Enforcement of Corporate Governance Codes Through Voluntary Compliance or Legislation
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Date
2015
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Journal of Corporate Governance
Abstract
Corporate Governance principles and practices are being evolved by the board of corporations worldwide to serve as the guiding principles in the running of the affairs of an organisation on day-to-day basis. It embodies the integrity of the organization, as to what that entity stands for in the conduct of its business dealings, which directly mirrors the person of the individual members of the Board, as acts perceived or carried out by agents of the organization will be deemed to be acts of the board and that of its representatives. It is in such light that members shall be viewed as good or bad. Effective Corporate Governance anchors ultimately on 'meeting the demands' of all participating stakeholders in the fortune (or otherwise) of every corporate entity. The greatest of the stake contributors are the owner-shareholders who submit their governance authority to the Board of Directors (BOD) on behalf of the company. (See CAMA 1990, Sec. 244(1). The concern for good corporate governance apparently received the loudest of the clarion calls only at the beginning of this millennium. Today, it can safely be said that the need for directors to observe the notion of accountability, transparency and timely responsiveness to corporate issues started to receive the most attention since 2001 — the year that marked the fall of the world-renowned Enron and the WorldCom (both US-based energy and communication giants). These two celebrated events have re-written the entire global corporate history with, perhaps the most crucial chapter, "need for good Corporate Governance" receiving the most focus. A major fall-out of these unwanted events has put in place some regulatory responses in most advanced economies that cannot just wait and merely submit the corporate entity largely to the dictates of the BOD machinery. A notable instance is the enactment of the Sarbanes-Oxley Act of 2002 in the United States of America (USA). This singular Act now renders the Chief Executive Officer (CEO) of a corporate organization to be directly responsible for all its acts-thus further unveiling the mask of incorporation and narrowing the divide between the company and the managers ' responsibility towards it. This paper examines the issue of enforcement of Corporate Governance, both international and locally (Nigeria) and considered whether this should be by voluntary compliance or through legislation. The merits and set backs of each of the options were examined. In the end, this writer is of the view that there is no amount of legislation that can change peoples mind, as there are various devices to circumvent any legislation if those to comply are not really keen in doing so. In the end, the writer submits that enforcement of Corporate Governance should be by a combination of Voluntary Compliance and Legislation. This is borne out of the fact that each company, industry and of course, country differs in their legal and business structures and what is good for the geese in one country may not necessarily be good for the gander in another.
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Keywords
Corporate Governance, Legislation, Voluntary Compliance, Regulators