SEC Urges Strict Compliance on Corporate Governance
The Securities and Exchange Commission (SEC) Nigeria has restated the need for business owners in the country to embrace corporate governance as a desirable option to grow their enterprises, improve shareholders’ funds and profitability on a sustainable basis.
The commission’s Acting Director General, Ms. Mary Uduk, gave the advice during her comments as one of the panelists at the Alliance Law Firm’s Maiden Lecture Series, Luncheon and Book Presentation event with the theme ‘Contemporary Corporate Governance Issues in Nigeria’ in Lagos.
Uduk, who was represented at the event by a Director at the commission, Mr. Edward Okolo, noted that experiences globally have demonstrated that enterprises that showed commitment to corporate governance principles perform better and have continued to enjoy investors and other stakeholders’ confidence in building their brands.
Speaking on the commission’s findings on the level of compliance with corporate governance code in the country, the investment expert disclosed that level of compliance with the SEC Code 2011 remained low even as provisions relating to independent directors’ roles in companies were being violated by listed companies.
In addition, the SEC boss lamented that access to critical indices by which companies’ compliance with the SEC Code could be measured remained difficult as many companies were either unwilling to comply or lack understanding of the importance of corporate governance to their entities’ survival and profitability.
She said: “We observed that most of the issues covered in the SEC Code 2011 have remained difficult for some entities to observe in terms of fairness, independence, accountability and transparency requirements by their boards.
“The Code of corporate governance talks about how companies are run and managed. Looking at the scorecard as a follow up to the code, we have been able to see areas of weaknesses and strength across companies and these areas are very germane to having strong corporate governance.
“For example, the Boards are expected to have a deep understanding of the business and the environment to which the business is run. They are supposed to understand the blueprint, they are supposed to speak out, they are supposed to be innovative and they are supposed to have a little bit of financial experience so they could be able to interpret financial statements”, the SEC boss added.
Uduk pointed out that all these make for a strong board and that if a company doesn’t have that, it cannot have a strong board since experiences show that companies that have strong boards have better corporate governance system.
She explained further that this also remains linked to the issue of independent directors, adding that if a company selects its independent directors based on the principles of transparency, it would have informed judgment or decision making that is transparent or the courage to make a difference will be there.
“We believe there should be more disclosure. We believe that on the issues of conflict of interest and related party transactions should go to the shareholders to validate decisions taken by the boards in order to strengthen shareholders’ rights in public companies”, the investment expert stressed.
Earlier in his remarks, the Chairman, Financial Reporting Council of Nigeria (FRCN), Mr. Dotun Sulaiman, spoke on sundry initiatives being undertaken by the Council to improve on the contents of existing corporate governance principles as they relate to financial reporting in order to make them more investor-friendly.