By Victor Usen
The Concept of INEDs
According to Investopedia, Independent Non-Executive Directors (INED), also known as outside directors and external directors are generally appointed to a company’s Board as independent advisors in planning and policymaking due to their wealth of experience in a particular industry, their reach or contacts, and their public standing.
They are not employees of the company, hence, do not engage in the day-to-day running of the firm. Because they do not hold managerial positions, they are usually better situated to appreciate the company’s interest with greater objectivity; very much, unlike the Executive Directors, who may be grappling with an agency problem or conflict of interest, turn between management and shareholders. They challenge the direction and performance of the firm and its team. They monitor the Executive Directors in the overall interest of the company and its stakeholders.
Accordingly, Principle 7 of the Nigerian Code of Corporate Governance sums it up when it explicitly states that “Independent Non-Executive Directors (INED) bring a high degree of objectivity to the Board for sustaining stakeholder trust and confidence”.
Codes/Principles Guiding INED
As the Latin saying goes, “Uxorem Caesaris tam suspicione quam crimine carere oportet” (Caesar’s wife should be free from suspicion, as well as from accusation). Thus, like Caesar’s wife, INED are expected to embody key values, including integrity and objectivity to be able to perform optimally.
Consequently, the Financial Reporting Council of Nigeria produced “The Nigerian Code of Corporate Governance 2018”, (NCCG) which, among others, seeks to institutionalise corporate governance best practices in Nigerian companies and promote ethical practices that will boost the integrity of the Nigerian business environment.
Section 7.1 of the Code outlines the irreducible minimum for INED when it clearly states that “An Independent Non-Executive Director (INED) should represent a strong independent voice on the Board, be independent in character and judgment and accordingly be free from such relationships or circumstances with the Company, its management, or substantial shareholders as may, or appear to, impair his ability to make independent judgment”.
To be able to live up to the above, Section 7.2 goes further to list strigent conditions to qualify as an INED. It states, among others, that an INED is one who: does not possess a shareholding in the Company the value of which is material to the holder such as will impair his independence or in excess of 0.01% of the paid up capital of the Company; does not receive, and has not received additional remuneration from the Company apart from a Director’s fee and allowances; is not a representative of a shareholder that has the ability to control or significantly influence Management; is not a close family member of any of the Company’s advisers, Directors, senior employees, consultants, auditors, creditors, suppliers, customers or substantial shareholders.
Importantly also, to prevent an INED from becoming too entrenched, Section 12.10 explicitly provides that “The tenure for INED should not exceed three terms of three years each”.
How Independent is Seplat’s Chairman Omiyi as INED?
Several issues have recently arisen that has put the independence of Seplat’s INED, including the Independent Chairman, Mr. Basil Omiyi to both test and question. Nigerians were shocked over the news that the visa, residence permit, and work permit of Seplat Energy’s Chief Executive Officer (CEO), Mr. Roger Brown, had been revoked by the Federal Government of Nigeria sequel to lack of having appropriate work permits and the allegations of racism, favouring of foreign employees, bullying, discrimination against Nigerian workers at the company, breach of the Nigerian Code of Corporate Governance, among other weighty issues against the British CEO by the Nigerian workers in the company.
The federal government said that “Testimony was received from several witnesses, which supported the allegations”
The FG said it also discovered that Mr. Brown was in possession of a Combined Expatriate Residence Permit and Aliens Card (CERPAC) that was not based on validly issued Expatriate Quota approved by the Ministry of Interior, and by this, grossly violated relevant Immigration Laws and Regulations. According to the Ministry, as a result of these, “the Honourable Minister has determined that Mr. Brown’s continued stay in Nigeria is contrary to national interest”.
Unfortunately, like the Bourbon kings of the pre-French Revolution, France, the Independent Chairman of Seplat’s Board of Directors, Mr. Basil Omiyi, and his fellow INED have carried on like people who have learned nothing, and have forgotten nothing. They have failed to rise to the occasion or exhibit that independence. They have not only dared the FG by passing a vote of confidence in Mr. Brown, they failed to assuage frayed nerves within the company and among its stakeholders and shareholders. Seplat’s board appears not to mind the volatile and witch-hunting work environment and the big dent on Nigeria’s image that Roger’s return portends.
