Financial Reporting and Ethics - The Institute of Chartered ...

FINANCIAL REPORTING AND ETHICSexpropriation by insiders (including management, family interests and /orgovernments).’’According to the Oxford Advanced Learner’s Dictionary of Current English, 7 thEdition, the word ‘expropriation’ can be defined as follows:(a)“Of a government or an authority to officially take away private propertyfrom its owner for public use;” and(b)(c)(d)(e)(f)(g)“Taking somebody’s property and using it without permission.”The sense of ‘expropriation’ adopted in this study pack is as volunteeredin (b) above, by the dictionary. Expropriation takes several and differentdimensions which include the following:Outright theft or wrongful conversion of assets. By way of example, themanaging director of a company has been caught with moving a biggenerator which was meant for use in the organisation’s guest house tohis private residence in town or country home;Engaging in transfer pricing of the goods manufactured, to a rivalbusiness owned by a powerful member of the board, at lower the cost ofproduction;Approving excessive executive compensation package which erodes thecash resources of the organisation and corruptly enriches topmanagement;Entrenchment of inept management team which lacks focus and runsthe corporate body ineffectively; andCommitting hard-earned resources on unproductive ventures whichbenefit only the privileged few.Shleifer and Vishny are of the opinion that corporate governance deals withthe ways suppliers of finance to corporations assure themselves of getting areturn on their investments. They make sure that managers do notmisappropriate the capital or invest in bad projects.” It has been observedthat in the Nigerian and other experiences, members of the board on their ownor working in concert with top management may be expropriating.Consequently, corporate governance is seen as “essentially about the preventionof theft”, which can take place craftily executed by either the management orboard or both of them.11.3 THE NATURE, SCOPE AND SIGNIFICANCE OF GOOD CORPORATE/ENTERPRISE GOVERNANCE AND THREATS TS / GOVERNANCE: GOODPRACTICE AND ISSUESHaving defined the concept and dynamics of corporate governance as inparagraph 11.2, it is appropriate to state as follows:208