What is Corporate Governance?
Corporate Governance is a critical aspect of Nigeria’s business landscape, aiming to combat fraud, corruption, and unethical behaviour within the corporate environment. The Organisation for Economic Development (OECD), which posits a universally recognized definition of the concept, defines corporate governance as:
“The system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as the Board, managers, shareholders, and other stakeholders. it also spells out the rules and procedures for making decisions on corporate affairs. By so doing, it also provides the structures through which the company objectives are set and the means of attaining those objectives and monitoring performance.”
Corporate Governance outlines the principles and standards for board composition, disclosure, transparency, risk management, and ethical conduct within a company. Nigeria, as in many other countries, has had to tackle fraud, corruption, and unethical behaviour within the corporate ecosystem. The Corporate Governance Code was developed to serve as a guideline to effectively foster a culture from top-down to bottom-up that prioritizes ethical leadership, transparency, accountability, and integrity in the business landscape.
Nigeria Corporate Governance Code of 2018: Time for a change?
The Financial Reporting Council of Nigeria, the regulatory body empowered under sections 11c and 51c of the Financial Reporting Council of Nigeria Act, 2011 after due consultation with relevant stakeholders, suspended the erstwhile code of 2016 and released the current code of 2018 with the hope to apply a unified code of Corporate Governance that applies to both private and public companies in Nigeria, promote accountability, business sustainability, encourage international best practices and further boost the Nigerian business environment’s integrity and investors’ confidence.
The 2018 code made significant improvements in actualizing this idea, aims, and objectives of Corporate Governance by first and foremost adopting the “apply and explain” principle, tackling issues relating to concurrent directorship, the role of
chairman on board committees, and establishing a whistleblowing framework, amongst other improvements made.
While the intentions of the 2018 code have been noble, there have been several challenges in many areas since its inception. The code does not prescribe any penalty for non-compliance by companies, inhibiting implementation. Another challenge is the status of the code vis-a-vis pre-existing code, failing to address a situation of conflict between the 2018 code and the pre-existing code. Moreover, in the past five years, there has been a rapidly evolving business landscape currently empowered by technological and digital advancements such as the rise of global traffic, online users, connected devices, blockchain, Robotic Process Automation, and access to cloud computing which have all set the stage for the digital age. Empowered by these technologies, corporations have no option but to embrace digital transformation and global economic trends. Issues about the ethical use of these modern technologies are not provided for in the code.
Therefore, to achieve the aims and objectives of Corporate Governance, the code must be constantly re-evaluated to address the current challenges and bring it up to speed with international best practices.
The views expressed on this website are provided solely for general informational reasons and are not intended to be relied upon as legal advice.
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