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 MTN Mobile Communication Limited, Kaduna main branch 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 MTN Mobile Communications just like other telecommunication company have been constraint with issues arising form customer’s complaint of high tariffs, 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 MTN Mobile Communication Kaduna main branch.

1.3        Objective of the Study

The main objective of the study is to examine the corporate governance and its impact on the performance of an organization. The specific objectives are:

i)            To examine the effect of corporate governance on the performance of MTN.

ii)          To examine the internal and external corporate governance control mechanism in MTN.

iii)        To identify the systemic problems of corporate governance in MTN.

iv)         To proffer workable solutions to the identified problem of corporate governance in MTN.

1.4        Significance of the Study

The study will be significant to MTN Mobile Communication especially as they utilize the findings of this research in enhancing policy governance in their organization. The study will also add to the existing knowledge on the subject matter and will also be a reference material for further research on corporate governance.

1.5        Research Questions

The central research question is: What is the impact of corporate governance on the management of MTN Mobile Communication? The specific questions are:

i)            How does corporate governance affect the performance of MTN?

ii)          What are the internal and external corporate governance control mechanism in place in MTN?

iii)        What are the systemic problems militating against corporate governance in MTN?

iv)         What are the solutions to such problems?

1.6        Scope of the Study

The study covers the examination of the impact of corporate governance on an organization using MTN Mobile Communication as a case study. The collection of empirical data is limited to MTN Mobile Communication Kaduna main office. The study covers a time from 2006 – 2011.

1.7        Definition of Terms

Corporate Governance: This is relationship that exists between the different participants, and defining the direction of the firm.

Corporation: This refers to corporate entity or a body by means of which capital is acquired, used for investing in assets producing goods and services.

Shareholders: People who have invested in a company through subscribing to the company’s stock.

Board Structure: Management at the top comprising of board of directors.

Ownership Structure: Shareholders and directors.

CEO: Acronym for Chief Executive Officer.

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