Corporate Governance

- Part I - Principles, Theories and the Codes -

The Meaning of Corporate Governance

Corporate governance refers to the mechanism of internal and external controls of the actions and inactions of the organs of a company in a manner that ensures:

1. Compliance with public policy;
2. The interest of stakeholders; and
3. The avoidance of corporate failure, collapse and abuse.

The Basis for Corporate Governance

It is aimed at building and strengthening:

1. Corporate transparency;
2. Accountability;
3. Credibility;
4. Integrity; and
5. Trust.

Commonly Accepted Principles of Corporate Governance

• Rights and equitable treatment of shareholders;
• Interests of other stakeholders - host community, consumers, general public (S305(3) & (4) CAMA);
• Integrity and ethical behaviour;
• Disclosure and transparency.

Major Laws on Corporate Governance

1. Companies and Allied Matters Act – CAMA 2020;
2. Investments and Securities Act – ISA 2007;
3. Banks and Other Financial Institutions Act – BOFIA 2020;
4. Central Bank of Nigeria Act – CBN Act 2007;
5. Insurance Act 2003;
6. National Insurance Commission Act;
7. Financial Reporting Council of Nigeria Act 2018;
8. Finance Act 2021;
9. Federal Competition and Consumer Protection Act.

Why the Codes? - The Need for the Codes

• The available laws do not adequately provide for all the different sectors of the economy.
• The process of passing or amending laws is lengthy, and delay may affect the business sectors involved.
• The codes allow for quick and effective response to the dynamics of corporate governance.
• Various codes emerged in response to corporate financial failures which had notable macro-economic impacts.
• In Nigeria, some of the codes serve as international benchmarks. Such codes include those by the Organisation for Economic Cooperation and Development (OECD), the Halsbury Report and the Cadbury Report.
• The Financial Reporting Council of Nigeria has released a standardised code - the Nigerian Code of Corporate Governance (NCCG) 2018, with commencement date of 15 January 2019 (operative from 1 April 2019).