Evidence from our recent survey confirms that corporate governance lapses were significantly responsible for the collapse of many companies.
A lot of businesses are failing in Nigeria. Some people believe that the number of crashed businesses is unnecessarily high.
The state of the nation’s infrastructure is always tagged as the major culprit and this is quite true as infrastructural shortcoming, institutional and structural challenges are thorns in the flesh of every businessperson.
MarkMonitor’s recent survey revealed that the situation in the country has created conditions that ail vulnerable businesses, but it also revealed that a major factor resulting in the untimely death of many (indigenous and foreign) businesses is the absence of “Best Practice Corporate Governance.”
Corporate governance Lapses
Setting up a business is an exciting venture, but beyond the initial excitement and vision, corporate governance, which is the body of principles and values that guide a company in the conduct of its day-to-day business and how stakeholders interrelate among one another, remains key to the survival of the business.
Evidence from our recent survey confirms that of the defunct companies in Nigeria in the past two decades, corporate governance lapses were significantly responsible for the collapse of over 70%. We found that the impact of market share, volume of turnover and asset size is not as potent as the impact of sound corporate governance for the survival of a business.
The renewed interest in corporate governance practices globally, could very well be a result of the reawakening to its potency. And the clamour for corporate governance is on a record high, given the spate and high profile corporate failures that preceded the global economic and financial crisis between 2008 and 2011.
League of Defunct companies
Revelations from the Nigerian banking sector, insurance and the media in extension confirmed that corporate governance lapses are potent enough to send high profit businesses crashing, even those that have waxed strong over decades.
The long list of examples are available with the likes of Intercontinental Banks, Oceanic Bank, BankPHB, Afribank, Spring Bank, Lion of Africa Insurance, Societe Generale Bank Nigeria, Mtel, Kaduna Textile Mills, Nigeria Airways, Concord Group, HITV, NEXT, leading the way. All of these businesses and many others crumbled on the back of corporate governance questions.
The recklessness with which the executive management and the board of these institutions allegedly handled investors funds, neglected due processes and took biased decisions; conducts that negate the principles of corporate governance testified to the magnitude to which corporate governance lapses can expand.
In the case of Oceanic Bank, the former group managing director, Cecilia Ibru, was alleged to have given out depositors’ funds worth over ₦150 billion as loans to friends and relatives without collateral; including her nanny who got ₦13 billion loan to cater for personal needs.
Today, investors and clients are becoming more sensitive to the corporate governance framework of companies. There is also a consensus among experts that strong corporate governance and transparency are necessary for going concern, as this is a major indicator of a well-managed and resilient business.
Submissions on Corporate Governance
Ilori Kayode –an Economist
Effective Corporate Governance: Despite all efforts by stakeholders to institute sound corporate governance practices, Nigeria has continuously fared poorly in this regard. 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 unravelling of bad corporate governance practices by senior managements of banks. The decline in the performance of activities at the Nigerian Stock Exchange also brought to fore some of these practises by capital market operators.
James Akpuyibo –a Financial Investment Consultant
Full Disclosure is Key: A couple of challenges are militating against corporate governance in Nigeria. Inadequacy in the implementation strategy of corporate governance standard in Nigeria is a major problem. Regulatory institutions in Nigeria, such as the Securities and Exchange Commission (SEC), the Central Bank of Nigeria, the Corporate Affairs Commission, and the Nigerian Deposit Insurance Corporation still have a lot more to do in ensuring that companies entrench sound corporate governance practices in their business operations. Transparency, proper disclosure, controls and accountability in the system should be conscientiously encouraged, while there should be sanctions for non-compliance. It would therefore imply that the Code of Corporate Governance Practises should be legally binding on public companies in Nigeria.
Bisi Alonge –a Business Risk Manager
Enforcement: Having a credible regulator is the surest way of enforcing cooperate governance in business concerns. The regulators, themselves, should be above board and should lead by example at all times. They should be firm, fair, equitable and transparent in their dealings, and policy initiation should always be by consensus. Effective internal control systems should be put in place by corporate organisations and there should be a system of independent sub-committees of the board, especially the finance, audit, and remuneration committees of companies. Stakeholders’ interests should be protected by the regulators at all times.
Udoma Udo Udoma –former SEC Chairman
International Best Practise: In 2011, SEC launched a new code of corporate governance for listed companies at the Nigerian Stock Exchange, following some sharp practises noticed in the activities of some quoted firms. The corporate governance code was reviewed to reflect the international best practise. In Nigeria, it became particularly important because of some of the unethical practise that was revealed in the administration of some companies. The new code was formulated to guide corporate companies in the conduct of their affairs. While the application of the new code is limited to public companies, other companies are encouraged to use the principles set out in the code to guide their own activities. The code sets out best practices and it allows companies to determine which option best suits them.
Christopher Kolade –former Ambassador of Nigeria to the United Kingdom
Communicate: Every company must bring up to its board a kind of competence that is required to run a successful business. The Board of every company must communication with various organs in their organisations. Communication, not just giving accurate information in good times, but also in giving accurate information in times that are not so good because that is the way to be transparent. With the progress being recorded so far in the banking sector, following the introduction of the new code of corporate governance, beaming the search lights across other sectors of the economy will be a welcomed idea for many as Nigeria continues her chase to be part of the 20 most industrialised nations by 2020.
