IMPACT OF CORPORATE GOVERNANCE ON CORPORATE PERFORMANCE OF CONROK NIGERIA LIMITED

Abstract

The study is focused on the impact of corporate governance on corporate performance of CONROCK Nigeria Limited. The study tries to examine this concept in the light of finding out if there is practice of corporate governance, the extent it exists, it examines how best practices/ethical behavior is transformed into performance, the extent to which corporate social responsibility and operational environment accounts for CONROCK competitive advantage in the industry, if internally and deliberately induced professionalism accounts for its performance and to determine how shareholders interest is managed with sound institution of corporate governance. The study used test-retest validity measure and person product moment co-relation. Also SPSS chi-square (X2) statistic at alpha value (a=0.05) level of significance of testing the hypothesis was adopted. The study having gone through several literature and using the research questions and test of hypothesis discovered that there is little or no practice if corporate governance in CONROK Nigeria Limited ,that the extent at which it exist is marginal, that code of best practices/ethical behavior is not a function of corporate performance in CONROCK, that their competitive advantage in the industry is not a function of corporate social responsibility but a function of use of internally and deliberately induced professionalism and finally stakeholders interest is not properly managed with institution of sound corporate governance in CONROK Nigeria Limited.  Based on the findings, the study recommends that CONROK Nigeria Limited should adopted the practice of corporate governance since it will improve performance, that introduction of corporate governance  in construction industry in Nigeria should be made imperative to avoid  future collapse, Corporate and Allied Matters Act should be strengthened to regulate the practice, a system of check should be put place for stakeholders to periodically review the practice and adherence to corporate governance in the construction industry and finally that CONROCK Nigeria Limited should continue to use their induced professionalism while trying to improve on the institution, practice and adherence to corporate governance hence better performance.

Table of Content

Title page                                                                                                                    i

Certification                                                                                                               ii

Declaration                                                                                                                 iii

Dedication                                                                                                                  iv

Acknowledgment                                                                                                       v

Table of Content                                                                                                         vi

List of Table                                                                                                               ix

Abstract                                                                                                                      x

CHAPTER ONE: Introduction

1.1        Background of the study                                                                           1-4

1.2        Statement of problems                                                                              4

1.3        Objectives of the study                                                                             5

1.4        Research Questions                                                                                  5

1.5        Research Hypotheses                                                                                6

1.6        Significance of the study                                                                          6

1.7        Scope of the study                                                                                    6

1.8        Limitation of the study                                                                             7

1.9        Profile of the organization CONROCK                                                    7-8

CHAPTERS TWO: Review of Related Literature

2.1        Conceptual Framework                                                                            10-11

2.2        Theoretical Framework                                                                            12-18

2.3        Empirical Studies                                                                                     18-21

2.4        Summary of the review related literature                                                 21

2.4.1      Gap in Literature                                                                                            21

CHAPTER THREE: Research Methodology

      Introduction                                                                                              22

3.1        Research design                                                                                        22

3.2        Sources of data                                                                                         22

3.3        Population of the study                                                                             22

3.4        Sample size determination                                                                       23

3.5        Description of the research instrument                                                    23

3.6        Validity of the instrument                                                                         24

3.7        Reliability of the instrument                                                                     24

3.8        Methods of data analysis                                                                          24

CHAPTER FOUR: Data Presentation and Analysis

4.1        Return rate of Questionnaires                                                                   25

4.2        Data presentation                                                                                      25-31

4.3        Test of hypotheses                                                                                    32-38

4.4        Discussion of results                                                                                 39-40

CHAPTER FIVE: Summary of Findings, Conclusion and Recommendations

5.1        Summary of Findings                                                                               41

5.2        Conclusion                                                                                                41

5.3        Recommendation                                                                                     42

5.4        Areas of further studies                                                                            42

            References                                                                                                      43-44

            Appendices                                                                                                     45-70

Questionnaires                                                                                                            71-74

List of Tables

Table 1:           Framework for construction industry                                                             18

Table 2:           Respondents’ Profile                                                                                      25

Table 3:           Sex                                                                                                                  26

Table 4:           Length of Service                                                                                           26

Table 5:           Educational/Academic Qualification                                                             27

Table 6:           Existence of Corporate Governance                                                               27

Table 7:           Extent of Existence of Corporate Governance in

CONROK Nigeria Limited                                                                            28

Table 8:           Code of best practices/ethical behavior and corporate

performance in CONROK                                                                              29

Table 9:           Corporate Social Responsibility and Operational Environment               29

Table 10:         Internally and Deliberately invalid professionalism

and the performance of CONROK Nigeria Limited                                      30

Table 11:         Management of Stakeholders interest using sound corporate governance 31

