Dialogue on Ethics and Corporate Governance for Business and Higher Education
1.1 Business Sector
Interests in ethical issues and corporate governance practices of modern corporations particularly in relation to accountability have attracted a lot of public interest over the past decade following the high profile collapses of a number of large corporations which involved accounting fraud. A glance at the list of failed businesses reveal why corporate governance has taken the center stage in every intellectual gathering on how to run a business. Corporate scandals tarnish organization’s clean image. It takes more than just corporate social responsibility for a company to earn the title ‘responsible citizen’. It requires the blend of business ethics, corporate governance and corporate social responsibility policies to meet the expectations of the public.
In today’s environment, stakeholders have high expectations that companies should be run in accordance with good corporate governance practices. Issues on ethics and corporate governance have been a subject of discussion in almost all disciplines and professions because it guarantees the economic well-being of corporations and the society in general. Most corporations have addressed business ethics in various ways including the introduction of compliance programs and managers, development of codes of conduct, dissemination of value statements, the hiring of corporate social responsibility managers and training programs of all kinds. Also, there have been several attempts on the part of the government to address business ethical issues and regulate corporate organizations in order to enforce good, transparent and accountable management practices in Nigeria. This led to the establishment of the Economic and Financial Crimes Commission (EFCC), Independent Corrupt Practices and related offences Commission (ICPC), Code of Conduct Bureau, Nigeria Accounting Standard Board (NASB), Securities and Exchange Commission (SEC), Nation Insurance Commission (NAICOM), National University Commission (NUC), Corporate Affairs Commission (CAC). SEC’s code of conduct is applicable to all public companies in Nigeria irrespective of the sector. SEC’s code of conduct ensures the highest standards of transparency, accountability and good corporate governance is promoted, without unduly inhibiting enterprise and innovation. NAICOM introduced code of business ethics and principles on corporate governance for the insurance industry.etc.
Unfortunately, the occurrences of the past few years in Nigeria have portrayed a sad story of corporate ethics as some organizations and institutions still engage in unethical behaviours that lead to larger corporate scandals. These corporate scandals highlight the risks that an insufficiently regulated economy poses for the country. There have been cases of financial misconduct especially in the public sector. Bravo Magazine of December 18, 2012, presented a shocking compilation of top CEOs who have defrauded Nigerians with just the pen. Fraud scandals ranging from money laundering, misappropriation of funds, insider trading, corruption and embezzlement, funds diversion, unaccountability, funds mismanagement, sharp practices, doctoring financial statement, round tripping, dubious accounting practices, inflated share prices, governance challenges etc.
The financial statements of many corporations are more cosmetics and far from showing a true and fair view of the real state of things. Corporate scandals that have occurred in organizations and institutions reflect the current state of immorality in the society. These corporate leaders involved in unethical practices are by their nature either very selfish people who are not concerned about who gets hurt from their misdeeds or foolish people who do not understand why what they are doing is wrong. The most notable corporate scandal in Nigeria involved Cadbury Nigeria plc. Cadbury Nigeria plc has been dubbed Nigeria’s version of the Enron corporation scandal in the United States of America. Following the review and investigation of the company’s financials by PricewaterCoopers (PWC) in October 2006 which confirmed deliberate overstatement of the company’s financial position over a number of years to the tune of between ₦13 billion and ₦15 billion, Cadbury Nigeria sacked its managing director Mr. Bunmi Oni and the company’s finance director Mr. Ayo Akadiri. Therefore, there was a deliberate breach in its accounting system and controls to achieve ambitious growth targets that were internally predetermined by its executives. Hence, the unsuspecting Nigerian public were fooled and misled over the years. Cadbury like every other quoted firm is answerable to thousands of investors, both foreign and Nigerian whose investments witnessed a downturn as a result of crash of company’s share price. This also led to loss in shareholders’ wealth as the investors could not take in the return on their investments for a while. Another similar case to Cadbury’s scandal is that of Afribank Nigeria Plc. A most respected accounting firm, Akintola Williams Deloitte which presided over falsified financial accounts belonging to Afribank plc is also responsible for auditing Cadbury’s books. Recently, there were cases like the NNPC missing $20 billion, ₦8 billion scam involving three ex-CBN staff and five First Bank staff etc. Corporate governance and responsibility has been sacrificed at the altar of nepotism and corruption. All these leave one wondering the place of ethics in Nigerian organizations.
