Shareholder group frown at FRCN new code of corporate governance for private sector

….Codes is a setback towards attaining best practices

By Kayode Ogunwale

isan3The shareholders advocacy group, Independent Shareholders Association of Nigeria (ISAN) has condemned the new national code of corporate governance for the private sector that was released by the Financial Reporting Council of Nigeria (FRCN).

The group led by its National Cordinator, Sir Sunny Nwosu raised concern on the suffocating effect of the code on entrepreneurial aspirations and initiatives of Nigerians and persons seeking to establish business in the country, saying that, it is based on the provision of the code that companies shall have not less than five directors.

“This provision is seen by ISAN as unnecessary expansionary and costly for Micro Small and Medium Scale Enterprises (MSMEs).

ISAN categorical position on the code mostly stemmed from perceived negative implications of over regulation of the nation’s corporate world, particularly the financial industry and the noticeable contradictions and conflict with the subsisting Companies and Allied Matters Act (CAMA), as amended,” Nwosu said.

The shareholders pressure group in identifying possible contradictions in the FRCN code, among other things, stressed that FRCN should and must provide leadership in the nation’s corporate world by constituting its board in line with its new corporate governance code.

ISAN also condemned the prescribed 10 years cool off period before former CEOs assume the position of chairman in the same company, saying it amounts to serious setback in utilisation of limited experts, managerial proficiencies and scarce human capital resources.

He however said most of retail investors contested that the waste in human capital as portrayed by the code was a vivid dis-service as it remained very silent on the cool off period before former CEOs are appointed non-executive directors.

The association suggested that the emerging character of the nation’s economy makes it imperative for a three year cool off period for interested former CEOs of companies.

He noted that there is a serious lacuna and breach of the law has been triggered with the provision of article 5.4 of the new code of cooperate governance on the size of the board.

“Article 5.4 of the code provides a minimum of eight board members for companies while the Companies and Allied Matters Act (CAMA) in section 245 (1) provides for minimum of two directors.

To ISAN, the confusion among stakeholders in the nation’s corporate arena now is how to resolve the conflict between an Act of parliament and a delegated legislation.

ISAN believes that the implementation of the codes requirement that non-executive director should be two-third of the board with Independent directors being half of the number of non-executive directors will lead to unintended consequences, of which one is forced breached of employment contract with the executive.”

The group expressed confidence that if urgent attention is paid to the identified grey areas of conflict and counterproductive clauses are expunged, the economy will resonate in dynamism, vibrancy and more productive.