Article By Damilola Adetunji & Jide Babalola
Corporate governance is considered to be the mainstay of modern day entrepreneurship. Issues have over the last few years arisen which have made it imperative for various jurisdictions to issue laws/codes to better regulate/enforce the management of public companies i.e. the Sarbanes Oxley "SOX" Act (US), the Combined Code of Corporate Governance (UK), King Report I & II (South Africa) etc. It is clear that the importance of strong corporate governance cannot be overemphasized, as weak governance has led to the collapse of hitherto vibrant companies all over the world, Nigeria inclusive. Indeed, several commentators have linked the recent failures in the Nigerian banking system to the weakness of the corporate governance regime.
Accordingly, and in line with international best practice, the Nigerian Securities & Exchange Commission ("SEC") has recently released an exposure draft of the proposed new code of corporate governance which would apply to public companies in Nigeria.
The document is to replace the existing code (Code of Best Practices on Corporate Governance in Nigeria) which was released in October 2003. Whilst still at draft stage, it is clear that the proposed code is an improvement on its 2003 counterpart as it is better "teethed" to handle present day issues/failings. Below are highlights of some of the noted improvements:
- The applicability of the proposed code has been more specifically defined.
- Directors' duties and responsibilities have been made more detailed and clearer providing specifics which were missing in the old code.
- The old code recognizes that it was ideal for the positions of the chairmen and chief executive officers of public companies to be held by separate persons while the proposed code makes it mandatory that these positions be held by separate persons.
- The new code specifically recognizes and states the criteria for determining independent directors while the old code does not.
- The proposed code mandates companies to ensure that at least 7 days be allowed for service of notice if sent out by post from the day the letter containing the notice is posted the old code does not allow for this provision.
The proposed code also, specifically, addresses issues like the whistle blowing policies of the companies, disclosures to be made by directors, meetings of the companies, sustainability, accountability etc. Most of these issues were not satisfactorily addressed in the old code.
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