Table 12:         SPSS Output                                                                                                   32

Table 13:         SPSS Output                                                                                                   33

Table 14:         SPSS Output                                                                                                   34

Table 15:         SPSS Output                                                                                                   35-36

Table 16:         SPSS Output                                                                                                   37

Table 17:         SPSS Output                                                                                                   38

CHAPTER ONE

Introduction

1.1        Background of the Study

Corporate governance is a key element for improvement to economic growth. In today’s global economy, the success of the national economy depends on the crucial role of the organizations competitiveness, transparency and governance structure which operate within her territory, since organizations are the entities that create economic value (ICAN, 2009). In the words of Wolfensohn (1998), corporate governance is on the top of agenda for international development, since it is now as important in world economy as the government of countries. This is so because indeed the need for trust and transparency in governance of corporate organizations have been one of the concerns for standard setters all over the world. This need has obviously spurred renewed interest in the corporate governance practices of modern corporations, particularly in relation to accountability and economic performance.

Good corporate governance can help to prevent corporate scandals, fraud and potential civil and criminal liability of companies. It enhances image and reputation of a company and make more attractive for investors, suppliers, customers and other stakeholders of the company.Nwachukwu (2007), emphasized the growing consensus that good corporate governance has positive link to a national economic growth and development. The degree of trust accorded to the managers of companies by its owners is strengthened through corporate governance.Directors without corporate governance mechanism may paint misleading pictures of financial and economic performance of their companies to lure unsuspecting investors.

The increasing incidence of corporate fraud relating to exaggerated and fleeting reports have reinforced the renewed global emphasis on the need for effective corporate governance. One of the characteristics of globalization is the ease of engaging in business transaction in the global financial markets. The exploration of this market has however exposed a high degree of diversity and inconsistency in business practices in the various markets. As these inconsistencies increase the risk of doing business, investors are identifying various mechanisms to standardize business practices. A key mechanism is the consistent definition of and adherence to good corporate governance practices -Al.Fake, (2006).

Good corporate governance practices extend beyond financial requirements to include the corporation’s business behavior in its operational environment. As an extension to this requirement, the operational environment, in good corporate governance term includes the corporations social and environment performance. Investors are therefore guided as much by the financial statement of an enterprise as they are by the enterprise business behavior.Consumers too are increasingly supporting those products that can demonstrably show an appropriate response by the enterprise to its operational environment. Increasingly, consumers are avoiding products produced by enterprises that fail in performing due diligence in the manufacturing and marketing of those products-Maria, (2013)

Llewellyn, (2016), says with the exception of listed Construction enterprises, the construction industry has thus far escaped such scrutiny, for a variety of reasons.  However, many of its participants such as investors, the workforce and material manufacturers are being subjected to good corporate governance requirements. Government and consumers too have due diligence expectations, much of which is being translated in statutory regulation. Regrettably, there has thus far not been an adequate and proactive response from the construction industry as a whole. In line with the position above, in 2006 CBN reported that despite the significance of good corporate governance to national economic development and growth, corporate governance was still at rudimentary stage as only 40% of publicly quoted companies including the construction companies had recognized corporate governance in place.  The separation of ownership from the management of business organizations via construction companies spurs a divergence of interest amongst the parties. The divergence of the interest of management and its owners has undermined investor’s confidence in the board.  Hence, investors are interested about the level of accountability displayed by the board of directors. The outcry of investors and other stakeholders are results of mismanagement and inadequate financial disclosures given by the management has deemed it necessary for the institution of sound corporate governance, procedure, policies, rules, processes, practices, programs and institutions used in administering, directing and controlling the operations and affairs of an organization generally constitute the elements and instruments of its corporate governance, and therefore the elaborateness, clarity and the degree of compliance with these elements and plans reflect the extent to which an organization is likely to experience good corporate governance.

Lambe (2014), says that empirical evidence in the corporate world suggest a positive association between corporate governance and organizational performance. In this regard, sub-optimal or outright failure of governance system can therefore be argued to be a major contributor to the collapse of many of the well establishedorganization ns that abound in the world’s corporate landscape. This failure, which translates into an inability of organizations to meet the expectations of their various stakeholders, has often been traced to weaknesses in the internal control infrastructures and operating environment still, and a lack of commitment to high ethical standards. These weaknesses are sometimes deliberately or intentionally induced by organizational designers and controllers, and at other times they may be a result of the naïve assumption that those entrusted with management responsibilities will always act in a way that suggests or promotes enlightened self-interest, which should ultimately have a positive implications for all stakeholders (Donaldson and Preston, 1995). However, evidence emerging from some of the recently collapsed organizations with construction companies inclusive the world over hitherto is assumed to be run professionally or on sound principles, succinctly demonstrate the point that there is indeed a lack of good corporate governance culture among corporate organizations, with its attendant effect of enormous financial losses to both the stakeholders and the society as a whole.