1.2 Higher Education
Furthermore, in Nigerian universities, there have been reports of obvious abuse of laid down rules and procedures. ICPC had received petitions from students, members of staff, unions and other stakeholders alleging all manner of corrupt practices and abuses in most tertiary institutions in the country. The pilot study on ICPC comprehensive systems study and review of Nigerian Universities in collaboration with National Universities Commission (NUC) revealed the following corrupt practices amongst others; manipulation and falsification of academic records such as transcripts, non-adherence to rules and regulations guiding admission, political interference in the admission process of the university, examination records mismanagement, delays in release of results and students’ timely graduation, all kinds of deliberate victimization, financial and sexual harassment, syndicated plagiarism by students and staff, delay or non-payment of gratuities and pension, non-adherence to bidding processes in the award of contracts, admission racketeering, high level examination malpractices, graduation of unqualified students, financial impropriety with regards to project and infrastructural development, distortion in enrolment, gratification and inducement to manipulate award of marks or grades, swapping of grades, writing of examination by proxy, delay in take off of lectures and non-completion of syllabus by lecturers, lack of commitment to work by lecturers, sales of lecture notes, handouts and textbooks etc. Preliminary investigations by the commission pointed towards the absence, utter disregard or failure of regulatory systems within the academic institutions which had allowed many form of corruption. All these have frustrating, disruptive and fatal consequences on innocent members of the university community, the nation and our international ranking due to institutional decay, corruption, and blatant abuse of processes.
Continuing examples of questionable behaviour by individual employees and executives in the past few years have given rise to critical questions of how corporate ethics efforts can be improved and can address the underlying causes of misconduct as well as the growing demands for proactive socially responsible and sustainable business practices. Corporate scandals and breach in codes of conduct in Nigeria cannot keep going on unchecked. Efforts to address the underlying issues are necessary. Therefore, it becomes pertinent for a research of this nature. In the light of the above, this study intends to have a dialogue with some stakeholders in public quoted companies and universities in Nigeria.
2.0 Statement of the problem
It is generally agreed that weak corporate governance has been responsible for some recent corporate failures in Nigeria. The increase in ethical issues and corporate scandals that have characterized corporate organizations in Nigeria reveals the extent to which ethical codes have been neglected. Therefore, the problem of this study is how ethical conduct will be instituted and enforced in corporate bodies which can result to creating higher value for stakeholders (shareholders, regulators, staff, employees etc.).
2.1 Aim and Objectives
The main aim of the study is to explore and analyze the different issues related to ethics and corporate governance in business and higher education in Nigeria. In line with this, the following are the specific objectives of the study:
- To analyze the extent to which ethics and code of conduct affect performance of business and higher education.
- To assess the level of compliance to SEC’s code of conduct by public companies and NUC’s guidelines on code of conduct, if any, for higher education.
3.0 Conceptual framework
Corporate governance is not always recognized as an important development tool by people outside the private sector. In many African countries, the application of corporate governance guidelines has been limited to capital market as a means for attracting foreign investment especially through privatization. Similarly, many people associate the enforcement of corporate governance with stock exchanges and so many companies in Africa are not listed on the stock exchange. Also, many Africans think the most important thing is corporate social responsibility or the philanthropic aspects of corporations. However, when corporate governance is only associated with foreign investment, it is difficult for people to see the benefits of good practices for the society at large and for the poor (Karugor, 2008).
Corporate governance is what allows businesses to grow and thrive in a way that builds strong frameworks for future growth. For Africa, corporate governance is crucial to building businesses that use entrusted resources efficiently, resulting in the greatest benefit for the majority of the people-maximum value with minimum waste. Good corporate governance leads to creation of wealth and viable businesses lead to job creation. Corporate governance helps ensure that resources are used efficiently and effectively. Corporate governance builds responsible businesses that do not damage the environment or exploit labour. It creates a framework that allows businesses to disclose their profits and pay taxes and creates viable states with governments that use revenues to address the social needs of the population. Therefore, corporate governance implementation must be framed in the context of social development, economic competitiveness and viability for corporations and transparent accountability. Corporate governance must be related to poverty reduction, increased standards of living and the transformation of society.
Ethical choices are relevant within the core business strategies that boards pursue and the way that they direct the business as a whole to achieve them. Questions of ethics or the right way of doing business are inherent in all aspects of corporate governance and in every board decision and action. A well run profession or business must have high and consistent standards of ethics in order to stand fast and to stand the test of time (Smith and Smith, 2002; Carse, 1999; Zuckerman, 1993). The main thrust of ethical standards and considerations is the upholding of professionalism and good practice. Code of ethics is necessitated by the need to ensure discipline, enhance professionalism, integrity and protect the interest of stakeholders and indeed the reputation of their institutions. Another view of ethics is that it must exhibit corporate social responsibility; an umbrella term indicating that an ethical business must act as a responsible citizen of the communities in which it operates even at the cost of profits or other goals. Worthy of note is the fact that the unethical activities of one member of a registered institution could jeopardize the reputation of the entire institution and the sector in general.
