Shareholders under the aegis of Independent Shareholders Association of Nigeria, ISAN, said that the overbearing position of the Secretary of Financial Reporting Council in relation to regulation of financial institutions, if unchecked, is capable of destroying business interests in the country.
They said that the Council under the Secretary, Jim Obaze, through various regulations brought to bear on companies, tries to elevate itself to the position of ‘another super regulator over existing sectoral regulators of certain companies.
ISAN National Coordinator, Sir Sunny Nwosu, stated these while making the position of the association known on the new National Code of Corporate Governance for private sector in Lagos. The new code became effective on October 17, 2016.
According to him, there are some observed contradictions in the FRC Code, which are in direct conflict with existing laws governing some sectors, while the short period provided for compliance might rubbish the initiatives of the FRC and suggested three years transitional period to enable companies rationalise their executive director.
Some gray ares being contested by the ISAN include provision of the Code which allows executive directors of companies to be appointed board members of another company or companies. Time frame provided or cool off period before a former executive director can be appointed chairman of same company he served to a maximum of 10 years and the engagement of two auditing firms and the provision of the Code that companies shall have not less than five directors among others.
He stated that all the issues were raised at the public hearing prior to the review of the Code but was ignored by the Council, except for the provision relating to chairmanship of audit committee, that was expunged before the final draft was released by the FRC.
He stressed that while shareholders are not in support of reckless conduct by management of companies, they would not allow the overbearing stance of the Council to destroy their investment in the capital market. Nwosu, therefore, stated that the association would explore every available option, including law suits to get the FRC to overturn the contentious provisions.
He said: “ISAN’s categorical position on the Code mostly stemmed from the perceived negative implications of over regulation of the nation’s corporate world, particularly the financial industry and the noticeable contradictions and conflicts with the subsisting Companies and Allied Matters Act, CAMA, as amended.
The review raised the concern by ISAN on the suffocating effect of the Code on entrepreneurial aspirations and initiatives of Nigerians and persons seeking to establish business in the country. This is based on the provision of the code that companies must have not less than five directors. This provision is seen by ISAN as an unnecessarily expansionary and costly for Micro Small and Medium Enterprises, MSMEs, noted as engine of the nation’s economy.”
“The FRC should and must provide leadership in the nation’s corporate world by constituting its board in line with its new corporate governance code. This should be done for the FRC to justify its enforcement and sanction regime in the new code,” Nwosu added.
The Sunny Nwosu led group argued that contrary to the views espoused by government through the FRC, the appointment of substantive executive directors into boards of other companies breached the whole essence of internationally accepted corporate governance and best practice.
According to him, the contradictions as provided in the Code on the latitude of subsisting directors questions the moral, transparent, due diligence and ethical practices of operating going concerns in the nation.
Suggestions made
He noted that the only window of ameliorating the contraptions contained in the code on executive directors remained the wholesome adoption of the provisions of section 19(3) of the Banks and Other Financial Institutions Act, BOFIA. The ISAN boss also suggested a comprehensive annual evaluation of all non-executive directors of companies.
