CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Corporate governance is the set of process, customs, policies, laws, and institutions' affecting the way a corporation was directed, administered or controlled. Corporate governance also includes the relationships among the many stake holders are the shareholders, management, and the board of directors. Other stakeholders include labor (employers) customers, creditors (e.g. banks, bondholders), suppliers, regulators and the community at large. (Dignam and Lowry 2006). Corporate governance is a multi-faceted subject. An important theme of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that tries to reduce or eliminate the principal agent problem. A related but separate thread of discussions focuses on the impact of a corporate governance system in economic efficiency, with a strong emphasis shareholders' welfare. There are yet other aspects to the corporate governance subject, such as the stakeholders view and the corporate governance models around the world. Corporate governance was defined in Cadbury report (1992) as; 'the system by which companies are directed and controlled. The role of shareholders is to appoint the directors and the external auditors, and to satisfy themselves that an appropriate governance structure is in place.
The directors are responsible for setting the company's strategic arms, providing the leadership to put these into effect, supervising the management of the business and reporting to shareholders on their stewardship. The financial aspects of corporate governance are identified as the way in which the board sets financial policy 'and oversees its implementation (including the use of financial controls) and the process of reporting to the shareholders on the activities and development of the company. According to Kwakwa and Nzekwu (2003), governance is a vital ingredient in the maintenance of the dynamic balance between the need for order and equality in society; promoting the efficient production and delivery of goods and services; ensuring accountability in the house of power and the protection of human rights and freedoms. Governance is, therefore concerned with the processes, systems, practices and procedures that govern institutions, the manner in which these rules and regulations are applied and followed, the relationships created by these rules and nature of the relationships. The concern with good corporate govern once emanated from the ripples and the challenges of the scandals associated with the collapse of the scandals associated with the collapse of ENRON Corporation, WorldCom, TYCO, Global crossing and ADELPHIA in the USA and the recent accounting disclosure in lever brothers (now Unilever) are Cadbury Nig. Plc. The scandals revealed hope accounting fraud and corporate abuses (CBN Bullion 2007). Good corporate Governance in the banking sector is vital because many banks are now global in terms of size of shareholders' finds, foreign investment inflow and lending activities. Good corporate governance is also in line with global best practices. David Smith (2002), President and CEO of the Canadian Institute of Chartered Accountant sees corporate governance as a "culture that has a common understanding of the roles of management and board.' To him corporate governance is a culture of mutual respect that both parties have for each other role.
It is a culture of continuous open dialogue and communication. In rounding up his views on corporate governance, smith noted that it is about people, "people doing not just what the roles say but about doing what is right. Corporate governance is an internal system encompassing policies, processes and people, which serve the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity and integrity. Sound corporate governance is dependent on external market place commitment and legislation plus a healthy board culture that safeguards policies and processes. (Definition of Gabrielle 0' Donovan). It can be refers to the processes by which all companies are directed and controlled corporate governance is also a system of structuring, operating and controlling a bank, with a view towards attaining long term strategic goals to maximize, shareholders (employers, depositors), suppliers other customers, and other stakeholders) Corporate governance is now widely accepted as being concerned with improved stakeholder performance viewed from this perspective, corporate governance is all about accountability, boards, disclosures, investor involvement and related issues. Research has shown that "firms with stronger shareholders rights had higher firm valves higher profits, higher sales growth, lower capital expenditure and fewer corporate acquisitions' (McRitchie, 2001). 
1.2   STATEMENT OF PROBLEMS
The executive environment of firms is under siege bankruptcy, insolvencies, massive unemployment, dwindling shareholders' turnover, failing national economies, etc are just a few the many woes at failure of corporate governance. When companies go down because of a deliberate or an unconscious neglect of the fundamentals of governance the impact can be felt almost in every facet of man's endeavor in the society; be it social, political, economical, or cultural. In fact, a failure of governance can 'lead to a subjugation of the system with debilitating consequences as such mention in the first paragraph. That is the more reason why there has been a renewed interest in the corporate governance practices of Modern Corporation especially in the wake of the new millennium. This renewed interest is particularly due to the high profile collapses of a number of large firms across industries from banking to manufacturing. To date, too much of corporate governance debate and discussion have centered in legislative policy to defer fraudulent activities and transparency policy, which misleads executives to treat the symptoms and not the cause. 
Therefore, to restore confidence, get the real sector working and provide the requisite filling needed by the economy, the real issues of corporate governance needs to be addressed. 
