Ensuring business continuity through corporate governance

When the ripples of the global financial meltdown touched the shores of the emerging markets in sub-Saharan Africa, deeply rooted administrative inefficiencies were laid bare.

Major conglomerates thought to have viable asset bases and healthy internal structures went liquid in less time than it took to build them revealing severe shortcomings in the business sector.

One of the prime reasons cited for the collapse was the fallible practices in indigenous corporate governance among purportedly stable blue-chip institutions. When most needed, existing standards failed to provide the checks and balances that companies require to cultivate sound business processes.

With more home-grown companies expanding faster than they can manage, it has become plausible for systemic flaws in the management and regulation of intricate company policies to create friction in the effective maximization of resources for optimal productivity.

According to reports by the Organization for Economic Co-operation and Development (OECD), “It is important for jurisdictions to regularly review whether their supervisory, regulatory and enforcement authorities are sufficiently resourced, independent and empowered to deal with corporate governance weaknesses that have become apparent.”

This, they state, should include an assessment of Business Development, Operations as well as Marketing and Communication decision making systems.

While development experts bemoan issues like the ambiguous expenses carried out particularly by top management personnel and uneven distribution of information across and along the cadre, others advocate for the firmer adherence to standards ratified by the bodies like the Securities and Exchange Commission, SEC, to ensure accountability without unduly inhibiting enterprise.

To develop the culture of values for professionals and ethical behaviour on which well-functioning markets depend, the Acting Director, Financial Standard and Corporate Governance at the Securities and Exchange Commission at the time, Edward Okolo, ?posited,

"Corporate governance is a new way of doing business that people need to engage in voluntarily but as we have witnessed, people are averse to change. We think that if companies comply strictly with the requirements of the code of conduct and Companies and Allied Matters Act on the processes ensuring that the audit committee carries out its functions as well as making sure that the [auditors] are actually skilled enough and understand the industry, a lot of these problems will significantly reduce.”

As professionals campaign for a change in the pattern in which directors manage their operations, the growing call for the need to set up strictly tenured autonomous teams to govern company activities is rapidly gaining attention. The general consensus is that organizations need to get to a stage where people on the board are stakeholders primarily focused on the bottom-line and not bureaucratic interests.

In addition, there is also the importance of ensuring board are accountable with proper oversight by setting up the appropriate management committees to check the activities of this unit so that their interests are constantly aligned with that of the long term business objectives.

In conclusion, adhering to global standards for corporate governance is important for business sustenance. To achieve this, clearly define the roles of institutional investors, private equity fund providers and other shareholders by enhancing their supervisory administrative functions within the companies, and inhibit monopolistic decision making processes by "Oga/Madam at the top?" as witnessed in many establishments across Nigeria. This is vital in restoring the confidence of the international community in staking much needed Foreign Direct Investments (FDIs) in the economy.

This articles was first published in BusinessDay: https://businessday.ng/life/article/ensuring-business-continuity-through-corporate-governance/