The society for Corporate Governance Nigeria recently organized a round table discussion on effective corporate gover­nance in the country. This is in furtherance to the company’s belief that good corpo­rate governance practices provide impor­tant framework for timely responses by company’s board of Directors to situations that may directly affect stakeholders’ value. It is also correct to note that the crisis that had overtaken the banking sys­tem had a lot to do with lack of effective corporate governance. In fact a study reported to have been undertaken by the Securities and Exchange Commission (SEe) confmned that code of corpo­rate governance can only be found in about 40 per cent of the companies quoted on the Stock Exchange. Dr Christopher Kolade, ProChancellor of Pan African University, harped during the round table discussions on the need for the understanding of who really is an independent director; what really are the implications of having independent director on the board where the independent direc­tor is one who sits on the board based on proven expertise in a particular area which the board needs and who does not have any other relationship with the organization including even business relation­ship? The question of how much information should a company disclose as it is well known that if companies are not circumspect in this regard they could make disclosures that could be at the cost of their competitive advantage including the issue of the appropriate level and mix of remuner­ation came up for discussions during the round table discussions. The question of Corporate Social Responsibility ( CSR ) which was lately in the news as legislators attempted to enact a law that should guide companies in discharging this responsibility and more recent challenges regard­ing tightened disclosure rules and escalating criti­cism of management compensation, concerns about shareholders’ value were all x-rayed at the round table discussions.

The issue of effective corporate governance has been the focus of attention for some time now. In fact following the Consolidation Program the Central Bank underscored its concern regarding the on- going viability of banks in the country by the issuance of a code of Corporate Governance to guide all operators. Atedo Peterside also chaired a SEC group on the articulation of a code of corpo­rate governance. It also remains a fact that the lack of effective corporate governance practices has been cited in the indictment of the board of the banks that recently came under the hammer of the Central Bank.

The problem with corporate governance in the country stems ab. initio from the fact that most company promoters do not conceptualize the com­pany as a legal and autonomous entity that has an independent existence which could be sued and can sue on its own. Most promoters have seen companies as at best an extension of themselves. This is why most promoters would prefer a board that is docile and compliant that would glory in the fact of membership, simply go along, not ruffle any feathers, from which members of the board receive the perks of office and attend irregularly held board meetings. This mindset gave rise to the incidences of over concentration of powers on one individual who is designated as Chairman! CEO or Executive Vice Chairman; a practice which the CBN code of corporate governance has now point­edly prohibited.

Under this model the membership of the board is determined based on one form of primordial relationship or another and had very little or noth­ing to do with proven expertise and therefore antic­ipated contribution at board meetings. And this attitude lays the foundation for the lack of effectiveness of the board and we would dare to suggest that may be if it is not going to amount to overload that the Central Bank in addition to the approval it has to give for executive members of the 1?oard should also extend its approval to the non-execu­tive members to correct this shortcoming. If the composition of the membership of board /s not taken seriously then all preachment in this regard will be in vain!

It is to change this attitude that has encouraged the emphasis on the percentage of shareholding which an individual member of the board could hold. At the moment for banks holding in excess of ten percent can only be allowed based on the express approval of the Central Bank and mem­bers of the same family are not encouraged to share the same board membership. But this restric­tion would seem not have amounted to much as promoters to circumvent this guideline proceed to recruit directors on proxy basis. The industrialised world does not concern itself with such issues but for them what is important is the separation of ownership from professional management. So attempting to foreclose the existence of one man banks might not be addressing the real problem. The number of member on a board should ideally not exceed 20 with the non executive members well exceeding the executive members.

It is also necessary that the board is made to be alive to its responsibilities particularly with regard to the preparation of strategic plan for the organi­zation for which it must monitor implementation by insistence on receiving regular briefing on progress by management.

The board must also be sensitized regarding its responsibility with the formulation of policies to ensure that it does not engage in turf battles in areas which are purely operational and therefore under the exclusive purview of management. It is recommended that scheduled board meetings are held quarterly with materials for discussions at the board meeting sent out to board members at least a fortnight before the date of the meeting. In this era when board membership carries vicarious responsibility board members are better advised to ensure that the company carries out its functions in a legal and ethical manner. The board must not attempt to complicate life for the regulator by not adhering strictly to guidelines and by not respond­ing positively to the request for submission of accurate and timely reports as might be demanded by the regulator.

The board has the responsibility to ensure that top level succession plan is in place. One of the acid tests for a truly independent board is whether it has the ability and enjoys the freedom to closely monitor the activities of the Managing Director, determine the scale of remuneration he enjoys and able to fire him should the need arise. On remu­neration the board must· pay adequate and com­pensating fees; sitting allowances and other peri­odic fees to the directors for the expertise and direction it is able to make available to the organi­zation. Remember if you pay peanuts; you get monkeys! Of necessity the company must do some regular work through some board committees. In banking these committees are usually the Credit Committee, the Audit Committee and the general purpose Committee. The Chairman of the board should not sit on any of the committees which ide­ally should be populated with the non executive members of the board. The Audit Committee must be composed with individuals of high integrity, independence and proven competence. The board must imbibe the culture of attendance to regular training and education to keep members abreast of cutting edge developments and the board must reg­ularly subject itself to self appraisal employing the services of independent consultants.

Chizea wrote from Lagos.

Boniface Chizea