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Corporate Governance

Corp governance14Corporate governance is an essential prerequisite for the integrity and credibility of financial institutions, stock exchanges, companies and the whole market economy. It builds greater confidence and trust by ensuring transparency, fairness and accountability with respect to shareholders and other stakeholders. Although corporate governance is a key issue in global significance, it has no universally accepted definition.

Many definitions describe corporate governance as the structures and processes for the direction and control of companies. In such definitions, the inclination is to view corporate governance as a system of relationships, involving several parties (including investors, shareholders, board of directors and management often having different and sometimes contrasting interests) defined by structures and processes that may vary widely depending on jurisdictions, regulations, voluntary adaptation as well as market forces. There is also the inclination within these definitions to view corporate governance as a means for increasing shareholder value and return on investments.


More progressive definitions of corporate governance not only focus on the internal perspective but also include relationships between the company and external stakeholders, and go beyond the single bottom line to include social and environmental performance. For instance, Sir Adrian Cadbury in Corporate Governance Overview (1999) opines that:

Corporate governance is concerned with holding the balance between economic and social goals and between individual and community goals, with the aim of aligning to the extent possible, the interests of individuals, corporations and society

Corporate Governance in an African context takes the following forms:

  • African economic activity is substantially conducted within informal networks, Stateowned or controlled entities, and subsidiaries of multinational enterprises. The development of a significant private sector on the African continent is still in its infancy and reform of corporate governance systems has also proven to be a political challenge at times.
  • A key feature in African markets are State-owned enterprises (SOEs), which if well governed, have the potential of contributing significantly to the national economy. The experience from many African countries does not indicate a
    commendable level of good corporate governance in SOEs. This has resulted in the ongoing privatisation agenda in many African countries, which needs to be underpinned by good corporate governance principles to be successful.
  • Prominent within the African economic landscape are country offices or divisions of Multi-national corporations (MNCs). While MNCs are often guided by codes or standards from their home countries (e.g. the OECD corporate governance principles, and its accompanying guidelines for MNCs), their roles within their host countries, especially in weak governance zones, are sometimes blurred vis-à-vis positively supporting reform processes in terms of social and economic institutions but also to provide a constructive lever for reform through their own conduct and operation.

 

 

 


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