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Human Resource: Imbibing Good Corporate Governance In Workplace

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The fact that over 70 per cent of defunct companies in the country collapsed because of poor corporate governance only goes to show the relevance of good corporate governance to business survival, ZAKA ABD-KHALIQ writes.

Nigerians are hardworking and this pays off when considering the huge base of entrepreneurs in this country. Irrespective of the harsh business environment in the country, businesses keep springing up day-by-day. Both local and foreign investors continue to build companies that they hope would outlive them. However, the painful aspect of this is that most of these businesses don’t celebrate their fifth anniversary. Even though some would point accusing finger on the harsh operating environment as being responsible for business closure, findings show that 70 per cent of defunct companies in Nigeria over the last two decades, collapsed because of breakdown in corporate governance and not necessarily, funding. Weak corporate governance with regard to undue interferences, lack of disclosures, padding of books and general corruption has suffocated these businesses out of existence. No doubt, corporate governance is key to business survival and continuity and any firm aspiring to outlive its founder must not joke with it. Hence, experts said good corporate governance remains the lubricant that oils the engine of successful brands and an aspiring entrepreneur must imbibe this, if he wants his business to outlive him. Corporate governance centres around such values as integrity, accountability, transparency, full disclosure of financial and nonfinancial information, among others. Good corporate governance is about having the correct policies and procedures in place. It is also about maintaining a culture where good relationships between stakeholders provide positive contributions to the long-term goals of the organisation. Directors, company secretaries and managers can all make a significant contribution to good corporate governance.

There are several key areas which, experts said, contributes to good corporate governance. These include; the board, whose necessary skills, independence and commitment to make the right decisions is germane. While Shareholders are central to any business, they stressed that keeping them informed and encouraging their participation through general meetings is sine qua non to good corporate governance, even as such organisation must recognise its obligations to non-shareholder stakeholders such as employees, suppliers and customers. Such firm, according to market observers, must also maintain a policy of transparency and disclosure in every aspect of the organisation from finances to personnel.

CASE STUDY

The recent casualty of poor corporate governance is Skye Bank, now known as Polaris Bank Limited. Weak asset quality, rising funding costs and increased customer wariness about the safety of their deposits and poor corporate governance have conspired to squeeze out the now defunct bank’s balance sheet and tear its profit figures to shreds leaving the bank in a life support situation. Before the first apex bank’s intervention on July 4, 2016, its erstwhile chairman, Mr. Tunde Ayeni , and another director, Dr. Festus Fadeyi, had borrowed huge loans from the bank to run other business concerns. Details showed that while Ayeni owed the bank as much as N36 billion and repaid only N6 billion, Fadeyi owed N98 billion, pointing to the breakdown of corporate governance in the bank. However, the apex bank, had, last month, revoked the licence of Skye Bank and transferred the liabilities, assets and management of the distressed bank to a newly- licenced entity, Polaris Bank, to be driven by the Asset Management Corporation of Nigeria (AMCON). So far, the Nigeria Deposit Insurance Corporation (NDIC), has liquidated 281 financial institutions after the Central Bank of Nigeria(CBN) had earlier withdrawn their licenses for their non-adherence to corporate governance rules, among others. Moreover, stakeholders in the aviation sector blamed the failure of local airlines on poor corporate governance and management structure.  The Nigerian Civil Aviation Authority (NCAA) statistics revealed that over 40 registered airlines had collapsed since the apex regulatory body was established in 2001.  The experts observed that while over 40 airlines had already collapsed in the last 17 years, some of the surviving seven local firms and the proposed Nigeria Air were not immune from the same problem.

Former director – general of the Institute of Directors (IoD), Victor Banjo, said airlines struggled around the world, but the major difference between the local firms and their foreign counterparts was the place of good corporate governance in management and operations of the business. Banjo, who is a former director at the defunct Virgin Nigeria Airlines, explained that corporate governance essentially addresses measures to manage and reduce financial and operational risks by building the integrity, transparency and accountability of a company’s board and management. He said, “It was not unusual to see Nigerian airlines collapse the offices of chairman and managing director in one person. Ditto for having one person as the manager and also a pilot, while wives and children are directors, and some not having board of directors or holding board meetings.”