1.3   OBJECTIVES OF STUDY
The main objective of study is to critically the impact of corporate governance mechanism on firm's financial performance in Nigeria. Other objectives are:
1. To assess the effectiveness of the processes of corporate governance in Nigeria organization. 
2. To examine the relationship between the ownership structure and effective adherence to governance procedures and structure.
3. To ascertain the extent to which the composition of the Board of Directors impact on the firm's financial performance. 
4. To highlight factors that hinder effective adherence and implementation of corporate governance procedures.
5. To examine the relationship between corporate governance procedures and firm is financial performance. 
6. To examine the relationship between the appointment of Chief Executive Officers (CEO) and stakeholders interest. 
1.4    RESEARCH QUESTIONS
1. How effective are the corporate governance procedures in Nigeria organization? 
2. Is there relationship between the ownership structure and effective adherence to governance procedures and structure? 
3. To what extent does the composition of the Board of Directors impact on the firm's financial performance? 
4. What the factors that hinder effective adherence and implementation of corporate governance procedures? 
5. Does a corporate governance procedure promote firm's financial performance (growth)
6. Is there a significant relationship between the atonement of Chief Executive Officers (CEO) and stakeholder's interest? 
7. Does a corporate governance procedure have effect on stakeholder? 
8. What are the impacts of corporate governance to Nigerian economy? 
9. What are the key elements of good corporate governance? 
10. Does corporate governance mechanism and control reduce the inefficiencies that arise from moral hazard and adverse selection? 
1.5   RESEARCH HYPOTHESIS 
(1) Ho: Corporate governance policies are not made in most Nigerian organizations. 
Hi: Corporate governance policies are made by most Nigerian organizations. 
(2) Ho: Corporate governance mechanism and control does not reduce inefficiencies in the operation of Nigerian organizations: 
Hi: Corporate governance mechanism and control reduces inefficiencies in the operation of Nigerian organizations
(3) Ho: there is no significant relationship between ownership structure and effective adherence to governance procedures and structure. 
Hi: there is a significant relationship between ownership structure and effective adherence to governance procedures and structure. 
1.6  SIGNIFICANCE OF STUDY
This study is necessary and inevitable if we must legends firms’ capacity for good governance. It will provide insight into the mechanics of corporate governance and the dividends enjoyable if properly pursued by corporate organizations. It will promote internal corporation governance control that monitor activities and then take corrective measures to accomplish organizational goals. It will highlight the various core element of corporate governance such as honesty, trust, performance orientation responsibility and account ability and full commitment to the organization. Conclusively, the study will express the results of good corporate governance to all associated with' the organization. To build an ideal control system that regulates both motivation and ability in Nigerian firms. This study will promote internal corporate governance controls that monitor activities and then take corrective action to accomplish organizational goals. This work provides information that guides the decision makers on how to maintain balance between different stakeholders in an organization. The study reveals the key elements of god corporate governance principles, which include honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization. 
1.7   SCOPE OF THE STUDY 
The scope of this work will be restricted to the impact of corporate governance mechanism and firm’s financial performance in Nigeria taking its evidence from Cadbury Nigeria Plc Lagos Plant. 
1.8   LIMITATIONS OF THE STUDY 
The difficulty in obtaining information from the staff of Cadbury Nigeria Pic is the major limitation of this study due to their unwillingness to supply the needed information. There was also a limitation in term of library facilities. It is only center for management and development (CMD) library that have enough materials on corporate governance among all the libraries visited by the researcher. 
1.9   DEFINITIONS OF TERMS
CORPORATE GOVERNANCE: The way in which organization are run and controlled. It is also the system by which companies are directed and controlled.
DIRECTION: It involves the use of personal managerial authority to establish a clear future strategy and how change will occur
EFFECTIVENESS: This is a measure of the level of valve, which can be created from a given level of resources. 
OBJECTIVE: A statement of what is to be achieved and when results are to be accomplished.
POLICY: A rule or guideline, which expresses the limits within which action should occur. 
POWER: This is the extent to which individuals or groups are able to persuade, induce or coerce others into following certain courses of action. 
STAKEHOLDERS: They are those individuals or groups who depend on the organizations fulfill their own goals and on whom in turn, the organization depends. 
STRATEGY: This is the direction and scope of an organization over the long-term, which achieves advantage for the organization through its configuration of resources within a charging environment to meet the needs of markets and to fulfill stakeholder expectation.