Code of Corporate Governance 2018 in Nigeria

corporate governance

Primus Inter Pares is the Chairman of the Board. He/she is usually elected by the Board of Directors, who also decide the term for which he/she will be in office.

The Nigerian Code of Corporate Governance (2018), launched January 2019, as a Code of Best Practice, is a principles-based Code that contains 28 Principles. It is intended to institutionalize Corporate Governance within Nigeria. Principe 3 states that the Chairman is responsible to provide overall leadership for the Company and Board, and encourage constructive participation from all Directors in order to facilitate effective Board direction.

The Chairman must facilitate constructive participation by all Directors and provide effective direction to the Board. The Chairman is responsible for ensuring that the Board works together to achieve the Company’s strategic goals and fosters a culture of cooperation within the Board.

A Chairman who is able to create an atmosphere that encourages all Directors to contribute to Board discussions is a hallmark of an effective chairman. This can be achieved even if they don’t agree with the popular view. Ineffective Chairman: One who dominates the discussions and pushes his/her view through every discussion.

While consensus is the best way to make decisions, the Board Chair shouldn’t try to silence dissenting voices. The Board should be able to benefit from its diversity. The Chairman should listen to Directors and encourage them to voice their concerns.

The Code suggests that the Chairman meet with the Non-Executive Director at least once a year. The Non-Executive Director should meet at least once a year without the Executive Directors. It will give them an opportunity to express their concerns objectively. However, it is important to avoid creating a “Us versus Them” situation.

The Chairman should not have any involvement in the Company’s day-to-day operation. Separation of the Chairman’s role from that of CEO means that the Chairman should be free from Management and from any business interests or other relationships that could affect his/her ability make independent judgments.

A new trend is to have the Chairman be an independent non-executive director. The Code stipulates that an Executive Director or CEO cannot become Chairman. The Code also states that if the Board determines that a former MD/CEO/ED should become Chairman, a cooling-off period should be established of three years.

A cool-off period of five years is required by the CBN code of corporate governance for banks and other financial institutions. It is believed that a cooling period of three to five years would be sufficient to allow the Board to perceive the MD/CEO’s influence as having diminished.

The cool-off period won’t be of any use if the CEO has never “left”. Importantly, the quality and manner of appointing other Directors will determine how much influence a CEO will have on the Board.

The Chairman is responsible for guiding the MD/CEO and is available for consultation and communication. The Board Chair must have extensive experience in business leadership including crisis leadership. He/she should also be retrained and collaborative, have complete candor, and expect the same from others. The CEO will trust the Board Chair as their trusted counsellor.

The Chairman should ensure that the Board has an annual Board Agenda. This agenda will help to make the most of Board time. To foster robust discussions, the Chair should ensure that directors receive adequate and timely information prior to Board meetings.

The Chairman must be aware of what each director brings to the Board.

The Chairman should supervise induction programs for new Directors. He or she should also identify skills gaps and collaborate with the Company Secretary to suggest appropriate continuing education programmes. The Chairman should also be responsible for evaluating the performance of Directors and Board members.

The Chairman’s role is to communicate effectively with shareholders and other stakeholders. The Chairman has a key role in this regard. He presides over the Annual General Meetings. It is not an easy task to preside over the Annual General Meetings of public companies in Nigeria.

The Company Secretary’s professionalism, organizational efficiency, and competence will be a major asset to the Chairman. A clear and concise Order of Proceedings, which is rehearsed beforehand if possible, and an amiable yet firm disposition are crucial factors for presiding over a successful AGM.

It’s always refreshing to see an experienced Chairman preside at and manage proceedings at an AGM. However, it can be embarrassing to watch shareholders rabble-rousing about a less experienced Chairman.

While the Chairman is the leader on the Board, he/she also needs to be supported by his/her peers. He/she should not be a dictatorial, overbearing or assertive leader style. The Chairman is the highest ranking member of the Board of Directors. He/she also provides leadership to the officers and executives of the company.

As a link between the Board of Directors and the top management, he/she ensures that shareholders’ duties are fulfilled. That is the bottom line. Management and the Board of Directors share the ultimate goal of maximising shareholder value. “The shareholders are the boss, and where their investment fails, the chairman is failing.” – Troy Segal. March 2018, Investopedia-Dotdash Corporate Publication.

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