Little wonder some shareholders of the company did not waste time in approaching a Federal High Court in Lagos where Justice Chukwujekwu Aneke made an order restraining Roger Brown from parading himself as the CEO of Seplat and the company from dealing with him as one. The court equally restrained Omiyi and the INEPs under him from “continuing to run the affairs of Seplat in an illegal, unfair, prejudicial, and oppressive manner pending the hearing and determination of the Petitioner’s Motion on Notice for interlocutory injunction”.
Instructively, it is recalled that the aforementioned lawsuit by the company’s stakeholders contend that by condoning the unlawful, discriminatory, and abusive conducts of Brown, Omiyi and the INED have “failed in the discharge of their duties and are unfit to continue to function in the Board of Directors of the 1st Respondent (Seplat)”. And a cursory look at the basic international best practices, principles, and the provisions of the The Nigerian Code of Corporate Governance 2018 vis-à-vis the crisis and trust deficit bedeviling the company will leave any objective observer wondering how independent the INED.
Protesting Host Communities
For instance, the company’s host communities have also joined the fray as they took to the streets of Sapele as well as Seplat’s headquarters in Lagos to protest not only Mr. Brown’s continued stay in office, but to express their displeasure over the fact that whereas Omiyi and Brown neglected to visit their communities to show any form of recognition or respect to them and their leaders as both hosts and shareholders, who invested in the company, but had the time to the bring White South African investors to the company’s facilities in their communties. They also found it instructive that Omiyi appointed a South African lady into Seplat’s Board shortly after that facility tour without due process. They see it as part of the plot to sell the company to South African fronts. The questions then are: Why should the CEO and the Independent Chairman take only White South Africans on a tour of Seplat’s oil facilities, leaving out the Nigerian investors contrary to good governance codes? Is an INED not supposed to be protective of a leading Nigerian oil and gas company and its other shareholders?
Worse still, it is worrisome that not only did the infractions for which the FG indicted Mr. Roger Brown happen under the nose of Omiyi as an Independent Chairman, but also most worrisome that he failed to institute an investigation into those grave allegations of racism, etc. The cut was deeper for the staff when their Nigerian Independent Chairman instead threw them under the bus by quickly issuing a statement exonerating the Mr. Brown without investigation, with staff taking to the social media to raise the alarm that they were being coerced to do the same.
Meanwhile, these appear to give credence to a recent claim by civil society organisation, Make a Difference Nigeria (MADI), that Omiyi had been unable to hold Mr. Brown accountable because he too had lost the moral high ground, having overstayed his legitimate tenure of a maximum of nine years as an INED. MADI said that whereas Section 12.10 of the Nigerian Code of Corporate Governance 2018 clearly states that an INED can only serve for a maximum of three terms of three years each (nine years), Omiyi, who was elected as an interim Chairman for one year to oversee the transition from pioneer Chairman and co-founder, Dr. ABC Orjiako, has now spent over 10 years on the Baord and still wants to stay put even after key stakeholders wrote to him to resign. The same applies to another INED, Mr. Charles Okeahelam, who is based in South Africa.
Outlandish compensation
However, how independent can an Independent Chairman in the circumstances Omiyi operates in the company? Whereas it is a fact that INED are usually compensated for their time by equity compensation, cash or fees, depending on the clime, the industry, the size of the company, etc., the question is, can an Independent Chairman earning an outlandish compensation of over $750,000 per annum in addition to other hefty benefits ever bother about holding the CEO and management accountable? Does that comply with the provisions of Section 7.2 of the Nigerian Code of Corporate Governance 2018? Is such excessive ‘compensation’ not enough for an Independent Chairman to fight to stay on even where there are good reasons to resign? Why would a beneficiary of all these not observe table manners, which is that you don’t talk while eating?
Again, Which Independent Chairman or INED for that matter would have his private house at Victoria Garden City (VGC), Lekki, Lagos maintained for him by the company, including supply of diesel and still retain his independence? Which Independent Chairman will have exotic car bought for him by management and still bother about investigating allegations of racism and bullying of Nigerians by a Whiteman in a company that was not only founded and built by Nigerians, but also making huge money from Nigerian oil and gas?
All considered, can Omiyi be said to still “bring a high degree of objectivity to the Board for sustaining stakeholder trust and confidence” as stipulated by Section 7.1 of the Nigerian Code? Is he still in compliance with Principle 7 of the Code?
Obviously, he has lost both the independence and capacity to lead the Board as required by the Code. The honourable thing to do is to take a bow.
.Usen a public affairs, business analyst writes from Lagos
