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The Nigerian Code of Corporate Governance 2018 seeks to institutionalise corporate governance best practices in Nigerian companies. The Code is also to promote public awareness of essential corporate values and ethical practices that will enhance the integrity of the business environment. It is flexible and aimed to apply at companies of varying sizes and complexities across industries. Compliance of the Act is monitored by the Financial Reporting Council of Nigeria
- What is Transparency and Disclosure?
Transparency and Disclosure basically means Communicating and interacting with stakeholders so to keep them conversant with the activities of the Company. In a nutshell, they entail Full and comprehensive disclosure of all matters material to investors and other stakeholders. Under the Act, Part F and Principle 27 & 28 cover the issue of transparency and Disclosure.
2. What is the relevance of Transparency and Disclosure in the context of Corporate Governance?
Primarily, the relevance is to assist stakeholders to make well informed decisions.
Secondly, it afford shareholders and investors to evaluate their investments.
Further, it aids the stakeholders including prospective investors and the general public to assess the performance of the company.
More importantly, it ensures proper monitoring of the company’s implementation of the Code and to identify when the activities of the company becomes a threat to good corporate governance practice.
3. Instances of situations desiring disclosure and transparent dealings in governance?
For instance, the Company’s annual report need and must be disclosed. The Company’s annual report should disclose very clear information on the Company’s governance structures, policies and practices as well as environmental and social risks and opportunities.
For instance, on the Board of Directors, the annual report should disclose composition, names of the board members as well as their appointment, induction and training process. If there are Board Committees, then it should disclose the names, roles and responsibilities, number of meetings and attendance even their tenure, its plan for achieving gender equality and diversity etc
- The company should also disclose:
-The external auditors and consultants etc
-Their policies and program for ESG- environment, social governance issues.
-Also policies on contracts and transactions, policies on insider trading and cases of conflict of interests
Also, one particular information many Companies hide…. Their fines and penalty…… The Company should provide a list of all the fines and penalties (including date, amount, and subject matter) imposed on the Company by regulators at the end of the reporting period
One provision worthy of note is that the Act ie Nigerian Code of Corporate governance provides that the Board should use its best judgment to disclose any material matter even though not specifically required by this Code to be disclosed if in the opinion of the Board such matter is capable of affecting the present or anticipated financial condition of the Company or its status as a going concern. The onus of proof of such possible negative effect is on the Board.
In other words, disclosure is not restricted to those items specified under the relevant provision.
4. Differences between financial and non-financial disclosures?
Financial disclosures as the name implies relates to money matter. That is the company’s expenditures, income like advertising costs, sales revenue, employee compensation and the value of assets.
Non- financial information relates to Company’s ESG (environment, social and governance) activities ie…environmental impact, your relationship with your vendors, diversity in the workplace and social responsibility etc
5. Harms in not fulfilling the disclosure requirements.
-First and foremost, failure to disclose is a violation of the Act because a provision of the Act has not been complied with.
-Secondly, non-disclosure will mean that the stakeholders will not be able to make well informed decisions.
-Since corporate disclosures encourage efficient management of enterprises and better-run companies, so non – disclosure could signal that the Board of directors are covering up some illegality which may cost some loss to the stakeholders which could lead to class actions and eventually cause damage to the company’s reputations. If some investors are not in the know of the happenings of the company it could trigger distrust and which most often than naught end in litigation which could be damaging to the company.
6. How important is the Concept of Transparency and Disclosure in stakeholders’ relationship?
As earlier said, Transparency and Disclosure is about knowing what’s going on in the company. So the Concept of Transparency and Disclosure is always to provide a clear and detailed information which aids stakeholders in making well informed decisions and even make invaluable contributions to the company. So it is a very important concept in shareholders’ relationship.
Lack of disclosure to a stakeholder is like driving a car at night without the headlights on. You can imagine what will become of that journey.
7. On Transparency, the Code provides that “Communicating and interacting with stakeholders, keep them conversant with the activities of the Company and assists them in making informed decisions.” To what extent do you agree with this statement.
To the extent that the Company in question is communicating the true status or happenings of the Company.
8. On Disclosure, the Code provides that, “The Board should ensure that the Company’s annual report includes a corporate governance report that provides clear information on the Company’s governance structures, policies and practices as well as environmental and social risks and opportunities. “What is the significance of this requirement?
It is a requirement of the law that companies publish their annual report. Of course as the name implies, it must be published every year. Now, the Code provides what the annual report should contain/disclose:
‘clear information on the Company’s governance structures, policies and practices as well as environmental and social risks and opportunities.’
The significance is that the Code aims to ensure that these information are disclosed at least once a year and ultimately that stakeholders stay abreast of what is going on in the Company. They should be in the know…..so they can raise alarm where they need to.