The Rhetoric of Corporate Governance and Accountability for Executive Expenditure

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ABSTRACT

The Rhetoric of Corporate Governance and Accountability for Executive Expenditure

Joseph Abugu*

Good corporate governance and accountability are buzz terms in the efforts of corporate regulators to hold managers of other peoples’ money accountable to the owners of residual capital. Statutory prescriptions details financial books that must be kept of corporate expenditures with the ultimate presentation of financial statements reflecting a true and fair view of the state of affairs of the company. Over time however, due to recurrent corporate failures with scandalous systemic financial consequences, financial statements have ebbed in reliability. It is contended that accounting and audit practices have not been effective as corporate gate keepers of shareholders funds. The link between corporate governance failure and financial mismanagement is evident in all the financial scandals of the 21st Century. For failure of good corporate governance manifests in corporate managers failed accounting systems, hideous financial transactions, reckless expenditures, manipulation of figures to conceal losses and pilfering of corporate funds, resulting ultimately to corporate failures with grave consequences for the financial system of any nation. These have not been effectively addressed by accountants and auditors. An essential aspect of financial regulation that is lacking is with respect to capital expenditures and operating expenses. It is contended that the discretion of corporate executives in expenditure must be interrogated and subjected to regulation. A number of ways are suggested: provisions in articles of association on the formulation of a corporate policy which underscores advanced planning and approval for capital expenditures and a cap on operating expenditures viz a viz enterprise performance; introduction of new corporate governance rules with prescriptions to the same end; or changes in accounting and audit practices that enables auditors query and distinguished between luxury expenditure and truly operational expenses.

Keywords: Corporate Governance, Accountability, Financial Statement, Financial Mismanagement, Shareholders, Corporate Failure.

* Professor of Law, Department of Commercial and Industrial Law, University of Lagos.

THE GRAVITAS REVIEW OF BUSINESS & PROPERTY LAW VOL.10 NO.3