AN INVESTIGATION ON THE IMPACT OF CORPORATE GOVERNANCE ON ORGANIZATIONAL PERFORMANCE IN CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the study 

Corporate governance has been recognised as a growing area of focus in recent decades, aimed at enhancing the performance of companies. Implementing best practices of corporate governance reduces risks for stakeholders, attracts investment capital, and improves the performance of companies. Effective corporate governance enhances the financial performance and enduring worth of enterprises (Khoni, 2018). Therefore, it has become a crucial notion for any firm. Furthermore, scholars have focused on studying corporate governance methods by examining the failures of various organisations. 

In Khoni (2018), Cadbury (1992) defined corporate governance as "the system by which companies are directed and controlled." The primary focus of corporate governance is the duties and responsibilities of the board of directors, as well as the relationship with stakeholders, in order to achieve the company's success. According to the Principles of Corporate Governance of the Organisation for Economic Co-operation and Development (2019), corporate governance is a collection of relationships among a company's management, board, shareholders, and other stakeholders. It also establishes the framework by which the company's objectives are established, as well as the methods for achieving them and evaluating performance. Conclusively, corporate governance is a set of mechanisms that are incorporated into a company to direct it towards enhancing the long-term value of stakeholders and, as a result, enhancing the performance of the company. Corporate Governance encompasses the formal and informal rules, processes, systems, practices, and procedures that govern government institutions, as well as the manner in which these rules and regulations are implemented and enforced. It also encompasses the relationships that these rules and regulations establish or establish, as well as the nature of those relationships (Eneh, 2020).

It has been noted over the years that corporate failures in both developed and developing countries are due to the deliberate unethical behaviour of the boards and senior managements of corporations, or to negligence. Improved corporate governance and stringent sanctions for "corporate rogues" are being advocated by stakeholders in order to prevent further corporate failures and the resulting economic repercussions. This clamour is more necessary in a country such as Cameroon. The public's confidence in corporate governance has suffered a substantial decline in recent years as a consequence of corporate scandals and exceedingly opulent compensation packages. Executive or board action or inaction resulted in the bankruptcy of certain firms, resulting in significant hardship for investors, pension beneficiaries, and employees (Khoni, 2018).

Insufficient management practices by entrepreneurs and corporate entities, such as insider trading and other forms of corporate misconduct, have resulted in job losses, investment losses, and corporate failures in Cameroon and worldwide. As a result, corporate governance is receiving increased attention and action. There is a strong demand for corporations to adhere to the principles of corporate governance. The topic of corporate governance has swiftly emerged as a strategic concern that no reputable firm can afford to overlook (Nelson, 2021). Corporate governance principles have an impact on every aspect of organisational administration. The difficulty for organisations is being further intensified by the growing public awareness.

 Statement of the problem

The absence of efficient corporate governance in Cameroon has adversely affected shareholders and stakeholders, leading to a decline in their engagement with the system. The viability and durability of a financial industry seem to rely on the calibre of its governance. Historically, numerous organisations in Cameroon have engaged in unethical acts, casting doubt on the legitimacy of their corporate image (Ngembe, 2019). Several companies in Cameroon have faced constraints due to client complaints about the exploitation of workers. These companies have been using contract staff instead of directly hiring workers who would be compensated according to their terms of employment. 

Prior studies have revealed the inadequate management of numerous enterprises with financial obligations in the economy of Cameroon. Their accounting systems failed to accurately represent the financial standing of the organisation. An illustrative instance is the financial fraud perpetrated by Oceanic and Intercontinental Bank following the consolidation in Nigeria. The majority of managers in these organisations were not responsible to the stakeholders of the companies. In addition, both the counts and the regulatory agencies lacked sufficient jurisdiction, and corruption and kickbacks were prevalent among the enterprises. The inadequate governance standards resulted in the downfall of numerous firms in Cameroon. 

Furthermore, it seems that there are no corporate governance initiatives specifically aimed at supporting social initiatives that could enhance business competitiveness. Prior research on corporate governance in Cameroon has solely focused on organisations listed on the Cameroon Stock Exchange (Odo, 2018). While the rationale behind this decision is comprehensible, it poses a problem of exclusion and prevents an understanding of the corporate governance practices and results of private medium and large companies, which constitute the majority of organisations in different sectors of Cameroon's business landscape.

1.3 Objectives of the Study 

The primary objective of this study is to investigate the impact of corporate governance on organizational performance in Cameroon. Specifically the study seeks:

To determine whether there is a relationship between corporate governance and organizational performance in Cameroon.

To find out the impact of corporate governance on organizational performance in Cameroon.

To assess the systemic problems of corporate governance on organizational performance in Cameroon.

To evaluate the strategies for improving corporate governance in business organizations in Cameroon.

1.4 Research Questions

The following research questions will be answered in this study:

Is there a relationship between corporate governance and organizational performance in Cameroon?

What are the impact of corporate governance on organizational performance in Cameroon?

What are the systemic problems of corporate governance on organizational performance in Cameroon?

What are the strategies for improving corporate governance in business organizations in Cameroon?

1.5 Research Hypothesis

The following null hypothesis will validate this study:

Ho1: There is no relationship between corporate governance and organizational performance in Cameroon.

1.6 Significance of the study

The research will have significant implications for researchers, employers, students, managers, and others involved in policy governance inside their organisations. The study is significant as it will identify the diverse difficulties of corporate governance in organisational performance in Cameroon, along with potential ways to address these challenges. 

The study's findings and recommendations will also facilitate collaboration among managers, specialists, regulatory authorities, development agencies, and stakeholders to formulate improved policies that would foster the growth of our domestically-owned enterprises in Cameroon. The study will further contribute to the current understanding of the subject area and serve as a reference for future research on corporate governance. 

1.7 Scope of the study

The study aims to investigate the impact of corporate governance on organizational performance in Cameroon. Empirically, this study will assess whether there is a relationship between corporate governance and organizational performance in Cameroon, the impact of corporate governance on organizational performance, the systemic problems of corporate governance on organizational performance and the strategies for improving corporate governance in business organizations.

This study will be carried out in Cameroon.

1.8 Limitation of the study

The researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that the impact of corporate governance on organizational performance in Cameroon discourse is vast thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size covering only residents of Cameroon. Thus findings of this study cannot be used for generalization for other regions within Cameroon. Additionally, the researcher will simultaneously engage in this study with other academic work will impede maximum devotion to the research. Howbeit, despite the constraint encountered during the research, all factors were downplayed in other to give the best and make the research successful.

1.9 Definition of terms

Corporate governance: Corporate governance is the framework through which organisations are managed and directed. A set of rules, practices, and processes is employed to guarantee that a company is administered in a manner that is fair, transparent, and accountable to all of its stakeholders, including shareholders, management, customers, suppliers, financiers, government, and the community. The mechanisms by which company objectives are established and pursued in the context of the social, regulatory, and market environment are referred to as corporate governance. It endeavours to ensure that the interests of society, corporations, and individuals are as closely aligned as feasible.

Organizational performance: Organisational performance is the degree to which an organisation effectively accomplishes its objectives and goals. In areas such as financial outcomes, operational processes, customer satisfaction, and employee engagement, it incorporates a variety of metrics and indicators that evaluate the organization's efficiency, productivity, and overall success. Key performance indicators (KPIs) are frequently employed to assess organisational performance, as they offer quantifiable values that demonstrate the organization's advancement towards its strategic objectives.