INTRODUCTION

Corporate Governance refers to the system of rules, processes and policies by which a company is controlled and managed.[1] These rules and policies dictate the corporate behaviour of all entities in the company and ensure that the company achieves its objectives.[2] It may also be defined as the exercise of ethical and practical leadership by the governing body towards the achievement of ethical culture, excellent performance, effective control and legitimacy.[3] Corporate Governance is also crucial for companies that seek external sources of funding, for example, companies such as start-ups and those seeking venture capital investments.

Some of the key benefits of good Corporate Governance to companies include[4]:

• Good corporate governance ensures the organisational success of the company and improves its economic growth.
• Good corporate governance maintains and improves investors’ confidence which may lead to an increase in the company’s capital.
• As a corollary to the above, good corporate governance boosts the reputation of the company before shareholders, stakeholders and the general public.
• Corporate governance helps to prevent corporate scandals through the existence of mechanisms for relevant disclosures by the Board and management to stakeholders in the company.
• With a proper auditing framework in the company, good corporate governance minimises wastage, corruption, risks and mismanagement by the Board or management of the company.
• Corporate governance ensures that the company is managed in a manner that considers the interest of all stakeholders in the company.

LEGAL FRAMEWORK FOR CORPORATE GOVERNANCE IN NIGERIA

Several legislations and corporate governance codes have evolved over the years to prescribe rules, policies and processes for the successful management of the companies. In Nigeria, the fundamental laws and Corporate Governance Codes regulating Corporate Governance are[5]:

• The Companies and Allied Matters Act, LFN 2020
• The Banks and Other Financial Institutions Act, 1991
• The Investment and Securities Act, 2007
• FRCN Nigerian Code of Corporate Governance 2018
• SEC Code of Corporate Governance for Public companies, 2011
• CBN Code of Corporate Governance for Banks and Discount Houses in Nigeria and Guidelines for Whistle Blowing in the Nigerian Banking Industry 2014
• Code of Corporate Governance for Licensed Pension operators, 2008

THE ROLE OF THE BOARD IN ENSURING GOOD CORPORATE GOVERNANCE

The Board of Directors as the mind of the company is saddled with the statutory responsibility of directing and managing the business of the company[6]. Accordingly, the role of the Board in ensuring good corporate governance are[7]:

• To define the purpose of the company: this should be in line with the company’s Memorandum and Articles of Association
• To define the values by which the company will perform its daily duties
• To identify the relevant stakeholders of the company and ascertain the impact of the company’s decision on stakeholders.
• To develop strategies for achieving the company’s goals.
• To ensure the implementation of set strategies for the attainment of the company’s goals: this is usually done by setting up relevant committees to oversee the critical issues in the company.

In ensuring good corporate governance, the Board is, among other things, saddled with the responsibility of protecting the interest of all stakeholders in the company, in the overall best interest of the company. The stakeholders in a company may be broadly categorised as financial stakeholders and other stakeholders. Financial Stakeholders are stakeholders with a commercial interest or stake in the company. They include shareholders and creditors of the company[8]. Other stakeholders in the company include the management, employees, significant suppliers to the company, and the general public[9]. The interest of these stakeholders often conflict, hence it is the responsibility of the Board to work with management in striking the right balance between the conflicting interest of stakeholders in ensuring that the goals of the company are achieved.

In striking the right balance between the conflicting interest of all stakeholders, the Board may be guided by the following corporate governance principles:

1. Fairness

The Board should ensure the fair treatment of all shareholders in the company, including the minority shareholders[10]. The Board must also ensure that its employees are treated well by providing a pleasant working environment, reasonable remuneration and excellent welfare packages. With regard to its customers, the Board should provide quality goods and services to ensure customer satisfaction. 

2. Transparency

The Board must make the necessary disclosures (financial and non-financial disclosures) to stakeholders in the company as at when due. This information may be contained in the company’s annual reports and website which should be available to all stakeholders.

3. Compliance

The Board must always ensure compliance with all relevant laws and Corporate Governance Codes that apply to the company. 

4. Accountability

In ensuring accountability, the Board must ensure that management keeps the proper records and books of account. The Board should set up an Audit Committee which will be responsible for overseeing the financial position of the company. This Audit Committee would work with the external auditors in auditing the company’s books and upholding the company financial integrity[11].

5. Inclusiveness

The Board must recognise the rights and interests of all stakeholders in the company and strive to ensure the inclusiveness of all stakeholders in the administration of the company.

CONCLUSION

Indeed, the benefits of good corporate governance in ensuring the success of every organisation cannot be overemphasised. From regulating organisational behaviour to providing efficient and optimal operations, mitigating risk, improving access to capital, and safeguarding the interest of shareholders, the list is endless. However, in providing good governance, it behoves on the Board of directors as the controlling mind of the company to steer the wheel of the company in the right direction by upholding accountability and transparency, complying with the relevant laws and Corporate Governance Codes and protecting the interest of stakeholders in the best interest of the company.