BY Professor Akin Oyebode


We might, perhaps, begin with an acknowledgement of the fact that capitalism is on the ropes all over the world. The observation by the one-time British Prime Minister, Ted Heath on the "ugly and unacceptable face of capitalism", following the indiscretions of Tiny Rowland in relation to the management of Lonrho in the 1970s may appear today somewhat feeble and tepid in light of the trauma that capitalism has been enduring in the recent past. The global crisis of capitalism which has since come to be described as the "global meltdown" has necessitated the re-invention or reconfiguration of the capitalist system if it is not to expire. Whether it is called a stimulus, bail-out or recovery package, the truth of the matter is that throwing money at the current crisis without interrogating and identifying its underlying causes can only guarantee temporary relief.

It seems that the key to understanding the nature of the on-going crisis lies in good corporate governance which warrants a thorough grasp of the ground rules of the activities of corporate bodies and the application of same. The law, being the subjection of human action to the governance of rules, is the conditio sine qua non for the optimal performance of corporate entities in the modern world. While law might not be a hold-all, it is hardly in dispute that without acknowledging the centrality of law in the scheme of things, it is unlikely that society would go far in the achievement of set objectives and guaranteeing the well-being of citizens.

Accordingly, we intend to examine the essence of corporate governance and its existence (or lack of it) in the Nigerian milieu and come to grips with its efficacy in the contemporary world before attempting to formulate a prophylaxis aimed at avoiding a recurrence with a view to putting an end to the anxiety and misery that seem to have descended on Nigeria and other emergent economies in recent times.

The Nature of Corporate Governance Generally

Right from the time of the invention of the joint stock company and the activities of the Medicis in Florentian Italy, the aggregation of capital by individual, private investors required state licence and protection for the enhancement of their search for profit, fame and influence. Now, the permit of the state to create artificial entities, possessing names different from those of the promoters and vested with capacity to possess a common seal, own property, sue and be sued and endowed with perpetual succession, no doubt, accelerated the growth and development of capitalism. The fact has to be admitted that limited liability of the companies established by private persons hiding behind the corporate veil helped to advance the cause and fortunes of investors for as long as the companies established did not contravene their charters or act in any way considered inimical to the interest of the state or the public good.

In other words, company charters did not envisage unlimited or unrestricted power to make money. If and whenever the company acted contrary to the public interest or, for instance, traded with the enemy in times of war, the granting authority could always pierce the corporate veil or revoke the licence and thereby put an end to its activities.

In modern times, the company has become subject of innumerable regulations pertaining to matters such as structure, composition of boards, the duty of full disclosure of accounts, payment of taxes, prohibition of monopolies, unwholesome business practices, compliance with employment laws, etc. Today, companies are required to comply with tenets of corporate governance as well as good corporate citizenship by way of corporate social responsibility, non-payment of bribes for contracts and sensitivity to the needs and interests of communities in their areas of operation.

Accordingly, the long and short of corporate governance is that companies adhere to their memoranda and articles of association and the web of legislation, rules and regulations that order their operation. Thus, companies do not have untrammeled powers to act and function in their quest for profit but should also pay heed to matters such as fair labour practices, environmental pollution, global warming and sustainable development.

Corporate Governance in Nigeria

The recent collapse of the stock market and uncovering of flagrant abuse of loans and perquisites in the banking sector and the high incidence of corruption in the Nigerian economy generally are enough to pose the question indeed of not corporate governance but actually its absence in this country. The massive fraud and cooking of the books in companies, a notable example of which is Cadbury, not to mention insider dealings and compromised boards in many companies as well as spineless shareholders' associations audit committees and rubber stamp Annual General Meetings suggest the collapse of corporate governance in Nigeria.

It should be pointed out that while the Company and Allied Matters Act envisages good corporate governance by specifying the structure of companies, the powers and role of the boards of directors, management shareholders, etc., the reality of our situation is that all this has largely become academic on account of impotent and moribund regulatory agencies such as the Central Bank, Security and Exchange Commission, Nigeria Insurance Commission or the Nigeria Deposit Insurance Commission. There is enough reason to suspect that some functionaries of the regulatory bodies actually run with the hares and hunt with the hounds. After all, making a poacher a gamekeeper is not altogether unknown in the Nigerian experience!

