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

FINANCIAL REPORTING AND ETHICSCompanies should adopt remuneration policies which induce andmaintain gifted and motivated employees, top management anddirectors, to achieve enhanced performance. It is important for corporateentities to clearly state the relationship between performance andremuneration. Additionally, the policy which underlies executiveremuneration should be understood by investors. The need to disclosethe remuneration policy is a pre-requisite for reporting. Shareholders’interests and the market are best catered for through the agency of atransparent and easily appreciated framework for executive reward andits cost and benefits. The board member remuneration policy should besupported by full and effective disclosure, in consonance with the spiritand intent of the Companies and Allied Matters Act (Cap. C20, LFN. 2004)and Code of Corporate Governance in Nigeria, 2003.Corporations owe a number of legal, social and moral obligations tonon-shareholder stakeholders. Examples of the stakeholders areemployees, communities and customers/clients. It is held fervently thatcompanies can create value by optimally managing social, natural,human and other forms of capital. Most companies are subject to anumber of legal specifications such as trade practices, occupationalhealth and safety, consumer protection and effluent discharge control.In orderly societies, directors and members of top management are heldpersonally answerable for exhibiting corporate behaviour which runscounter to the laid down norms. A board which is in charge of its destinyhas to set the tone and indices of moral behaviour of the corporate entityand ensure adherence by the rank and file. Examples of the activities ofsocial responsibility are the awards of scholarship to indigent studentsand the employment of the physically challenged people in the localcommunities. According to the chairman of Guinness Nigeria Plc,Engineer (Chief) R.A. Alabi, in his year 2005 annual statement, “thecompany continued with its age – long sponsorships of various sportingactivities such as the Kaduna International Polo Tournament. The Waterof Life Programme was expanded to cover Badia in Lagos State whilediscussion to commence work on state-of-the-art boreholes for PortHarcourt in Rivers State is in progress.11.4.2 Agency Problems in Corporate GovernanceThe agency problems which emanate are many and diverse. They includethe following:(a)The discreet interests of the agents of a company such as boardmembers and top management vis-a-vis those of the entity donot always converge. Rather, they are divergent. Since theindividual interests run counter to those of the body corporate,there is goal incongruity, misapplication of resources, lack of212