BACKGROUND TO THE STUDY
The original need for corporate governance stems from the separation of ownership and control in publicly held companies in the 19th century, it is pertinent at this point to note that this separation has brought about overzealous managers and passive owners. Investors seek to invest their capital in profit-making firms so that they can enjoy these profits in the future. Yet many investors lack the time and expertise necessary to operate a firm and ensure that it provides an investment return. As a result, investors hire individuals with management expertise to run the company on a daily basis to see to it that the firm’s activities enhance the company’s profitability and long-term performance. In order to have the assurance on the money invested, investors look to the published annual reports and accounts of the business and other information releases that the company might make. The recent spate of corporate debacles have damaged seemingly unassailable corporate reputations and undermined the confidence of investors and the general public in the international financial system. It has been as a result of these corporate failure that corporate governance has take center stage drawing the attention of the international financial services industry to the increasing significance of corporate governance and opened the subject to intensive and extensive discussions and debate at various international financial and economic fora. In 1999 alone there were 274 conferences in 39 countries on the subject. (Mansur, 2007) These high profile corporate debacles have arisen despite the fact that the annual reports and accounts seemed fine. These corporate debacles have had an adverse effect on many people: Shareholders, Government, Employees and the company itself. Examples of such include; Enron in the United States Of America, World Com in the United States of America, Parmalat in Italy, Barings Bank of the United Kingdom, Cadbury Nigeria, and a host of others. Moreover, these high-profile scandals have emerged in markets held to be the world’s most transparent, amply demonstrating that there’s no such thing as a regional exclusive on ethics.
Ethical values can be seen to provide a framework upon which any civilized society exists. Ethics has become a topical issue in many societies with particular reference to Nigeria, where our value system as individuals and as a people have been misplaced. The fruits of these have been expressed in fraudulent accounting practices, misstatement of financial figures, income smoothing, creative accounting and a host of other unethical behaviours which have in time past led to the collapse of seemingly infallible organizations. The channels through which these unethical acts are expressed are in the financial reports which lack the due objectivity, accountability, transparency that is expected. There has been a great demand on those entrusted with directing and controlling companies for transparency, requiring more reliable and accurate financial statements that will ensure adequate protection to shareholders. This is because, it is generally believed that the financial scandals in which people have lost billions of naira were majorly caused by non compliance with ethical values. The dire need for quality financial reporting has come to fore, the need to ensure the accuracy, objectivity and credibility of financial reporting. The cases that will be referred to in this work have been known as major business disasters instead of typical ethical issues within corporations. The reason for this being that many of them started as small issues until mismanagement, denial, or other more malevolent motives caused these seemingly minor situations to mushroom into huge legal, ethical and public relations nightmare. This saliently can translate to the fact that if ethical behaviour was rewarded in direct proportion to the punishment of unethical behaviour, it could...
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