EXPERTS CALL FOR GOOD CORPORATE GOVERNANCE 

The chairman, Institute of Chartered Secretaries and Administrators of Nigeria(ICSAN), Lagos State Chapter, Mr. Francis Olawale, said, for businesses to thrive, especially now that the economy is struggling, they must embrace corporate governance. More education, he added, was still needed for people to imbibe the principle of corporate governance practice, noting that the impact has not fully been felt across sectors of the economy. Saying that negative vices such as nepotism, corruption, and bribery, among others, had eaten deep into the fabric of the public sector, he added that if corporate governance was adequately explored, it guarantees sustainable development.  To him, “I am of the opinion that robust corporate governance is needed in the sector; if the sector must be revived to contribute immensely to the economy. There has been a lot of noise in terms of getting organisations to imbibe corporate governance in Nigeria, but there is need for more education for people to imbibe the principle.”

Good public administration, according to him, entails time-tested principles like disclosure and transparency in government operations and affairs, deepening of effectiveness and efficacy at all levels and institution of governance, prudent management of resources, equitable treatment of all citizens, and unwavering focus on welfare and security of the people.
The deputy managing director, Legal Services, Federal Airports Authority of Nigeria (FAAN), Mrs. Bridget Gold, who said that poor corporate governance mechanisms in companies have proved, in part, to be a major impediment to improving the competitiveness of firms, canvassed for enhanced corporate performance that can lead to higher economic growth.
“The best management practices adopted by the best managers cannot succeed in an environment characterised by poor governance. Shareholders and financial backers should be informed about how economic growth, social well being and environmental care finds a proper believe in corporate strategies and operations,” she stressed.
On his part, senior partner, Phillips Consulting Nigeria, Paul Ayim, said, lack of regulatory framework and multiplicity of codes have not helped organisations on good corporate governance.
An economist, Ilori Kayode, had said, despite all efforts by stakeholders to institute sound corporate governance practices, Nigeria has continuously fared poorly.
“We have observed how the lack of an effective corporate governance framework in Nigeria has been exploited by senior managements of companies at the expense of other stakeholders. More staggering is the recently unraveling of bad corporate governance practices,” he observed.

2018 CORPORATE GOVERNANCE CODE

The establishment of the Financial Reporting Council of Nigeria (FRCN), through the Financial Reporting Council Act 2011, was to ensure that the council develops principles and practices of corporate governance. Executive secretary, FRC, Daniel Asapokhai, while speaking on the Nigerian Code of Corporate Governance 2018, said the code would also enhance the integrity of the Nigerian capital market, by entrenching a culture of disclosure, transparency and accountability.While believing that this code would promote ease of doing business, attract local and foreign investments and enhance the integrity of the Nigerian capital market, by entrenching a culture of disclosure, transparency and accountability, he added that this code would raise public awareness of good corporate governance practices. The Nigerian Code of Corporate Governance, he said, has adopted the principle, which requires companies to apply the requirements of the code and to explain how they did so.

The FRC boss said, the decision to adopt the approach was made after careful considerations of several factors including the Nigerian legal system, Nigerian culture and history, government policies, state of the Nigerian economy, global economic and political climate, and levels of capital inflow of investment coming into the country. “The Nigerian Code of Corporate Governance 2018 shall apply to all public companies; whether listed or not, all private companies that are holding companies of public companies and other regulated entities, concessioned and privatised companies, and regulated private companies,” he said. The 2018 code, he noted, was developed based on a comprehensive review of the suspended 2016 Code of Corporate Governance by a fifteen-man technical committee, and extensive consultative and collaborative engagement with a wide range of stakeholders and other regulators. Speaking at a public hearing on the exposure draft of the Nigerian Code of Corporate Governance 2018 for south-south geopolitical zone in Port Harcourt, the managing director/chief executive officer, Seplat Petroleum Development Company Plc, Austin Avuru, noted that many indigenous companies have failed because of non-adherence to good corporate governance. Avuru, who was represented by the Mrs Obianuju Othniel, said most indigenous firms die before 20 years while their foreign counterparts last for even centuries. “In the oil and gas industry for instance, we like to ask why international oil companies (IOCs) are doing business successfully for more than 50 years while indigenous companies do not survive. The answer is simply good corporate governance. The secret is adherence to good corporate governance which instils discipline and accountability,” he said. The president of Port Harcourt Chamber of Commerce, Industry, Mines and Agriculture, Dr, Emi Membre-Otaji, urged relevant stakeholders to start implementing the provisions to enhance their growth, adding that, it may be a little more expensive at the onset, but in the long-run, it is very beneficial to the company.

 



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