Shareholders have described the National Code of Corporate Governance for the Private Sector issued by the Financial Reporting Council of Nigeria (FRCN) as unnecessary and duplicitous, warning that the code could be counterproductive to national economic development.
Shareholders under the aegis of Independent Shareholders Association of Nigeria (ISAN) stated that the code bordered on over-regulation of the nation's corporate world, particularly the financial industry. Shareholders also noted that the code also suffers from noticeable contradictions and conflict with the subsisting Companies and Allied Matters Act (CAMA).
According to the shareholders, the FRCN's code could suffocate entrepreneurial aspirations and initiatives of Nigerians and persons seeking to establish business in the country. Citing the provision of the code that companies shall have not less than five directors, the shareholders said such provision was unnecessarily expansionary and costly for micro small and medium scale enterprises (MSMEs), which are the engines of the nation's economy.
Already, the Securities and Exchange Commission (SEC) has a subsisting code of corporate governance that applies to all public limited liability companies. The Central Bank of Nigeria (CBN) and other financial regulators also have sectoral codes and rules that guide operations and corporate governance in their sectors.
"There are also identified provisions of the code which directly conflict with existing laws governing certain sectors, which FRCN has included in the code all in a bid to elevate itself to another super-regulator over and above existing sectoral regulators for some companies," ISAN stated.
While identifying possible contradictions in the FRCN code, the shareholders' group charged FRCN to lead by example by constituting its board in line with its new corporate governance code in order to justify the enforcement and sanction regime in the new code.
ISAN listed grew areas in the code to include provisions that allow executive directors of the companies to be appointed board members of another company or companies, the time frame provided or "cool off period" before former executive director can be appointed chairman of the same company he served, engagement of two auditing firms and board size.
The shareholders pointed out that the appointment of substantive executive directors into boards of other companies as contained in the FRCN code breached the whole essence of internationally accepted corporate governance and best practices.
The Sunny Nwosu-led group noted that the prescribed 10 years "cool-off period" before former chief executive can assume the position of chairman in the same company amounts to serious setback in utilisation of limited experts, managerial proficiencies and scarce human capital resources.
The minority retail shareholders said a major lacuna and breach of the law has been triggered with the provision of article 5.4 of the new code on the size of the board, noting that while FRCN's code provides a minimum of eight board members for companies, the Companies and Allied Matters Act (CAMA) provides for minimum of two directors.
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