Corporate governance provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. It is all about running an organization in a way that guarantees that its owners or stockholders receive a fair return on their investment, while the expectations of other stakeholders are also met. (Magdi and Nedareh, 2002).Corporate governance addresses the need for organizational stewards or managers to act in the best interest of the firms core stakeholders, particularly, minority shareholders or investors by ensuring that only actions that facilitates delivery of optimum returns and other favorable outcomes are taken at all times.This is typically facilitated by creating an operational base which promotes the observance of codes of conduct that entrenches accountability, transparency, fairness, ethical behavior, responsibility and other values designed to act as safeguards against institutional corruption and the management of scarce organizational resources.

The code of best practice (2003) identifies three ‘key players’ in the implementation process and prescribed the functions and responsibilities for each of them. The principal actors are the board of directors, shareholders and audit committees. The board expectedly, will be an assemblage of distinguished individual from diverse backgrounds. Effective corporate governance is an enduring factor which enables an establishment to evolve business excellence. It is capable of enhancing board competence and team work which will result in much improved benefit to the shareholders. Uche, (2004) says that, the board has to be structured in such a way that it can achieve three ends which are stated thus:

(a)        Proper understanding of, and capability to contend with, the matter of the company

(b)       Effective review and appraisal of the output of the management, and

(c)        Exercise of incisive and unbiased judgment.

1.2   Statement of the Problem

A lot of construction companies had sprung up in the recent past but have also failed to heed and observe sound corporate governance codes. There have been cases of collapsed companies in the construction industries caused by lack of commitment to high ethical standard, use of substandard materials, contractor-contractee dirty dealings, corruption, shady execution of jobs, and inadequate attendance to corporate social responsibility. Conflict of interests, compromising integrity, disclosure of official secrets, destruction of official documents for financial benefits and many other practices against moral principles and ethical standards which are the major problems besetting performance in construction industries in Nigeria. Corporate governance demonstrates responsibility which is an approach to adopt and manage the impact of a company’s operation exert on society and the environment. The interest of the   firm and that of the society should be harmonized such that, none suffers or operate at the detriment of the other even if the firm has an overriding advantages over the society. Due to poor commitment to corporate social responsibility, organizations are unable to compete successfully among rivals .It is against this background that this study is being undertaken.

1.3     Objectives of the Study

The main objective of the study is to determine the impact of corporate governance on corporate performance of CONROK NIGERIA LTD. Based on the study; the specific objectives are as follows

1      To determine if CONROK Nigeria Limited Practice Corporate Governance

2      Ascertain the extent to which Corporate Governance exist in CONROK Nigeria Limited.

3      Examine the relationship between best practice/ethical behavior of CONROK Nigeria limited in terms of performance.

4      Ascertain the extent to which corporate social responsibility and the operational environment is accountable for the CONROK Nigeria Limited competitive advantage in the construction sector.

5      Determine whether there are internally and deliberately induced professionals in CONROK Nigeria limited which is accountable for its performance in the construction industries.

6      Determine how stakeholder’s interest in CONROK Nigeria limited is managed with a sound institution of corporate governance procedures, policies, rules, programs, practices etc.

1.4  Research Questions

This study is anchored on the following research questions

1      .Does CONROK Nigerian limited practice corporate governance?

2      To what extent does corporate governance exist in CONROK?

3      What relationship does code of best practices/ethical behavior have with the performance of CONROK Nigeria limited?

4      Does corporate social responsibility and operational environment affect the extent to which CONROK Nigeria limited gain competitive advantages in the construction sector?

5      Does internally and deliberately induced professionalism in CONROK Nigeria limited account for its performance in the construction industry in Nigeria?

6      How are the stakeholders interest managed with the institution of sound corporate governance, procedures, policies, programs, rules in CONROK Nigeria limited?

1.5  Research  Hypotheses

H0₁ :    There is no significant impact to show that corporate governance is practiced     in CONROK Nigeria limited.  

H0_2:    There is no significant impact to show the extent to which corporate governance exist in

            CONROK Nigeria limited.

H0₃:     There is no significant relationship between codes of best practice/ethical           behavior and corporate performance of CONROK Nigeria Limited

H0₄:     Corporate social responsibility and operational environment does not significantly affect the extent to which CONROK Nigeria limited gain competitive advantage in the construction sector.

H0₅:     Internally and deliberately induced professionalism does not significantly    account for the CONROK Nigeria limited performance in the construction         industry in Nigeria.

H0₆:     Stakeholders interest is not significantly managed with institution of sound          corporate governance procedures, policies, programs, rules in CONROK   Nigeria            Limited.

