Fabian Ajogwu, SAN, Nigeria’s First Professor of Corporate Governance, holds a doctorate degree in Law from University of Aberdeen, Scotland. He assisted the Securities and Exchange Commission in drafting Nigeria’s pioneer Code of Corporate Governance. He also chaired the Nigerian Communications Commission Committee on Corporate Governance that produced the 2014 NCC Code of Corporate Governance for the Telecommunications Sector. He is also a director, and Fellow of the Society for Corporate Governance Nigeria and speaks to BusinessDay’s ISAAC ANYAOGU on the forthcoming 10th edition of the organization’s conference. Excerpts:
Please give us a brief profile of the Society for Corporate Governance of Nigeria
The Society for Corporate Governance Nigeria (SCGN), a registered non-profit organisation committed to the development of corporate governance best practices and ethics in Nigeria. It was set up following the intermittent crises in the banking system at the time as well as in other sectors due to bad corporate governance practices, and a realization that there was an urgent need to set up a mechanism which would enlighten the key players an stakeholders in the corporate governance sector on the importance of engaging in sound corporate governance practices.
Fellows and Members of the Society have played one role or the other in the issuance of most of the existing Codes of Corporate Governance in Nigeria. SCGN works with the active support of the International Finance Corporation, World Bank, the Securities and Exchange Commission, the Nigerian Stock Exchange and leading listed companies in Nigeria.
What informs the choice of the theme, ‘Institutionalization of Corporate Governance in Nigeria, as a tool for economic development, for your annual conference?
There is an inextricable link between corporate governance and economic development. Corporate governance is receiving greater attention in both developed and developing countries as a result of the increasing recognition that a country’s corporate governance affects both its economic performance and its ability to access long-term, low-cost investment capital. Recent cases of corporate governance failure in large companies have focused the minds of investors, boards, companies, regulators and indeed governments on the threat posed to the integrity of financial markets.
Prof. Mervyn King’s code of governance is said to ‘try to change the tone at the top, the tune in the middle, and the beat of the feet at the bottom of an organisation’ in South Africa, what are we to expect from his address at your event?
Professor Mervyn Eldred King SC is a South African corporate attorney, arbitrator, mediator, corporate director, commission chair, author and speaker. He is Senior Counsel (Silk), a former Justice (Judge) of the Supreme Court of South Africa. He is best known for chairing the King Committee on Corporate Governance, which issued three comprehensive reports in 1994, 2002 and 2009 endorsing an integrated and inclusive approach to corporate governance in South Africa.
We expect that he will address the issue of direct company strategies and operations with a view to achieving sustainable economic, social, and environmental performance, among other notable points, and recommended standards of conduct for boards and directors of listed companies, banks, and state-owned enterprises. I have no doubt that he will also touch on financial and regulatory aspects of corporate governance, and advocate an integrated approach that will involve all stakeholders.
How will your conference deepen corporate governance in Nigeria?
Knowledge, as they say, is power. It is expected that the SCGN annual conference will shed more light on the resolution of the issues which threaten sound corporate governance in Nigeria. With the address by Professor King who is known as the ‘Father of Corporate Governance’, I have no doubt that many grey areas will become transparent during the conference.
Now, let’s talk about the corporate governance in Nigeria, from your vantage point, can you give an informed assessment of the current state? What happened to the Unified Code of Corporate Governance introduced by FRC?
I am of the opinion that we have come a long way from the time when there was no well-laid out system of Corporate Governance in Nigeria. There is now a renewed emphasis in Nigeria for the effective corporate governance of public companies, as well as private companies and the non-governmental organizations.
Furthermore, there are regulatory agencies set up to keenly watch and ensure that there is no violation of the principles of corporate governance. These include the Corporate Affairs Commission, the Securities and Exchange Commission, the Nigerian Communications Commission, etc.
The Unified Code of Corporate Governance while containing some key provisions which would have gone a long way to strengthen corporate governance in Nigeria, has been suspended by the Federal Government citing some unresolved clauses in the Code. It is my recommendation that the Code be revisited to ensure that those provisions are reviewed, and the Code applied. To leave the Code suspended indefinitely would sound like ‘throwing the baby and the bath water out’.
