IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 21, Issue 7. Ser. VII (July. 2019), PP 48-61 www.iosrjournals.org DOI: 10.9790/487X-2107074861 www.iosrjournals.org 48 | Page Corporate Governance and Business Performance Adebite G Adewale 1 , Ademola Adeniran 2 , J.E Idowu 3 , J.O Ajayi 4 1 Dept. of Marketing Ogun State Institute of Technology, Igbesa, Ogun State. 2 Dept. of Business Administration Ogun State Institute of Technology, Igbesa, Ogun State. 3 Dept. of Banking and Finance Ogun State Institute of Technology, Igbesa, Ogun State. 4 Dept. of Accountancy Ogun State Institute of Technology, Igbesa, Ogun State. Corresponding Author: Adebite G Adewale Abstract: Firms have in the past endeavoured to mitigate employee job dissatisfaction and increase firm performance through seminars and workshops (training), team building and interdepartmental transfers, which did not yield much in motivation. The aim of this study was to investigate the impact of corporate governance mechanism on firm performance in some selected firms in Lagos state. The study employed descriptive survey adopting stratified sampling technique to select representative samples of 154 respondents determined through the Yamane formula (1967) out of a total population of 250. Questionnaires were administered to generate primary data that was used for this study. The data obtained were presented in tables while Pearson correlation test was used to test the relationship between the stated variables with 10% level of significance. The analysis was carried out using statistical package for social sciences (SPSS) version 21.This study found out that corporate governance mechanism has significant impact on firm financial performance and employee performance. This study recommends that adequate measures should be taken to enhance efficiency and effectiveness of governance frameworks in the firms. Stakeholders should be adequately paid the returns on their equity and knowledgeable on the relevant laws, rights, responsibilities and ethical requirements so that the firm will be able to perform well financially. The level of the remuneration should be sufficient and reasonable to motivate employees for higher performance. Steps should also be taken for mandatory compliance with the code of corporate governance. Also, an effective legal framework should be developed that specifies the rights of customers and obligations of a firm, its directors, management and employees to the customers so as to encourage the customers to patronize. -------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 18-07-2019 Date of acceptance: 03-08-2019 --------------------------------------------------------------------------------------------------------------------------------------------------- I. Background to the study Corporate governance has, in recent years, become a topical issue both in business and academic circles (Ross 2013). The concern in business arose out of the perceived importance that a tradition should be developed that supports moral and ethical conduct in business affairs which will create a general climate (both legal and social environment) that will promote good governance of firms. In the academic world, it is established that business decisions are not made in a vacuum. Business decision makers have objectives outside the firms’ objectives, for example managers are interested in their own personal satisfaction, in their employees’ welfare, as well as in the good of the community (society) at large and these objectives impact on shareholders wealth adversely. According to Otti S.A (2015), corporate governance is a system or an arrangement that comprises of a wide range of practices (accounting standards, rules concerning financial disclosure, executive compensation, size and composition of corporate boards) and institutions (legal, economic and social) that protect the interest of corporation’s owners. According to Laporta et al (2000) “corporate governance is to a certain extent a set of mechanism through which outside investors protect themselves against expropriation by the insiders.” Insiders are defined as both managers and controlling shareholders. The corporate governance structures specify the distributions of rights and responsibilities among different stakeholders in a corporation, like the board, managers, shareholders, accountants and others, and spell out the rules and procedures for making decisions on corporate affairs. This is in conformity with the view of (Uche & Akinsulwe ,2016). Effective corporate governance reduces the “control right” conferred on managers and increases the chances that manager’s investment decisions enhance the maximization of shareholders wealth. This however, suggests that better corporately governed firms have better operating performance. According to a study of Latin America’s largest Banks, it is observed that, apart from the obvious reputation benefits of corporate adherence to ethical standards, there is another reason why firms should adhere to corporate governance standards: