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Adhere to good corporate governance: World Bank

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IMPLEMENTING good corporate governance practices within a company leads to effective, transparent and accountable governance of affairs of an organisation, says an International Finance Corporation (IFC) official.

Report by Business Reporter

The IFC is a member of the World Bank Group, which finances and provides advice for private sector ventures and projects in developing countries.

Isimkah Osayuware Ibuakah, the legal advisor in the Africa Department for the Corporate Governance Advisory Programme for the Banking Sector in Nigeria, who was the guest of honour at last Friday’s Director of the Year Awards (DOYA), spoke about the key issues and challenges to implementation of corporate governance.

Unable to be present at the awards because of logistical problems, her remarks were read by Tinashe Rwodzi, the managing partner at PricewaterhouseCoopers and a senior councillor of the Institute of Directors Zimbabwe, organisers of the DOYA.

She says the corporate governance systems in place should be based on decision-making processes that hold individuals accountable, encourages stakeholder participation and facilitates the flow of information across all organs of the company’s structure.

“Corporate governance, as we all know, has evolved and increased in relevance across the world over the last decade. Even more so over the last five years in the wake of the global financial crisis,” she told guests at the DOYA held at the Rainbow Towers in Harare.

“A great number of known incidents of corporate governance failures across the world were attributed to poor corporate governance and inadequate risk management practices such as Tyco, Barings Brothers, AIG, Satyam and closer to home, the nationalised banks in Nigeria.”

Corporate governance involves the set of systems by which companies are directed and controlled as described in the Cadbury Report on the Financial Aspects of Corporate Governance.

Issues of corporate governance implementation in a company become rather sensitive and systemic in the case of financial institutions because of the specific function of their business as a financial institution which involves accepting and managing cash deposits from its customers.

Osayuware said: “Consequently, we are clear that while good corporate governance in banks is essential, even more so in developing economies, its importance is further heightened for a number of reasons.

“First, banks have an overwhelmingly dominant position in developing the financial systems in an economy and are very important as vehicles to achieve economic growth and financial system stability.

“Second, banks in developing economies are typically the most important source of finance for the majority of firms and companies. Third, banks in
developing countries serve as the main depository of the savings of an economy and provide the means for payment. Therefore, effective corporate governance practices are essential in achieving and maintaining public trust and confidence in the banking sector.

“The foregoing makes it clear that the financial health and economic performance of banks are important for the growth of the economy because a stable and healthy banking sector is critical to the along-term growth of an economy.”

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