Shareholders under the aegis of Independent Shareholders Association of Nigeria (ISAN), have said the National Code of Corporate Governance (NCCG) for the private sector released by the Financial Reporting Council (FRC) will discourage the establishment of new business, kill existing ones and invariably stunt economic growth.
ISAN stated this after a review of the code. Stating the position of ISAN in Lagos on Wednesday, the National Coordinator of the group, Sunny Nwosu said its 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.
According to him, a review of the code by ISAN revealed 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 shall have not less than five directors. This provision is seen by ISAN as unnecessarily expansionary and costly for micro small and medium scale enterprises (MSMEs) noted as engine of the nation’s economy,” he said.
He added that there are provisions of the code which directly conflict with existing laws governing certain sectors, which FRCN has included all in a bid to elevate itself to another super regulator over and above existing sectorial regulators for some companies.
The shareholders pressure group stressed that FRC should and must provide leadership in the nation’s corporate world by constituting its board in line with its new corporate governance code.
Other grey arrear, he said, is the provision in the code which allows executive directors of the companies to be appointed board members of another company or companies.
They also contested the time frame provided or “cool off period” before former executive director is appointed chairman of the same company he served and the engagement of two auditing firms.
The group argued that contrary to the views espoused by government through the FRC, the appointment of substantive executive directors into board(S) of other companies breached the whole essence of internationally accepted corporate governance and best practices.
The group argued that the prescribed 10 years “cool off period” before former CEOs 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 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.
ISAN also suggested a comprehensive annual evaluation of all non-executive directors of companies under clause 6.7.7 of the code, adding 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.
As part of the noticeable conflicts, ISAN insists that a serious lacuna and breach of the law has been triggered with the provision of article 5.4 of the new code of corporate 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.