BY LEVI JOHNSON
Business managers in Nigeria have been urged to fuse their personal and corporate objectives to create value for their shareholders.
This demand was made by a Professor of Accounting and Taxation, Professor Folajimi Adegbie while delivering the 36 inaugural lecture of Babcock University.
Professor Adegbie noted that when value is created for the shareholders, the value of the organization is enhanced and shareholders would be in a position to receive full benefits.
In his paper, Resuscitating financially distressed profit-oriented organization: Reinventing and
regenerating pragmatic strategic approaches for business sustainability, Professor Adegbie said some of the strategies towards reinventing and regenerating a distressed profit-oriented organization include redefining the vision of the organization, putting in place integrated corporate governance as well asthe philosophy of interplay between environment, shareholders’ value and corporate governance for value drivers.
He said if all the above pragmatic strategies articulated were adhered to, organizations would be freedfrom financial distress and be able to move to evergreen sustainability.
He expressed the view that, in a dynamic and fast-growing business environment, only the organisations that employ sustainability models in proffering solutions and create value delivery would continue as going concerns.
He said such an organization should, among others, ensure a healthy working capital, be able to execute profitable projects, and invest in non-current assets to generate income with an operating profit margin to efficiently manage the cost of production.
While noting that value creation was dying at an alarming rate and putting investors in a big dilemma thereby undermining wealth creation, Professor Adegbie advised organisations to use ‘sales growth rate’ to create a free cash flow to earn a greater amount of income.
“Companies need to sell as much as possible (sales growth) at a determined price with quality products to gain a market niche.
They must also consider the competitive environment using Michael E. Porter’s Five
Forces model (2008) such as working capital investment, fixed capital investment, cost of capital,operating profit margin, income tax, and value growth duration to determine the competitive situation of the company”, he said.
Professor Adegbie said it was painful to see companies that contributed to national growth and welfare of workers being forced to close down due to distress, concluding that there was no other alternative to business sustainability other than focusing on value creation and value delivery.
