Regulators should be enhancers rather than killers of businesses, says Dozie
Although, Corporate Governance is meant to facilitate effective, entrepreneurial and prudent management that can lead to long-term success of a company, many Nigerian organisations have shied away from adopting good and acceptable best practices. In this interview with BERTRAM NWANNEKANMA, President, Board of the Society of Corporate Governance of Nigeria (SCGN) and distinguished administrator, Mr. Pascal Dozie, gives an insight into how regulatory environment affects adherence to best corporate governance practice. Excerpts:
Non-adherence to good and acceptable corporate governance practices in some of the institutions in the financial services sector have been a major problem in Nigeria. What do you consider as the reason for this?
That is a very good question. When you hear of corporate governance, you think of regulations. That is how corporate governance has been sold in this country. For people that have adopted corporate governance initially, it was coercive. When you asked whether they observe corporate governance, they said yes, we have the code and then they give you a copy of their own Code. Corporate Governance is what I call corporate enhancing which helps you increase the RAFT that is Responsibility, Accountability, Fairness and Transparency. These are the pillars of corporate governance. Therefore, it is corporate enhancing. It is something that helps you to build a proper business that is sustainable and predictable. It is really something, which should be innate. You may not call it corporate governance but to put all the necessary rudiments of RAFT, so that everybody knows who is responsible, accountable, and transparent. Can you imagine working in a company where everyone knows who is responsible and accountable? You know what is happening, and nothing is hidden. That is what corporate governance is all about.
Now, if you believe that corporate governance should be an enhancer and somebody thinks it is an imposition, the attitude will be different. So you look at it from the point of, “Oh, these people again!”. But this is something which somebody or organisation should think, how to make their company sustainable so that everybody can predict their organisation. So it develops a prestige in a company setting.
Are you saying the reason is attitude?
Yes, it is attitude. Attitude governs behaviour.
What role can regulators play to ensure strict compliance to global best practice?
Regulators can play significant role, it also come to attitude. We need the word enhancing. A regulatory framework should be enhancing. It should enhance the sector, which it is regulating. Regulators are not there as a policeman waiting for someone to commit an infraction or flaunt a rule. It depends on us. It is how corporate governance has been sold as something you must do or else. Nobody has explained to us how important it is to the organisation in order for us to have
sustainability and respectability in the sector in the country and internationally. But you now said because you are doing this, you must establish corporate governance code and there is penalty, if you don’t do it. You now see that people will be doing it just to satisfy the regulators. But corporate governance is not for the regulators it is for the company and the stakeholders.
From your explanations, are you saying that Nigerian companies are being over regulated?
It depends on your understanding of regulation. Take all the regulators; do they themselves observe corporate governance? It will be nice to know. Over regulation also depends on their attitude. You look at our regulators, if they are there to find fault or guide. If they are there even if they find fault, nobody is perfect, you guide. If your regulation is with guidance and less with punishment, you will not feel over regulated. As a matter of fact, when you see your regulators coming, you feel happy, you are relaxed because you know that if they found something, they will tell you, don’t do it again.
It is when you continue to make that mistakes after they told you don’t do it that they can punish you. They can begin to suspect that either you don’t like your company or there are some things you are trying to hide. So, if regulators will come with that kind of attitude and not to witch hunt or find fault, then the organisation will grow through the observance of certain rules.
Do you say that Nigeria companies are over regulated?
I think, I have answered that question. It depends on how you look at regulation. If you look at regulation as something that is there to guide, which I think it is not what they are trying to do, I will say there is too much existence of rules. It does sometimes stunt innovation in management.
Are there roles the Society for Corporate Governance Nigeria (SCGN) can play in this regard?
The way, I look at the society basically, they are not doing badly. One of their basic objectives should be to change attitude, first of all understanding. When corporate governance is understood, if it is properly understood, you will find out that attitude towards corporate governance will change. You will find out that most people observed corporate governance in breach than making it work for them, making it a culture, “we have to do this, examiners may come tomorrow, we have not done that, you heard that regulators are coming,” your heart jumps. You should welcome your regulators in such a way that the relationship your
company has with a regulator is cordial, not when you hear that a regulator is coming; you start jumping up and down. That means, if you are worried about what they may find, it becomes obvious that you are not doing what you are supposed to do. I am sure because of the attitude of some of the regulators, if they come to your company and do not find anything implicating, they will say, “how come we came here and did not find anything”.
The way the society can do it is through education, making people understand what corporate governance is about, especially in so far as it is a healthy development to grow from them. You did not set up your company for a regulator, when you were setting up your organisation, you did not have the regulator in mind. You have your stakeholders, those you are going to serve, those you are going to buy things from, how much profits you are going to make, how much dividends you are going to pay to shareholders, what will bring growth. That is what you should have in mind. Corporate governance helps you to achieve all these and this is why the society should at least concentrate part of its activities to help people understand the need for corporate
governance for their own sustainability.
