‘Legislation on Corporate Social Responsibility is taxation’
Corporate organisations who violate the rules and codes that supposed to guide their operations have sore stories to tell. The Society for Corporate Governance, a non governmental organisation has shouldered the responsiblities of assisting in developing those codes in the last ten years in Nigeria. Its promoter, Fabian Ajogwu SAN in this interview with JOSEPH ONYEKWERE explains the activities of the organisation.
What does the society for corporate governance stand for?
The society for corporate governance of Nigeria is a non profit organization registered under the laws of this country and committed solely to the development of corporate governance. And this is an issue that has become prominent in how organisations are run, after the first and second waves of failures of companies in Nigeria. We have history of companies maladministration in Nigeria and elsewhere in the world, it is not peculiar to us. But what is important is to draw lessons from each wave of company failures. We have Unilever issues on financial misrepresentations, which misled investors and a lot of people lost money. Those were essentially corporate governance problems. After that era, we had another wave of the Commerce bank, Alpha Merchant bank and Forum, a mortgage company.
What you find with those is that a lot of people lost money. People were laid off, deposits were lost and there were sanctions, maybe they were not enough. Again, it threw open issues of how far a person can be in control of much and what you should do when you have multiple stakeholders. About the same time as we got to the end of the 90’s, you have the Enron, which was a global big collapse. People lost several millions of dollars. All these led to Nigerians realizing that we have to sit down and define what corporate governance is for us and write a set of rules. And that was the beginning of the idea for having a body dedicated to corporate governance. After working and drafting Nigeria’s pioneer code, which is the SEC corporate governance code, under the chairmanship of Atedo Peterside, much of that work was for me fulfilling, but yet, challenging to find a way to actually beyond making the code, to make people understand the code, comply with the code, challenge things when we feel they are not in compliance and help regulators to enforce the code. This is the reason for the birth of the Society for Corporate Governance.
Ten years on, what has been the experience? .
The society has gone from its initial period of establishment to putting in place itself to observing corporate governance. The pioneer president and chairman of the board is the very respected Christopher Kolade CON. It was a rich board of very experienced people and captains of industry. We have just to mention a few, Mr Pascal Dozie, the chairman of MTN, Mr, Olusegun Oshunkeye, who is the current president and chairman of the board of the society. He was previously the chairman of Nestle, Larfage, Wemco, Glaxosmithkline, and a whole lot of those blue chips. We have the current chairman of Diamond Bank, Dr. Chris Ogbochie on the board. The current vice chairman of Exxon Mobil for Africa, Dr. Kachukwu and the executive director of Etisalat, Ibrahim Dikko on the board, Vice President in First Bank, Alhaji Tijani Borodo on the board and professor Pat Utomi is there as well. That is just to mention a few of them. What we did was to establish a very sound society with broad based membership. We selected those who met the criteria. We have individual members, we have corporate members and we have fellows. Over this period of ten years, the society has first of all sought to observe the things that it preaches and has regular board meetings once every quarter. The attendance is almost 80 to 100. There is sound financial reporting. It is constantly audited by KPMG. And I must add that KPMG does it entirely on a pro bono basis.
Again, it has succession planning. We know that as one leader is retiring, we know that the next leadership will be seamlessly installed. We do have regular communications with stakeholders to tell them what is happening. The society embarks on research and publications. It has a journal of corporate governance where ideas from the academia and practitioners are drawn. It has been published regularly since 2009 till date. It has the corpgov news which is a very select news of what is happening in corporate governance world at the centre weekly to the members and stakeholders. It also has observatory on corporate governance, which is like a 30,000 degrees view on corporate governance within corporate Nigerians. These are the things foreign investors look at. It is not just that there are returns on investment in our country, but that they can rely on whatever you pulled out and publish as your account. Whenever investors fear that they may no longer rely on what you said it is, then, you have lost and you can’t even quantify what you lost. So we take this observatory published annually. Now there is also a publication on the top 20 most capitalized companies in our stock exchange. It also has e-governance news letters. It doesn’t stop at those publications. It is important to research and bring out critical data within the industry. It really does advocacy in that field by finding out what laws, bills are likely to affect businesses in Nigeria, especially governance and proactively follow through with it to either provide advice to the National Assembly or the investment community and we have several instances.
