‘Uniform code of governance will boost investment’

THE proposed uniform Code of Corporate Governance being developed by the Financial Reporting Council of Nigeria (FRC) has been described as a veritable tool in the quest to guarantee investment in the economy.

The Executive Secretary of the FRC, Jim Obazee, made the assertion, while addressing a press conference on the code in Lagos.

Identifying the benefits of the uniform code of corporate governance, he said it would lead to increased management credibility, more long term investments, lower cost of capital, improved access to new capital and higher share values.

“For foreign investors, local investors and lenders, better disclosure provides more relevant information for making sound investment decisions and risk assessment respectively.

“It is obvious to all now that financial statements published by entities in Nigeria are fuller; with more disclosures of the activities of the companies they have invested in. As such, the risk of loss of their investments is low because the activities in the capital market are driven by informed decisions”, he added.

The new uniform code which was produced by a Steering Committee of the FRC under the chairmanship of Victor Odiase, was issued on April 15 this year and it is available for comment on the website of the FRC.

Already, a public hearing has been slated for May 19 this year, after which the code would become law.

The uniform code is replacing the present set of six codes being operated by the CBN, NDIC, NAICOM, PENCOM, SEC, CAC and the NCC.

Obazee however, said the new code would be different from the previous ones because it would be mandatory with full force of law, unlike the previous ones that were based on moral suasion.

He further disclosed that the uniform code would bring Nigeria in conformity with other parts of the world, while noting that countries like India, China and South Africa are attracting investments because of the excellent corporate governance put in place.

The new code is divided into three segments- Public Sector, Private Sector and Not-for-profit.

Among major provisions of the private sector segment of the code are clear statement of the main purpose of a corporate board to clear any ambiguity, specification of a minimum board size of eight while the maximum board size is left to corporate needs, prohibition of continued dominant influence of “board retirees” to sustain board independence, Joint Auditors for Listed and Significant Public Interest Entities and strengthening the authority of the audit committees by requiring that any override of their recommendations on external auditors’ appointment, reappointment or removal be subject to a 75% override validity vote.

It also provided for strengthening of whistle blowing apparatus, prescription of definite time limits for the tenures of the MD/CEO, executive directors and non-executive directors, appointment of only independent non-executive directors as Chairmen of certain critical Board committees, particularly audit, remuneration and nomination and mandatory rotation of external auditors every five years and possible re-appointment after a cooling off period of five years.