CORPORATE GOVERNANCE & ETHICAL BUSINESS DEALINGS IN ...

Professor Fabian Ajogwu, SAN, FCIArb

CORPORATE GOVERNANCE & ETHICAL BUSINESS DEALINGS IN NIGERIA: THE IMPERATIVES

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Mr. Chairman, Distinguished Professionals, Ladies and Gentlemen, Existing Protocols adopted! I would like to share with you my thoughts on the subject, whose importance has, in recent times, been brought to the front burner as it rightfully should.

Recent financial crisis and enterprise collapses across the globe again reinforce the need to Check ethical behavior in corporate dealings. It is true that a company is an artificial entity, with all the rights and powers of a natural person of full capacity conferred on it by law, however it was not the intention of Lord McNaughten (or indeed statutory codification of those principles) in laying out this principle in the locus classicus of company law — the old case of Salomon v Salomon Ltd, that there should be a total extrication of the importance of human behavior in the management of these entities created by law. It is the socio-economic nexus between managerial behaviour and company administration (or maladministration) that has brought out the subject — Corporate Governance. In simple words - Governance of the Corporation!

Thrust of the DiscussionThe banking crisis in a range of jurisdictions has raised serious questions about the adequacy of corporate governance arrangements. Consideration of recent concrete examples in Nigeria reveals that not only must existing arrangements be questioned in terms of their ability to cope with the problems that have already been well-described in the literature but also in terms of their ability to cope with the problems raised by group structures, coupled with issues of ethics and professionalism of managers in their dealings.

It has been argued that shareholders have an incentive to invest resources in curbing both managerial and owner opportunism1, however the recent experiences in Nigeria show that the

1 WS Schulze, MH Lubatkin, RN Dino and AK Buchholtz, A gency Relationships in F amily Firms: Theory and Evidence, Organization Science, Vol.12, No.2 (2001), pp.99—l l6, URL:http://www.jstor.org/stable/3086050, Accessed April 9,20092 Bob Tricker, Corporate Governance, (New York, 1994)3 Fl Ajogwu, Corporate Governance in Nigeria: Law and Practice, Centre for Commercial Law Development (CCLD), Lagos, 2007 4 Foreword by Sir Adrian Cadbury to Magdi R Iskander and Nadereh Chamlou Corporate Governance: A Framework for Implementation, World Bank Group, 1999.

significant shareholders that are most capable of curbing board and management excesses (for example the institutional shareholders and majority shareholders) have showed an apparent unwillingness to oppose the management and the boards of the companies. This situation is more prevalent in companies operating within group structures (companies having parent — subsidiary relationships).

What has evolved in these companies particularly in the Nigerian banking and financial services sector is that the management of the subsidiaries tend to report directly to the Chief executive officer of their parent company in line with the respective functions of the senior executives within the group, and in so doing, the management side track their respective boards, thereby rendering them ineffective in governance. The effect is that accountability to the board is reduced and the checks and balances which an effective board would have brought to bear on the management of the company are eroded. This puts the sustainable development of the enterprise at risk.

Corporate governance is “…the exercise of power over the direction of the enterprise, the supervision of executive actions, the acceptance of a duty to be accountable and the regulation of the corporation within the jurisdiction of the states in which it operates’.2 Corporate governance guidelines and codes of best practices arise in the context of, and are affected by, differing national frameworks of law, regulation and stock exchange listing rules.3 It is concerned with —

....holding the balance between economic and social goals and between indiVidual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society.4

Corporate Governance & Ethical Business Dealings in Nigeria: The Imperatives

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Corporate governance has been defined as an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management actiVities with good business savvy, objectivity, accountability and integrity.5 G O’Donovan takes the View that —

…sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes.6

The codification of corporate governance principles and best practices is really to reinforce specific provisions of the law, introduce best practices and regulations that are critical to the discharge of the duty of accountability of the board and management to stakeholders. As E. Kachikwu succinctly puts it —

codes of corporate governance are intended to regulate the conduct of directors, accountability to shareholders, recognition of the interest of other stakeholders and the need to encourage investment to flow where it could be most productive by raising in this case the Nigeria corporate governance standards to best international practices in comparable jurisdictions. This would appear to be the reason and purpose of corporate governance.7