More often than not, non-executive directors are not totally up to the task they are supposed to perform as sentinels of corporate governance, having been largely nominated by the managing directors themselves. Even the chairmen are usually drafted onto boards from the ranks of retired civil servants, senior military officers or traditional rulers who albeit might have high public profiles but are largely lacking in the skill or expertise required for the supervision and control of companies. Cronies who might be unable to correctly read or interpret statements of accounts and are, ipso facto, incapacitated in censuring an erring chief executive or, in fact, firing him are usually the type of people found on the boards of many companies. Frequently, there is little compliance with mandatory dispatch of notices of meetings to shareholders while the venues of important meetings are deliberately fixed in distant locations in a bid to ensure the absence of shareholders. More important, members of the audit committees do not generally possess the requisite skill to perform their statutory functions. We should not fail to mention the corruption that goes on in pre-AGM forums in order to compromise shareholders or the deliberate recognition of ÔÇśsettled' shareholders at meetings to chorus and celebrate the success of the board when the annual report is being discussed at the AGM. Thus, the critical role of the audit committees and the shareholders as a check on the management has all but evaporated as a result of the prediliction for filthy lucre by all concerned.

However, it should be emphasized that the failure of corporate governance is, by no means, a peculiarly Nigerian phenomenon. The failure of Northern Rock, HBOS, Freddie Mac, Fanny Mae, Lehman Brothers, Bear Stearns, AIG Investment Bank, Washington Mutual and Wachovia and the Central Bank of Iceland confirms that the need for effective corporate governance is world-wide. That some of the biggest corporate entities-General Motors, Chrysler and Ford-also recently manifested symptoms of poor corporate governance, warranting infusion of humungous funds from the US Treasury and loss of managerial autonomy of their boards is an important teaching moment for all those who had believed that bad corporate governance was a Third World disease.

The Failure of Corporate Governance and Its Consequences

It would seem that for as long as companies and, especially, the banks in Nigeria were able to act within a veneer of secrecy, the presumption was that everything was alright. However, the disclosure of the shenanigans of corporate boardrooms has robbed many companies and the banks of the trust of the public. Indeed, things can never be the same again.

The immediate consequence of the loss of faith and confidence of the public has been the current lukewarm attitude of many Nigerians in the stock market. The vast depreciation in the value of stock has veered the investing public away from the capital market to real estate, foreign currencies, gold and more familiar territory like buying and selling of goods. The lull in the stock market has cast a pall on the entire national economy with companies putting on hold plans for IPOs and devising all manner of survival strategies. For example, shrinking profits has meant imminent lay-offs or cut in emoluments of staff lucky to have escaped being thrown into the labour market. Indeed it is no exaggeration that with many companies actually going under or moving to other lines of operation or physically re-locating to neighbouring countries, it is no exaggeration that we are at the precipice of, at the very least, a recession, if not a depression.

Thus, there is an obvious link between corporate governance and the health of the national economy. Just as good governance is a categorical imperative in the public domain, effective corporate governance is a desideratum for healthy growth and development of any economy which has put its commanding heights in the hands of the private sector. In other words, corporate governance is not a matter of altruism but an act of survival and enlightened self-interest of corporate entities. The way and manner corporate governance has been trifled with in Nigeria with one or two private codes formulated at the instance of a few players and bereft of an enforcement mechanism can only amount to a shibboleth or mere declaration of intent and symbolic gesture when what is needed is policy decisions, monitored and enforced by fully empowered regulatory agencies. 


The incorporation of the Nigerian economy into the global capitalist economy means that it is futile to aver as some have done in the recent past that we are immune to the vagaries of the so-called global melt-down. When the aftershocks of Black Thursday hit us, massive capital flight and unconscionable, self-serving acts by some of our managing directors and their hirelings and inaction or complicity by the regulating agencies signaled the collapse of corporate governance which has brought us to today's sorry pass.

There is now an urgent need to strengthen the countervailing roles of non-executive directors, audit committees, shareholders' associations, regulatory agencies, the media and the entire population to rein in corporate entities in order that they play the game correctly and in compliance with the tenets of corporate governance such that the integrity of the boards and management of the companies and especially financial institutions like banks and insurance companies is never in question.

For the modern separation of ownership from management to be meaningful, those put in charge of running businesses should be put on a short leash so as to ensure compliance with corporate governance and not sacrifice integrity on the altar of relentless pursuit of the profit motive. Disclosure in corporate activities is an elixir for the problems identified with autonomy of private decision-making and the sooner a code of corporate governance emphasizing public accountability is put in place, the better the prospects for utilitarian values in Nigerian corporate practice. 


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