Operators dither on NAICOM’s push for corporate governance

Insurance companies  in Nigeria are holding back against a push by the National Insurance Commission (NAICOM) to enforce a code of corporate governance in the industry, BusinessDay findings show.

The application of the corporate governance principles would make the industry operate according to international best practices and make local operators attractive  to foreign investors.

Many of the companies, particularly owner-managers and directors, however believe that enforcement of these guidelines would forcefully send them out of business they had established and nurtured over the years.

They say that section 5.04 (vii) of the 2009 corporate governance code which states that “non-executive directors shall not be re-nominated and appointed for more than three terms of three years each, is their major concern.

However, NAICOM is hinging its position on the need to achieve transparency, efficiency and best global practice which would place the local industry at par with  counterparts in developed economies.

Sunday Thomas, director-general, Nigerian Insurers Association (NIA) who responded to BusinessDay enquiries on telephone, said operators are not against implementation of corporate governance in the industry, but have raised issues about the suddenness of enforcement.

“What we have asked for from NAICOM is time to enable companies go through the hurdle of changing their directors, where the law applies, and we are hoping they will listen to our plea”.

It may not be a straight jacket postponement of enforcement, but allow time for specific company cases, Thomas said.

According to him, corporate governance as a global best practice is a function of environment and area of operation. He further observed that even though it might apply in some other jurisdictions, it is specific to environment and that should be taken into consideration.

Thomas further stated that operators are not at loggerheads with the regulator over enforcement, but that NAICOM should consider the operating environment in the Nigerian insurance sector and respond appropriately.

A CEO who preferred not to be named, said, “we are not against corporate governance but we think entrepreneurial investors should not be discouraged from coming into the industry. When you tell somebody that he should quit a company he has invested in after ten years, it could be discouraging, the CEO said.     

Joe Irukwu, a professor and insurance icon, who wrote the foreword on the corporate governance code, said the present leadership of NAICOM has embarked on some positive steps in order to promote the quality and efficiency of the insurance industry, for the benefit of insurance  consumers  and  the  national  economy, and one of them being the  Principles  on  Corporate  Governance.

“Undoubtedly, if its principles are enforced,  we  will certainly have a first class insurance industry that would be as good as any of the best in the insurance world.

“It  sets  out  and  recommends  various structures  and  control  systems designed  to  ensure  efficiency  and  accountability by both the Board and Management of insurance companies, as well as measures that will eliminate fraudulent and self serving practices among members of staff, the management and boards of insurance institutions, in line with modern trends, Irukwu stated.

NAICOM has set  tomorrow (April 1)  as deadline for insurance companies to comply with the 2009 corporate governance code, which operators are currently struggling to comply with.

Section 5.04 (vii) of the 2009 corporate governance code which states that “non-executive directors shall not be re-nominated and appointed for more than three terms of three years each, has continued to generate concern in the industry. This section, market watchers say, would likely send over 150 non-executive directors off their seats.

Mohammed Kari, commissioner for Insurance, had said during an interview, that the National Insurance Commission is committed to enforcing the regulations as stipulated in the code of good corporate governance for the industry, which was released in February 2009.

“By the first of April, you wouldn’t find anybody on the board of any insurance company that has been there for more than nine years,” he said.

Kari said NAICOM had issued the code before that of the banking sector,  and that the banks have implemented theirs and are better for it today.” So, we are not going back on that.”

According to him, studies conducted after the financial crisis in 2008 showed that the sit-tight attitude of management personnel in many economies was largely responsible for the problem.

He said it was in the interest of the investors to have succession plans for insurance companies and stressed the need to continue to review their programmes.

Kari described the stay-put attitude of many leaders/managers as a bad corporate structure, which NAICOM was going to discourage.

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