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Companies Must Operate Highest Standard Of Corporate Governance – Alo

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Dr. Oladimeji Alo, immediate past chairman Of Berger Paints Nigeria Plc, in this interview with OLUSHOLA BELLO, urged companies to adhere to highest standard of corporate governance and other issues.

Being a chairman of Berger Paints Nigeria Plc, what was the corporate governance structures put in place during your tenure?

When I joined the board of Berger Paints, I met a company that had a very good brand. The company was established in 1959 and was the first paint manufacturing company to be listed on the Nigerian Stock Exchange. Besides, the company was a pace-setter and had recorded many feats in its sector of the Nigerian economy.

Today, the company’s products are known in the market for their high quality and dependability. The first puzzle I confronted, therefore, was finding out why a company with such intimidating profile was not realizing its full potentials. I did not have to search too long for answers to that puzzle. I quickly identified a number of issues that needed to be addressed to free the company from what might be described as self-inflicted stagnancy.

Under my leadership, the board took a number of initiatives aimed at strengthening the company and modernising its operation. One of the initiates was on strengthening the structure of corporate governance in the company. In that regard, we developed governance charters for the board and its committees. We introduced a whistle-blowing mechanism and dealt with reported cases of fraud promptly.

We made public examples of managers implicated in unethical practices and sent clear signals to all stakeholders that the board had zero tolerance for fraud and other malpractices. The effect was a radical reduction in cases of fraud and a positive change in the corporate culture.

Looking at the way and manner companies in Nigeria implement the ABC of corporate governance, what would be your comment?

It would be wrong to lump all the companies in Nigeria together. I have been privileged to serve on the board of some companies that take the principles of corporate governance to heart in everything they do. Today, those companies are strong and doing very well in their sectors of the Nigeria economy. I have also encountered other companies which see any attempt to get them to do things in the right way as attempts to interfere in the way they run their businesses.

The owners would simply say it is my money, why are you asking me to have a board of directors? Why do you say the board should meet four times a year? Why do you say I should submit this or that for the consideration of the board? Many of those companies do wellin five years, 10 years and suddenly disappear once they face a major crisis or something unforeseen happens. They collapse easily because their foundations are weak.

You find that in some of those companies, the chief executive officer is often richer than the company he manages. Those companies simply pay lip service to the principles of good corporate governance. We also still have a large number of indigenous companies, especially in the SME sector, where the owners do not even understand what corporate governance is all about. All we need to do for that group is to continue to educate them; that it is in their own best interests to create structures, create processes and adopt best practices in managing their enterprises.

In your view, what should corporate organisations do to promote capacity building of their employees to enhance output?

I think the first thing is that every company must have a policy on capacity building. Policy means that you have a clear statement of purpose and intentions that serve as a clear guide to all stakeholders on what you plan to achieve and how you want to achieve them on any subject. The next thing you do is, you develop a plan for implementing those policies on an annual basis. You then proceed to allocate resources for implementing the plan and ensuring that it is effectively implemented.

What are the factors militating against the enforcement of the code of corporate governance by the regulatory bodies?

You must remember that the country is currently working on producing a unified code of corporate governance for all companies in Nigeria. That effort is being led by the Financial Reporting Council (FRC). Prior to that, we had different codes for different sector. We had the Central Bank of Nigeria (CBN) code, National Insurance Commission (NAICOM) code, National Pension Commission (Pencom), code, Nigerian Communications Commission (NCC) code and Securities and Exchange Commission (SEC) code. The different regulators had done a lot of commendable work in educating the operators and enforcing the codes. In my view, the imposition of fines and other sanctions should not be the primary focus. There is a need to get the operators to know that it is in their best interest, on the long run, to adopt and implement the codes. There should also be a regime of incentives to reward companies that play by the rules. That, in my view, would promote voluntary adoption of the rules.

What are the corporate governance issues affecting quoted companies?

Quoted companies must operate the highest standard of corporate governance. It is part of the Post Listing Requirements of the Nigerian Stock Exchange (NSE). The board of quoted companies play vital role to ensure compliance with the principles of corporate governance because there are sanctions for infringement. Let us examine the selection of board directors, it is not enough to have a board. You have to carefully select those who would serve on the board.

Those appointed to the board of a company must possess complimentary skills and knowledge that would benefit the company on whose board they serve. This would enable each director to add value to the company’s operations. The key issue is the value each director is bringing to the board. An effective board must have people with diversified skills, experience and competencies. A board could have Lawyers, Accountants, Management Experts, Engineers, etc. A board is not just an assemblage of persons. It is a group that must generate positive momentum and synergy that would ultimately benefit the company.

Nowadays, the issue of board size and appointment of ladies to the board is gaining currency globally, what is your take on this?

The first thing about size of the board is that there is no prescription as to the number of directors a company must have on its board. The right size is dictated by several factors, some of which would differ from one company to the other. A board must neither have too many directors or too few. A board is expected to have at least three or four committees.

Assuming that a company has four committees, it would have difficulty constituting the committees, if each director is not expected to serve in more than three committees, if it does not have at least seven directors. Again, there are rules on the class of directors that should serve on some major committees. That further makes the task of constituting the committees difficult if you do not have a certain minimum number of directors on the board.

So, often time, a board may need to have a minimum of seven directors. On the question of gender, do we need gender balance on boards? My answer is yes. Women bring a unique perspective to issues and so if you have an all-male board, you are losing out on that perspective. If we were to re-constitute the board of Berger Paints today, we certainly would ensure we have some gender balance.



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