There have been a good number of new corporate governance codes in the last seven years. All of them point to the fact that the days of appointing people onto a board because they are your uncle, your mother’s sister or blood relation are over. Today, the change that has started happening, and still going on, is that the selection of board members is given the very critical attention it deserves. Now, priority is given to those who have the educational qualification and understand the business.
If you are a banker, once you find yourself appointed a director of a bank, you sort of go to school on your own: you pick up books on banking, you listen more to financial analyses, you strive to understand core financial issues. Today, every person who gets into the board of a bank goes through a period of induction which leads you through the various sections of the bank’s activities. You ask questions to understand, you do your own reading, you embark on self-education, and in no time, you understand the basics so much that when issues about finance are being discussed, you are not thrown overboard. These days, the industry no longer seeks for board members who habitually doze off while the meeting is going on.
The other change has to do with internal loans, a malpractice that killed a lot of companies in this country, banks especially with a board member saying: “I am a director of this bank; I need this loan. I am qualified for it because I am on the board.”
That is in the past now. For some boards, it is now a written (or unwritten) law that members of the board are not qualified for personal loans. If you run a good business that requires facilities, your loan application will have to go through all the rules and procedures. Paper check is carried out, even if it entails screening by State Security Service or other relevant agencies. In any case, nowadays, nobody goes into any bank directorship without proper screening, including fingerprints and background check dating back to your primary school days. You can be sure that a lot of information you filled in the form will be closely scrutinized. I was surprised one day when I got a call from the current principal of St. Gregory’s College, Ikoyi, Lagos, an institution that I passed out of fifty years ago. He called me to say: “I had a visit from the State Security Service. They questioned me about you, about your time in the school.”
If you give names of neighbours where you have lived in the last 10 years, they would go and find out your past from those neighbours. Do they know you? What kind of person are you? Can you be trusted with a directorship? That goes on now. It helps to weed out those who have no business being there, those who shouldn’t be directors on the board of a bank. Boards these days are looking for people who are not desperate. For you to be on the board of a bank, you must have excelled in your field. You must have been credited with some degree of intelligence and integrity. You must be someone society can vouch for.
Now, directors are also required to undergo compulsory training. For instance, the Central Bank stipulates one or two courses that you must attend locally in Nigeria. Failure to do that could disqualify you and lead to your being dropped from the board. The courses are in the area of finance, banking, corporate governance, audit, credit facility and risk management. In some banks, you do the local courses and you also do the foreign equivalents. They are mandatory. It’s not a matter of whether you like it or not. So, as a bank director, you are kept on your toes a lot of the time and that keeps in your subconscious, the reason you are on the board. It’s not just money thing. In any case, banks these days put a cap of directors’ earnings. It is not a free-for-all anymore as it used to be.
Corporate governance is all we have been discussing in this book. It is ensuring that the bank is running according to industry rules and regulations; ensuring that the bank’s operations are conducted within the ambit of rules and regulations stipulated by the Central Bank; ensuring that we are interfacing as effectively as possible with the shareholders and stakeholders of the bank. The importance of corporate governance can never be overemphasized. More so because the advanced world that we always looked up to as the citadel of knowledge and integrity fell like a pack of cards in 2008! That was so because the world started taking a lot of things for granted—that once you have a beautiful structure in place, and you appoint or elect heads of various multinational companies and you engage a good name consulting firm as your auditors and financial advisers, that all was done, so investors can go to sleep, leaving the reins of powers and authority to the executive management, and taking the words of auditors as sacred. Talking about external auditors, I mean the best names that had grown over the periods.
Then the cracks started. Companies the world thought were the best blue-chips to invest in suddenly started collapsing due to inside mismanagement and ethical breaches. The world unfortunately was caught napping. Besides inside mismanagement, the so-called auditing firms that should be the eyes and nose of investors were also complicit, either looking the other way or also part of the scheme. Suddenly, we were all jolted awake. We woke to the fact that there is a need for far closer watch on management of companies and auditors around the world. Post-mortems showed that in some areas, there were outright collusions; in other areas, the board was working direct opposite of the ethos set up by the owners of companies. Shareholders became people that hardly knew anything about their business anymore. That is the catalyst for a new crusade to step up on corporate governance, to step up on good input management of human and material resources, and of course, to improve supervision of auditing companies. Auditing companies can be quite a problem. They could present accounts crawling with all kinds of terminologies and jargons which a board may not be able to decipher until it is too late.
We cannot overemphasize the need for improved corporate governance as a means of giving integrity to the business world. Therefore, there is need for boards to become more assertive. Directors need to understand that the reason they are on the board is not be a “yes sir” kind of board where directors just come for board meetings, believing “all we need to do is attend meetings, collect our remunerations and go back.” It is so serious now, that the law says that even board members would be prosecuted and jailed if the board is found guilty of dereliction. That tough stance is putting some sanity into the system.
(For more on Sir Steve Omojafor’s Zenith Board experience and others, buy ‘50 NIGERIA’S BOARDROOM LEADERS—LESSONS ON CORPORATE GOVERNANCE AND STRATEGY.’ By Mike Awoyinfa, Dimgba Igwe and Jibril Musa. Enquiries: [email protected] Also available on Amazon)