1.6      Significance of the Study

This study focus on the impact of corporate governance on corporate performance of CONROK Nigeria limited

It will be beneficial to the government, the construction industry, particularly construction industries in Nigeria, shareholders, customers, employees, suppliers, management and the general economy at large.

It will also serve as a dependable material for any individual/group of persons who may wish to conduct further research on this area of study.

1.7       Scope of the Study

This study is focused on the impact of corporate governance on corporate performance of CONROK Nigeria limited, the construction company that is located in Amasiri – Afikpo North Local Government Area, Ebonyi State, South East Nigeria.

1.8      Limitations of the Study

The researcher did not have access to all the relevant official records and thiswas a major constraint that the researcher faced in this study, hence, the researcher made use of the available libraries in the construction industry where these official publications were found.

In view of the unpredicted nature of human beings, the researcher discovered that not all respondents sampled for this study gave the needed co-operation for the completion of the questionnaires that were administered on them.  This made it difficult for the questionnaire to be returned hundred percentage. The researcher made adequate follow up to the respondents to ensure that not less seventy five percent of the questionnaire were retrieved.

1.9       Profile of CONROK Nigeria Limited

CONROK Nigeria limited is a Construction Company that has both national and international presence. Its international office is located in 106 Des Alpes, saint Lambert, Quebec Canada while its Nigeria registered office is in 387 Agege Motor Road, Mushin Lagos with Zonal and of course its operational office in kilometer 65,Okigwe-Amasiri Highway, before Afikpo junction, Ebonyi state.  Their scope of service covers road works and earthworks, infrastructure projects, crushing and screening and asphalting, water retaining, structures and concrete works. It has a pool of transitional, human, material and technological resources that is capable of assuming total project responsibility and of providing a comprehensive project

delivery program which includes design, engineering, construction, management, procurement, materials management, logistic and site support services.

The mission statement of CONROK Nigeria limited is a group of companies operating in Nigeria and Canada, fast growing, diverse and pro-active; CONROK is synonymous with efficiency, ethics and cost effectiveness. They answer the real needs of public and private sector clients. They are committed to fulfilling the expectations of the clients by developing relationships through integrity, professionalism and service to provide the highest quality projects through dedication, teamwork and expertise, CONROK stands out from the competition  by addressing the demands of the high end market. To accomplishing this they offer superior service and expand into new, promising markets, their solid approach to work uses the full potential of our network of firms and the diverse expertise of our professionals. They value their personnel, the spirit of partnership and transparency, they rely on the talent, competence and dedication and motivation of our team who make our company a successful and innovative network. Because of this their performance and productivity are optimal which translate into high client satisfaction. CONROK has developed the experience and system to mobilize within a short period of time, technical staff, management, personnel and labour, to organize them into fully integrated project teams and to deploy them to execute a variety of small or large projects.

Vision, our success can be attributed to our vision, the implementation of sound ideas and the development of new plans through years of dedication and expertise.  They evolve by expanding their facilities while focusing on international growth, fleet diversification, infrastructure development and business integration. CONROK’s vision is to answer the evolving needs of client and markets by building our experience, innovating, further developing our core engineering business, enhancing new skills and branching out into new activities.  In light of this, we are committed to open communication with client’s flexibility, multiculturalism and quality services.

Environment, health and safety: CONROK places high premium on matters relating to environment, health and safety (EHS). The company operates a carefully formulated and robust EHS policy.  The policy is the basis of our environment, health and safety management system which provide a frame work for setting our EHS objectives and targets.   CONROK is committed to actions geared towards promoting the good health and welfare of employees, provision of safe working conditions and protection/ conservation of the environment. In the course of our construction activities, adequate measures are in place to prevent accidents, injuries, pollution and adverse effects on the environment. Issues relating to environment, health and safety are methodologically approached through a structured risk assessment program while identified hazards and impacts are promptly resolved.  Our goal is to keep our workers safe and healthy; we care for the environment and strive to keep our planet clean.

In line with our research, the mission, vision, and the environment, health and safety policy of CONROK Nigeria limited are geared towards institution of sound corporate governance in the system as they speak volumes.

1.10 Operational Definition of Terms

For the purpose of clarity, it is necessary that certain terms used in this study are defined. These terms among others include the following:

Corporate performance:  this has to do with the input-output ratio of a corporate body in turns of efficiency of management of scarce resources.

Ethics:  Is an acceptable norms and values of standard in a corporate organization.

Social responsibility:  it has to do with how effective the organization interact and respond to its operating environments

Transparency:  it has to do with doing things such that there will be no room for doubt.

Accountability:  a concept that deals with giving account of everything you are entrusted with to the understanding of all stakeholders involved.

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