The foundation for good corporate governance is sound business strategy along with competent and responsible management team. Good corporate governance involves transparent disclosure and accountability. Disclosure builds trust. Trust is key in helping people see the importance of corporate governance. Like effective contract enforcement, facilitates new transactions that would otherwise never take place because it develops trust among economic actors. Trust is also essential in establishing an organization’s license to operate, maintaining successful business relationships and operations require businesses to manage their risks including their integrity risks and guard their reputations. Trust worthiness is a valuable asset and guarding that asset is a core remit for those running a company, it is a core remit of good corporate governance. Virtually all ethical systems encourage honesty (Murphy, 1993).
Empirical studies on ethics and ethical issues revealed that efforts are always made to introduce and enforce the practice of ethical standards by the regulatory bodies. However, the strict adherence to the standards is always a problem (Gowthrope and Amat 2005; Dogarava, 2004; Luft, 1997, Finn et all, 1988). One of the common recommendations in their various researches is that the regulatory authorities should intensify their efforts towards effective monitoring and strict supervision on the application and observance of ethical standards and considerations. According to Smith and Smith (2003), ethical values provide the foundation on which a civilized society exists. In our societies today, ethical standards act as a compass that direct and monitor the actions of people so that the best true and fair practices are achieved.
For the purpose of clarity, definitions will be provided for each of the terms that can be understood as related to the goal of improving the conduct of business, namely, corporate governance, business ethics, corporate compliance, corporate responsibility, CSR, and corporate sustainability.
3.1. Corporate governance refers to the manner in which companies are directed and controlled. Corporate governance refers to the mechanisms, processes and relations by which corporation’s objectives are set and pursued in the context of the social, regulatory and market environment. It encompasses the means by which the board and senior management are held accountable and responsible for their actions which includes corporate discipline, transparency, independence, accountability, responsibility, fairness and social responsibility. Governance structures identify the distribution of rights and responsibilities among different participants in the corporation such as board of directors, managers, shareholders, creditors, auditors, regulators and other stakeholders. It also includes the rules and procedures for making decisions in corporate affairs. Corporate governance increases competitiveness and makes criminal activities more difficult. The presence of an effective corporate governance system helps to provide a degree of confidence that is necessary for the proper functioning of the market economy and economic growth. Good corporate governance therefore includes those structures, practices and procedures put in place by the board of directors as well as persons duly appointed by the owners to direct and manage the business of the company.
Olumide Fusika (2009) defined corporate governance as the set of policies, customs, laws and institutions affecting the way a corporation is directed, administered and controlled. Alo (2008) opined that the increase in the interest in corporate governance as a subject is traceable to the fact that there is now an increasingly clear separation of ownership from management which is in charge of the day to day affairs of the business. This has created the need for the installation /institution of an appropriate and effective framework for insuring transparency and accountability in the management of businesses.
3.2. Business ethics is the part of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. Ethics is also defined by David (2002) as special morally permissible standards of a group or profession. Here, standards are referred to as guidelines and or principles of good behaviour pattern of a group or profession. David further posits that “a profession comprises of a number of individuals in the same occupation voluntarily organized to earn a living by openly serving a moral ideal in a morally permissible way beyond what law, market and morality would otherwise require”. He further said that groups especially professions tend to formulate their standards of conduct in writing as “code of ethics”. This code however serves as the laws governing the profession and they are also important for teaching ethics.
3.3. Corporate transparency describes the extent to which a corporation’s actions are observable by outsiders. Recent research suggests that there are three primary dimensions of corporate transparency: information disclosure, clarity and accuracy. Therefore, the strategic management of transparency involves intentional modifications in disclosure, clarity and accuracy to accomplish the firm’s objectives. Transparency deals with the idea that by having an engaging and open environment in the company as well as the community will improve the performance and increase profits. It is an open culture that promotes employee involvement in the innovation and creative process.
3.4. Corporate social responsibility also called corporate conscience is aimed at embracing responsibility for corporate actions and to encourage a positive impact on the environment and stakeholders including consumers, employees, investors, communities and others. Proponents argue that corporations increase long term profits by operating with a corporate social responsibility perspective. Business dictionary defines corporate social responsibility as a company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates.