Could you please give us an example of such?
I will just give you one instance because it is very significant. There was a proposal at the National Assembly to pass the corporate social responsibility bill. On the surface of it, it looks like it was going to promote the corporate social responsibility. But then, when you read further, it says that you will need a take off grant of about N1billion, it would have a DG, directors and so on. It was going to surcharge two percent of every companies profit to pay to this commission. We know that there is no where in the world where you make corporate social responsibility a mandatory thing. It is a desirable thing, but you don’t legislate on it. Once that is done, it is a taxation, by whatever name you call it. So we went and made submissions to the National Assembly and said these are best practices across the world, we cannot be different.
In any case, the primary responsibility of the welfare of the people of Nigeria is vested on the government. Companies may be kind, nice and sponsor things, we cannot outsource our welfare to those companies. These are a kind of quite advocacy which we do. If we don’t raise it and the laws are made, they bind everyone. We also do the training of preparing people to become directors. People assume that you only prepare to enter university through JAMB, prepare to go to post graduate, prepare orientation to become staff, they don’t feel that you now need to prepare yourself to assume directorship responsibilities. Very often, we have seen that uniquely, being a director is highest level of responsibility. But most don’t even know that that responsibility is coupled with a burden of leadership. If you fail, it is not just that you failed, you could end up in jail. Most times, you see that when companies go down, the real people that are taken are the directors. Rarely do you go looking for shareholders. So we try to educate in board programme that has been specially designed by the society in collaboration with key institutions that still work closely with it such as the International Finance Corporation and world bank. They have run programmes in association with the society to enhance the boards of financial institutions. You will see that the third wave which we had in 2009, where we had Intercontinental Bank, Oceanic Bank challenges, some of those challenges have to do with the quality and strength of the board. The society also collaborated with Lagos business school, the NDIC, the Nigeria Stock exchange to train the directors of their dealing companies and they were about 400 companies. In the last five years, the society has worked strongly with almost all the key regulators. It has supported the NCC in helping to issue its code of corporate governance.
Once we had a look at the market capitalization of 12 blue chip companies that included Nestle, Unilever, John Holt, Nigerian Breweries and we found out that the total market capitalization of those companies was less than the market capitalization of MTN alone. Yet MTN, is a private company. It is not listed in the stock exchange, so the code of corporate governance of the SEC is not applicable to it. So the NCC in its wisdom decided that they have succeeded in launching out the industry. The next phase, also as important as network quality, is the behavior of those who are in charge of these industries. There is a phrase used in the corporate world for companies which had grown so big over the years, which is ‘too big to fail’. A company can grow to a point where it’s failure will lead to the failure of so many other people in the society. So you cannot imaging where telecommunication company would collapse, it will drag down all the subscribers, network access and people would be laid off. So that company should regard itself as too big to fail. So it becomes important that the behavior of governance of the entities are adhered to. We should not be a nation that reacts only, we should be preventive. Much of these collaborations efforts is geared towards one thing – sending the message of corporate governance, behavioral governance, risk management across to those sectors. And what is the impact? The impact lies on the number of board members that have gone for the programme, which I will put at between 1000 and 1500; senior managements that have gone through this programme and the number of bills that have been properly conceived or amended because of our interventions. A whole of Nigerians only know about the law when it has become law. They don’t get involved when it is at the making process, where suggestions can be made to affect change. The society has tried to keep faith with its mission, which is to be the leading role player in the development and promotion of corporate governance within the federal republic of Nigeria. It has external partnership, but the emphasis today is to get it right at home. The next phase of launch of the activities of the society now is the SOE’s, the State Owned Enterprises. They function like companies and it is important that they have corporate governance code.
What is your view about the removal of fuel subsidy? .
The amount of money we spend trying to subsidize consumption is one of the biggest leakages in the system which ought to be blocked. My preference is that we do not subsidise consumptions of petroleum products. When we spend about N1.2 trillion out of the budget of N4. something trillion, it means that we are drinking away a quarter of our future.
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