Corporate governance has to do with the rules and procedures put in place to help the company run properly. Coming from the scandals that took place in the financial world—the big collapse of Enron and other companies—the regulators felt the need for remedial measures. This evoked some review of what happened and consequently the emergence of new guidelines and regulations that will help to prevent such catastrophic episodes from happening again. But alas, in 2008, we had also a financial crisis that underscored the fact that despite all the rules, we are not yet there.
So corporate governance can be defined as something that guides corporate organisations the right way to prevent fraud and ensure that the interests of the owners and stakeholders are protected. It is a good development because it helps businesses to grow. That is not to say there are people trying to go round the rules.
We shouldn’t, however, succumb to the temptation of having too many regulations that will stifle innovation and the growth of the business. For many smaller companies, there are so many things to do to be in line with these guidelines. Hence there is need for rules to be balanced. It must be seen to be trying to help, not to stifle the business.
Since corporate governance issue cropped up in 2001 and 2002, epito- mized by the financial recklessness of Enron and one or two other companies in America and in Australia, the world was jolted awake. Since then, regulatory agencies have been trying to get people to do the right things. Regulations, processes and guidelines have been drawn to make sure that the boards are looking after the interest of the owners and other stakeholders. Therefore, corporate governance issues are topical, important and necessary. It is about ethics, doing business the right way and with integrity.
Integrity is very important for every member of the board. It is only when people are fraudulent that they start to find ways to go round the rules. There must be those who check those who check the system. There is internal audit that looks af- ter controls and there is also the external auditor whose job is to help find things that are out of place, out of sync, or irregular in the system. Whatever the auditor finds cannot immediately be deemed fraudulent; but when the board refuses to make adjustment or amendment in response to the findings, then it begins to take the shape of fraud. When boards deliberately do certain things that are clearly aimed at benefitting its members, its integrity comes under question. It should be clear to board members that their working on the board is not for their own benefit.
While the bottom line of corporate governance is universal, occasionally, there may appear to be some relativity in some of its aspects. For instance, America is different to a large extent from the rest of the world, especially with the IFRS issue. The International Financial Reporting Standards (IFRS) is designed as a common global language for business such that company accounts are under- standable and comparable across international boundaries. It is a system that gives full disclosure for the interest of the institutional investors. With the rise in international share holding and trade, it is particularly important for the companies that have dealings in several companies. Every company quoted in Nigeria is expected to comply. But companies in America have failed to adopt the standard.
In America, you still find that the CEO can be the chairman (or president as they call it). It is very common there. Because the CEO is the one who started the business and grows it, he still retains the hire- and-fire power, whereas in most other countries, including Nigeria, it doesn’t happen that way anymore. The CEO is separate from the board chairman.
Nestle Nigeria is a big organisation. And being the chairman of the board comes with a lot of responsi- bilities. It may be difficult for some people to understand because these days the chairman is not the CEO and the chairman is non-executive, therefore, he is not the one who runs the day-to-day activities. His role is strategic decision and guid- ance, and ensuring there is good corporate governance. There are a lot of things he cannot do, yet the performance of the company is his
The codes of corporate governance duly spell certain things the chairman must do but if you have a good CEO who knows his job, who is doing the job the way it should be done, the job of the chairman is less tasking. Once reports are good, the company is doing well, and every stakeholder is happy, what else is the job of the chairman but to make sure that the company is doing well?
Going forward, I do not foresee any radical change in the concept of the board or its slew of roles. A change I’d love to take roots, how- ever, is a move away from the practice whereby people are put on the board only for prestige sake. There are certain places people are put on the board as a way of recognition or as a just reward for them. That brings to mind government establishments where people are put on board, not for value addition, but to fill some quotas or as rewards for some political favours and stuffs like that. Sometimes you hear of the squabbles in the National Assemble over who gets into ‘juicy’ committees. This is service we are talking about, what has it got to do with juicy committee? The board should be a place where people are going to add value. Of course, it is good to recognize people, make life comfortable for them, and get them some remuneration for what they do. But as far as the board is concerned, membership must be for competent people. Every one of the directors should count for competence.