What engagements, if any, are made with your organisation by statutory authorities in arriving at corporate governance codes?
The SCGN provides advisory support services to regulatory authorities, reviews best practices, and assists with code and charter drafting. The SCGN provides fora for exchange of ideas between the regulators and their regulated entities in areas of board leadership, integrity of financial reporting, shareholder rights and other aspects of corporate governance. These in turn provide insights into specific areas needing reforms.
Last month, the Securities and Exchange Commission (SEC), launched an amendment to Nigeria’s Code of Corporate Governance for public companies, to mandate SEC sanction companies without recourse to notice or redress. What’s your take? What other reforms are sorely needed in Nigeria’s code of corporate governance?
With a knowledge of the importance of corporate governance to the stakeholder involved, it is good that the Securities and Exchange Commission desires to make the Code less persuasive and more mandatory, so as to improve its efficacy. It is also good that the Code will empower the Commission to sanction companies that fail to comply with its directives. However, I am quite uncomfortable, to say the least, with the fact that the new amendment is expected to remove the persuasive provision that entitles companies to be put on notice, so they could seek redress in the Courts.
While this will reinforce the mandatory nature of the code and the authorities of SEC to sanction companies, it seeks to do this without recourse to notice on the Companies, or the right to redress. As a proponent of fair hearing, I am of the opinion that companies which fail to comply with the directives, ought to be given notice of their failure to comply, and also a specific timeline within which to comply or state their case, before being sanctioned. I do not think that the right to fair hearing or adequate notice will in any way impact on the efficacy of the Code, which the SEC is seeking to ensure. In any case, fair hearing is a fundamental right guaranteed under the Constitution of Nigeria.
For private companies, corporate governance compliance gets a little blurry, what needs to be done to strengthen corporate governance in private companies?
A lot of focus has been placed on corporate governance for public companies for a very obvious reason: the interest of members of the public in those companies and the stakes in the efficient management of those companies. Private companies are often ignored because they do not have numerous shareholders, hence the risk is relatively minimal (although not always the case, when one looks at the telecommunications companies).
However, corporate governance encompasses much more than shareholder rights. It includes creditors’ rights, suppliers’ rights, employees and the society among others. There are three major categories of private companies; private companies belonging to business families; private companies which are subsidiaries of listed public companies; and private companies as subsidiaries of foreign companies. There should be the promulgation of a Code of Corporate Governance for Private Companies which sets down the importance of practices such as Corporate Social Responsibility, Rules and Performance of Board of Directors, Risk Management and Internal Controls, Appointment of Auditors, among other things.
Even in publicly quoted companies, ownership is linked to management, and boards are filled with lackeys, making the companies unattractive to investors, what role can your organisation play in this regard, to correct this aberration?
The SCGN works with the active support of the International Finance Corporation, the World Bank the Securities and Exchange Commission, the Nigerian Stick Exchange and leading listed companies in Nigeria. The SCGN has worked hard to create awareness within the corporate world, giving trainings to the Board of Directors of Companies, enlightening the directors on best practices in corporate governance.
The SCGN also makes publications such as journals which contain articles by various experienced authors in corporate governance and showcase the various critical issues in corporate governance and how to address such issues, as well as reports on companies which have a strong system of corporate governance in place and the practices of these companies which have led to their success. These activities of the SCGN go a long way towards ensuring that public companies tailor their management in a way best suited to the ideal of proper corporate governance.
What kind of incentives should be created to have truly independent boards capable of removing a non-performing CEO?
Independence is a crucial element of an effective board, and if the Board aims to ensure that the interests of all the stakeholders of a company are protected, they need to have a disposition of independence from the management and from any particular group of stakeholders.
Incentives which would ensure that a company has a truly independent board of directors include: The mix of executive and non-executive directors, Independence of non-executive directors, and avoidance of combination of the positions of Chief Executive and Chairman. A separation of the two positions strengthens board independence.
