Elumelu lists benefits of good corporate governance in listed firms, others
Delivering a lecture at the 4th Presidential Biennial Lecture of Institutes of Directors (IoD) in Lagos recently, Elumelu explained that good corporate governance provides the proper incentives for the board and management to pursue objectives that are in the interest of the company and shareholders, as well as facilitate effective monitoring.
Elumelu, while speaking on the theme; ‘‘Building a Global Conglomerate on Corporate Governance Values: Challenges and Benefits in a Developing Economy” pointed out that good corporate governance also ensures that shareholders are sufficiently informed on decisions concerning fundamental issues of listed companies, which impact on share value, liquidity and investor portfolio composition.
He added that it also attracts capital inflow in business and assures shareholders of greater security on their investment.
Elumelu , however explained that there was need for corporate organisations and entrepreneurs to entrench good corporate governance, noting that the concept is not for listed companies alone.
“When we talk about corporate governance, people think it is limited to just listed companies on the stock exchange. One-man businesses should also have some set of rules about how you want to govern your business and that has some advantages, including succession. Despite the fact that it is a one-man business, a key concept is succession and when you have sound corporate governance practices, succession to a large extent is addressed.” He said.
He stressed that if a company is practicing corporate governance, people not linked to the firm will also be able to assess its governance.
This, according to him, could be attributed to the fact that the most fundamental principle of corporate governance is transparency and disclosure thus, every step taken by corporate management is in the best interests of the company and its stakeholders.
He added that this has a positive impact on business operations and may reflect upon the market valuation of the firm.
Good practices of corporate governance, according to him, also help companies become more efficient in their businesses, while employees that are trained to follow ethical business practices will avoid excess wastage of company resources but tend to utilize all resources optimally.
He affirmed that adherence to corporate governance helped Transnational Corporation of Nigeria to survive litigations when he took over the company.
“Transcorp were suspended by Securities and Exchange Commission many time due to poor corporate governance, with 99 court cases when we took over in 2011 but we were able to turnaround the company because of sound corporate governance and the company won the Nigerian Stock Exchange most compliance company in 2014”.
“It helps you to enhance your corporate reputation when governed as an institution. It helps transparency and accountability. It helps long term-continuity and success of business and of course it helps to attract and retain good customers and workers. It helps to attract capital and all businesses need capital.
“So if you have a company that is well run on the principles of sound corporate governance, investors pay a premium to invest and become part of this company. And so that is a clear benefit. that there is a direct correlation between sound corporate governance ‘practices in an environment and economic development and progress.”
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