3.5. Corporate sustainability is a business approach that creates long term consumer and employee value by creating a “green” strategy. It describes business practices built around social and environmental considerations. It also formulates strategies to build a company that fosters longevity through transparency and proper employee development. It takes into consideration every dimension of how a business operates in the social, cultural and economic environment. Corporate sustainability has also been defined by PricewaterCoopers as aligning an organization’s products and services with stakeholder expectations, thereby adding economic environmental and social value.
3.6. Corporate compliance means observing both company-specific and statutory regulations. It includes fair competition, integrity in business dealings, principle of sustainability, upholding foreign trade laws, preserving equal opportunity in securities trading, proper record keeping and transparent fianancial reporting, fair and respectful working conditions, protecting our intellectual property rights and respecting those of other, keeping corporate and personal interests separate. It means having internal policies and procedures designed to prevent and detect violations of applicable law, regulations, rules and ethical standards by employees, agents and others.
This study will employ the use of dialogues with stakeholders in order to explore their views, attitudes and behaviours relating to current ethical and corporate governance issues. These stakeholders include directors of public quoted companies, the top management of public and private universities in Nigeria and the regulatory agencies of both the business sector and educational sector (universities) in Nigeria. This dialogue will involve each of the stakeholders every quarter for twelve (12) consecutive months. Each dialogue will involve hundred (100) participants. The essence of this dialogue is to seek their identification and explanation of their perception of ethical codes of conduct.
4.1 Stakeholders and their goals
- Directors: the goals of directors of public quoted companies include the following;
- Exercising proper care in their duties, upholding high standards of integrity and acting fairly.
- Determining, articulating and communicating the values and standards of the business and for ensuring that policies, procedures and controls in place act to embed rather than hinder ethical values throughout the business.
- Responsible for ensuring compliance with or observance of the principles and provisions of the SEC’s code of conduct.
- Ensures the company is properly and effectively managed in order to protect and enhance shareholder value and to meet the company’s obligations to its employees and other stakeholders.
- Responsible for ensuring good corporate governance in the company. The directors ensure that the company carries on its business in accordance with its articles and Memorandum of Association and in conformity with the laws of the country observing the highest ethical standards and on an environmentally sustainable basis.
- Compliance with rules by regulatory bodies
- Higher Education Management :
Management of higher education represents the factory for moulding the character and learning of students and prepares them for living, working, and citizenship in an information age or in a knowledge society. Therefore, their goal functions must go beyond academic excellence to emotional intelligence and spiritual well-being of graduates. This will help graduates better manage their sustainable livelihoods from career, community, family and social perspectives.
- Regulatory agencies
- Corporate Affairs Commission (CAC): It is autonomous body charged with the formation and management of companies in Nigeria. Its objective goals include;
- Incorporation of companies (private or public company, limited by guarantee)
- Arrange or conduct investigations into the affairs of any company where the interests of the shareholders and the public so demand.
- Monitoring the compliance with CAMA by companies.
- Securities and Exchange Commission (SEC): it is the apex regulatory body for Nigeria’s capital market. It regulates the operation of capital market transactions ensuring that the relevant rules are complied with. Securities and Exchange Commission has developed a code of conduct for public companies. However, Securities and Exchange Commission only requires company to report on an annual basis. There are no penalties for non-compliance. The inculcation of Securities and Exchange Commission’s code of conduct into management practice is yet to be addressed.
- National Universities Commission (NUC): it is a regulatory agency acting as a catalyst for the production of globally competitive and nationally relevant graduates through the deployment of a number of quality assurance indices. NUC is statutory mandated to provide quality assurance for university education in Nigeria with the mission to ensure orderly development of a well coordinated and productive university system that guarantees quality and relevant education for national development and global competitiveness.
4.2 Intervention Strategies
- Identification of critical success factors. These critical success factors include the following;
- Career, community and family
- Nutrition, food and wellness
- Curriculum development
- Learning environment
- Student and program assessment
- Student organization integration
- Behaviour mapping: This involves examining the intervening variables among the critical success factors of an organization. For example, a positive learning environment is supposed to reflect in academic performance as well as positive professional achievement. In the same vein, a negative learning environment leads to a negative academic performance and ultimately negative professionalism.
- Options and strategies for implementing codes of conduct in the identified areas.
5.0 Publishing and dissemination
On successful completion of this stakeholder dialogues, our findings will be published and disseminated to government agencies and private sector organizations who have the authority to enforce the ethical standards that this dialogue will recommend.
6.0 Monitoring and Evaluation
We shall conduct follow ups of the sample organizations for the purpose of monitoring and measuring the implementation of code of conduct for a period of two years, and in critical situations, we can provide the required expertise and advise for implementing the code of conduct.
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