How do they do that?
They have already started doing it through symposium, public lectures, another is to help find out, you know that somebody know their specific rules, remember I used the words accountability, responsibility, to know their responsibility, especially at the Board level. Let me give you a simple example, how many people in Nigeria
know that there is no such thing as the chairman of a company. It is not in the statutory book, it is the chairman of the Board. Now if you understand that and you are the chairman of the Board of an organisation, the relationship between you and the management will be different. Because, you will not do like a colossus, trying to impose yourself as the chairman of the company, therefore, once you understand that you are not going to put too much pressure to do your bidding, because, the chief executive, who knows his onions can tell you something different of the board. The only thing he has over the chief executive is that the chief executive is a member of the board, which he is the chairman of. When he realizes it is Primus Inter pares- all board members are equal, then he would know how to handle the board and how he treats his colleagues. He is the chairman of their meeting.
How can organizations benefit from the activities of SCGN?
The society embarks on continuous research on how companies are managing their affairs to grow, if you take for example Enron Corporation, when it is spending a lot of money. It is a good example of what corporate governance ought to do. It is not about making much profit because when it collapsed, it collapsed like a pack of cards. Not only did it collapse like a pack of cards, they had the de facto dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world. Why? One simple thing, transparency in their activities. They were making profits all right but what sort of profits were they making. So you might be making a lot of money but are you a reputable organisation? From a distance, you might appear respectable because people tend to link respectability to profitability. I may be making money, posting high profits but doing all sorts of things that are illegal and getting away with it because I have found out the way and means of getting away with the law or anybody who could ask questions. But then, how long will that continue. It will not continue because one day someone who is not part of the clique, who does not understand the tricks comes and becomes a rebellious player in their midst, that will be the end both in their profit making machine and also that of the organisation. So the society helps and I don’t know how we can trim down to the lower level, to the medium scale industries and organisations to make them appreciate what it takes. For example, how do we manage our staff recruitments? All these things are important. It relates to every facet of the organisation. Are you a chief executive who lords it over the management? Or are you the type of chief executive who, when is not there, nothing happens? Do you have a system so that each department functions or must everybody keep running to you? If anybody wants to take a decision do they say, let’s go to him? Then whatever he says, that is what we take. You think of how he talks or does things then that will tailor your decisions.
Corruption and Transparency are the two most critical issues in the debate on good governance whether in the public or private sector. Do you agree? If yes, how can it be tackled?
Everybody is talking about corruption. Have we defined what corruption is? I was just talking about recruitment, if I recruit my cousins with the exclusion of others, without giving them opportunities, that is corruption, a major corruption. If I am paid but I don’t utilize the time and my service does not commensurate with how much I receive, that is corruption. Stealing is also corruption. Not doing what you are supposed to do is corruption. Some of those things could even be worse than stealing money. Some of those things you cannot seen I mean not obvious but money can be seen. You can see that somebody has stolen money, if you get that money and so what? Have you installed a system that will make that stealing near impossible? If you can do that and you have not done that, it is corruption, because you have given people opportunity to steal. Remember we pray, lead us not into temptations and deliver us from evil. So you are leading people into temptations. If you have rules and regulations, that is why we are clamouring for institutions being strong and having strong structure and not only big institutions, every institution; remember what I said about RAFT, Responsibility, Accountability, Fairness and Transparency. These are essential things. Where they don’t exist, then you talk about corruption. You can make laws that could lead to corruption. So there is a matter of definition here. That is why the society should come in to really explain what corporate governance is. Corporate governance is not only for corporate organisations, there should be corporate governance in all the ministries departments and agencies (MDAs). So, I believe that transparency is important because, you know that a system has to be predictable but you cannot predict what you don’t know. It only stands to reason that you cannot predict what you don’t know.
Transparency is a key factor of good public governance in all its ramifications. Do you think that many Nigerian firms are transparent in their dealings?
I will say yes, but there is not much transparency in most of all the organisations. It is something which has been going on, and our regulators have a lot to do with it. The whole regulatory environment does not encourage transparency because if you know that people are coming to find fault, you start hiding things.
What advice would you give to those that are hearing about the society for the first time on the importance of corporate governance?
Keep close to the society. The society should be a reference point where you ask of anything you are not sure of. The society is open to everybody at any time. We try to educate people making them aware of what corporate governance is and how they can benefit. The idea of corporate governance as a regulatory phenomenon is what really makes it unpopular. People think of corporate governance, as “you must do this, you must do that because this is the Code of Corporate Governance”. What is important is how you can use the Code to better your business. Quite frankly, the Code is just telling you what you ought to do without anybody telling you. Should somebody tell me to keep my books or to do proper accounting, to get auditors to look at the way things are done? Or to have a board where there are supervisory responsibilities. How are they getting things done or how are the Board members fulfilling their responsibilities either as individual members of the board or as part of the board.