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CORPORATE GOVERNANCE AND ITS EFFECT ON ORGANIZATIONAL PERFORMANCE (A CASE STUDY OF FORTE OIL NIGERIA PLC, KADUNA)

ABSTRACT

This study examined the corporate governance and its impact on the management of Forte Oil Nigeria Plc Kaduna. Research questions guided the study. A survey method was used for this study. The population consisted of all the management staff of Forte Oil Nigeria Plc Kaduna with a total population of twenty five (25) persons. The entire 25 person were selected for the study. A questionnaire developed by the researcher based on liker 5 point scale was used for the study.  Mean scores and frequencies were used to analyze the data based on the research questions. Research results shows that internal and external mechanism of corporate governance are used to regulate the performance of Forte Oil Nigeria Plc. The control mechanism put in place by Forte Oil Nigeria Plc include internal and external auditing as well as board of director monitoring and balance of power. The systemic problems militating against corporate governance include high cost of monitoring, inadequate supply of accounting information to shareholders.

CHAPTER ONE

INTRODUCTION

1.1   Background of the Study

Corporate Governance is a number of process, customers, policies, laws and institutions which impacts on the way a company is controlled. An important theme of corporate governance is the nature and extent of accountability of people in the business and mechanisms that try to decrease the principal agent problem (Wikipedia, 2011).

Corporate Governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. In contemporary business corporations, the main external stakeholder groups are shareholders, debt holders, trade creditors, suppliers, customer and communities affected by the corporation’s activities. Informal stakeholders are the board of directors, executives and other employees. It guarantees that an enterprise is directed and controlled in a responsible, professional, and transparent manner with the purpose of safeguarding its long-tem success it is intended to increase the confidence of shareholders and capital market investors.

The World Bank (2009) states that corporate governance comprises two mechanisms, internal and external corporate governance. Internal corporate governance, giving priority to shareholder’s interest, operated on the board of directors to monitor top management. On the other hand, external corporate governance monitors and controls manager’s behaviors by means of external regulations and force, in which many parties, such as suppliers, debtors (stakeholders), accountants, lawyers, and providers of credit and investment bank.

In the past, so many corporate organizations have been caught of getting involved in unethical practices, for example the discovery of financial scam by the Central Bank of Nigeria after the consolidation exercise, involving seven top bank executives in Nigeria, which puts the credibility of their corporate image under suspicion, which further shocking investors confidence. Consequently, corporate governance mechanism has been a crucial issue discussed again. It is against this background that the researcher see the subject matter; corporate governance and its impact on the management of Forte Oil Nigeria Plc, Kaduna as an issue worthy of being investigated.

1.2    Statement of Problem

In the past, so many organizations in Nigeria have been involved in unethical practices, which puts the credibility of their corporate image doubt. As such Forte Oil Nigerria Limited just like other oil company have been constraint with issues arising form customer’s complaint of exploitations of workers by using contract staff as against direct engagement of workers that would be remunerated according to their condition of service. Previous researches into the subject has brought to light the poor governance of so many companies with indebted accounts in Nigeria economy. Their accounting systems did not reflect the companies financial status. A typical example is the financial scam of Oceanic and Intercontinental Bank after the consolidation. Most management of such outfits were not accountable to stakeholders of the companies. Besides, the counts and the regulatory agencies were short of authority, corruption and kickbacks were part of the system in the companies. The poor governance practices led to the collapse of so many companies in Nigeria. Hence the need to study corporate governance and its impact on the management of Forte Oil Nigeria Plc  Kaduna.

1.3    Objective of the Study

The main objective of the study is to examine the corporate governance and its impact on the management of Forte Oil Nigeria Plc. The specific objectives are:

i)  To examine the effect of corporate governance on the performance of Forte Oil Nigeria Plc.

ii)  To examine the internal and external corporate governance control mechanism in Forte Oil Nigeria Plc.

iii)  To identify the systemic problems of corporate governance in Forte Oil Nigeria Plc.

iv)  To proffer workable solutions to the identified problem of corporate governance in Forte Oil Nigeria Plc.

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