In a chat with one of Africa’s leading Financial Risk Management experts, Adedipupo Osinloye, he stated that Corporate Governance is essential for organizational success. He noted that Corporate Governance is something altogether different from the daily Operational Management activities enacted by a company’s executives. It is a system of direction and control which dictates how a board of directors governs and oversees a company, he said.
Adedipupo further stated that perhaps one of the most important principles of corporate governance is the recognition of shareholders. The recognition is two-fold. First, there is the basic recognition of the importance of shareholders to any company – people who buy the company’s stock fund its operations where equity is one of the major sources of funding for businesses. Second, from the basic recognition of shareholders’ importance follows the principle of responsibility to shareholders. The policy of allowing shareholders to elect a board of directors is critical. The board’s ‘prime directive’ is always to seek the best interests of shareholders. The board of directors hires and oversees the executives who comprise the team that manages the day-to-day operations of a company. This means that shareholders, effectively, have a direct say in how a company is run, he noted.
According to Adedipupo, one of the biggest purposes of Corporate Governance is to set up a system of rules, policies, and practices for a company – in other words, to highlight accountability. Each major piece of the “government” – the shareholders, the board of directors, the executive management team, and the company’s employees – is responsible to the others, therefore keeping them all accountable. Part of this accountability is the fact that the board regularly reports financial information to the shareholders, which reflects the Corporate Governance principle of transparency, Adedipupo Osinloye concluded.