: Oxford University Press, 1994) pp 3-16, at 6.
169 G. Aras and D. Crowther, Global Perspectives on Corporate Governance and Corporate Social Responsibility, op. cit.
60 However, for ease of discussion, this work would pay greater attention to the United State, United Kingdom (U.K.) and Japan practice with partial reference to other countries like China, Germany and France. In view of the above, in the U.S. and U.K. corporate governance is concerned with the narrow goal of ensuring that firms maximize the wealth of shareholders. In Japan and some other countries, firms are concerned with a broader group of stakeholders, including employees, suppliers, customers and others as well as shareholders.170 Therefore, if markets and institutions are well developed and competitive, Anglo-American corporate governance ensures an efficient allocation of resources. In other circumstances, focusing on a wider range of stakeholders as the Japanese do can be more efficient.
In the U.S. and U.K., corporate governance is concerned with ensuring that the firm is run in the interest of shareholders with a highly demanding objective of creating wealth for them.171 This fundamental idea is embodied in the legal framework in the U.K. In these countries, managers have a fiduciary (ie very strong) duty to act in the interests of shareholders. This of course demands that markets must be perfectly competitive in order to understand when the invisible hand of the market works and when it does not. Ironically, in the U.S. and U.K., it is widely agreed that this is not the case and it is accepted that firms‘ sole and only paramount objective should be to create wealth for shareholders.
In many other countries there is no such consensus. Japan is perhaps the most extreme example. Instead of focusing on the narrow view that firms should concentrate on creating wealth for their owners, corporate governance has traditionally been concerned with a broader view to the effect that corporate governance is concerned with ensuring that firms are run in such a manner that society‘s resources are used efficiently by taking into account a wider range of stakeholders such as employees, suppliers, and customers, in addition to
170 F. Allen and M. Zhao, The Corporate Governance Model of Japan: Shareholders Are Not Rulers, (U.S.A:
Pennsylvania University and Bentley College, 2007), p. 22.
171 A. Smith, An Inquiry into the Nature and Causes of Wealth of Nations, (Dublin: Whitestone, 1776), p.12.
61 shareholders. With imperfects, this broad objective can potentially make everybody better off compared to just focusing on the shareholders‘ interest.172
For example, according to Allen173 if there are externalities such as pollution, then maximizing the value of the firm is well known to cause a misallocation of resources. He posited that if firms were instead to use the broad view above, they would change their behaviour and produce the socially optimal level of pollution. In general, although it may not be possible to obtain efficiency, it may be possible to achieve a better allocation of resources with the broad view than with the narrow view - underlining corporate responsiveness on the one hand and corporate social responsibility on the other hand.
In other countries like Germany and France, it is this broad view that is often stressed. In fact, in Germany, the legal system is quite explicit that firms do not have a sole duty to pursue the interest of shareholders. This is the system of codetermination.174 In Japan, large corporations‘ employees have an equal number of seats on the supervisory board of the company which is ultimately responsible for the strategic decisions of the company.175
Allen and Zhao176 had submitted forcefully that the evidence on managers‘ views of the role of the firm is upheld by the way that wages are structured in the different countries. In the U.S. and U.K. wages are based on the nature of the job done. Employees‘ personal circumstances generally have no effect on their compensation. In Japan and Germany, it is common for people to be granted family allowances and special allowances for small children. In France vacation allowances based on family are common. These differences
172 F. Allen, and D. Gale, Comparing Financial Systems, (Cambridge, MA: MIT Press, 2000), p.11.
173 F. Allen and D. Gale, ‗Corporate Governance in Emerging Markets‘, Oxford Review of Economic Policy, 21 pp. 164-177.
174 F. Allen and D. Gale, ‗Comparing Financial Systems, op, cit., p.11
175 K. Scott, ‗The Role of Corporate Governance in South Korean Economic Reform‘, Journal of Applied Corporate Finance, 10, pp. 8-15.
176 F. Allen and M. Zhao, The Corporate Governance Model of Japan: Shareholders Are Not Rulers, op. cit, p.15.
62 underline the fact that in the U.S. and U.K., companies are designed to create wealth for shareholders whereas in Germany and France, the company or firm is a group of people working together for their common benefit.
In this circumstance, we may safely submit that the United Kingdom and United States of America practice seems to be the practice obtainable under the Nigerian corporate jurisprudence considering the enormous rights granted to shareholders by the Companies and Allied Matters Act.177