Corporate Governance is simply the responsible and sustainable direction of the affairs of the enterprise (in and outside of the boardroom), in a way that recognizes and balances the competing interests of the stakeholders, as well as keeps faith with the promise made to the stakeholders. The notion of corporate governance can simply be put to effective governance of the corporation in the real sense of the words — ‘corporate’ and ‘governance’. The Oxford New English Dictionary on Historical Perspectives defines governance as —

… the action or manner of ‘governing’ or ‘controlling, directing, or regulating influence; control, sway or mastery,’ or ‘the manner in which something is governed or regulated; method of management, system of regulations.8

The Crucial Questions & PremiseThe crucial questions are -

• Does the control of a subsidiary by a parent company, together with the functional reporting lines that exist between the management of the parent company and those of its subsidiaries, not blur the legal principles of separation of ownership from management?

• What is the corporate governance impact, where a significant shareholder in a group wears several hats (e.g. shareholder, creditor, supplier, manager and franchisor) in relation to the company or companies?

• Can rules and codes of corporate governance by themselves alone ensure good behaviour in management of company affairs?

5 G O’Donovan, A Board Culture of Corporate Governance, Corporate Governance International Journal, 2003 Vol.6. Iss. 3.6 Ibid.7 Foreword by E. Kachikwu to F1 Ajogwu, Corporate Governance in Nigeria: Law and Practice, 11.48 Oxford New English Dictionary on Historical Perspectives (1901) (OED) monitored and controlled in order to ensure that they do their primary job (work to maximise shareholder value).

The questions are premised on two main points —1. The challenges of modern day corporate governance in the

context of the ‘Agency Theory’, which sees shareholders as ‘principals’, and management as their ‘agents’ argues that agents will act with rational self—interest, not with the Virtuous, wise and just behaViour assumed in the stewardship model (fiduciary based relationship). It highlights the tendency of people (agent - managers) to act in their own interest rather than for the public or greater good, and for shareholders. They therefore need to be monitored and controlled in order to ensure that they do their primary job (work to maximise shareholder value)

2. The recent events of corporate governance challenges in Nigeria, as well as the changes in regulation. There have been some significant cases of corporate governance challenges in Nigeria recently. A notable one is that of Cadbury Nigeria Plc, where the Chairman of the company was stated to have issued a rather unusual statement, which stated in clear terms that the company, for whose board leadership he was responsible, had its Financial Statements overstated to the tune of N13.25 billion (approximately $109.5 million). The regulator, the Securities and Exchange Commission, found the company as Issuer, the chairman, the chief executive officer, other members of the board, some management staff and audit committee members guilty of having issued or authorised the issuance of Cadbury’s Rights Circular dated August 24, 2005 which contained untrue statements. I must mention two things —a. It was the Chairman of Cadbury Nigeria Plc, who notified

the Securities and Exchange Commission, and indeed the general public that they (the Board of Cadbury) had discovered what they deemed to be wrong doing on the part of the Management of the company led by the Chief Executive Officer.

a. It is being contested by the Chairman and some of the Directors that they were not given a fair hearing (specifically an opportunity to make their defence to the allegations against them). Some of these issues are currently the subject of litigation before the courts.

In this paper, I intend to examine corporate governance practices and ethical behavior in enterprise development in Nigeria. We will look at the control factor in subsidiaries by their parent companies, together with the functional reporting lines that exist between the management of the parent company and those of its subsidiaries, with a View to determining the impact on corporate governance from the perspective of the legal principles of separation of ownership from management.

The argument, that I proffer is, that there is incongruence between the group titles, functionalities and contract models within a group of companies on the one hand; and the practice of core principles


of corporate governance by these companies on the other hand. This argument, which no doubt may on the face of it be disputed by some, presses the point that expressions such as ‘Group Managing Director’ and ‘Group Financial Director’ are really mere titles rather than positions of fact or law because the subsidiaries are indeed separate legal entities with separate officers and Board of Directors different from those of the parent company. Under Nigerian law, group issues relate more to the ability to consolidate accounting and financial statements.

A group may be the collection of several separate legal entities, each one bound by the law creating it to abide by the timeless principles set out in the case of Salomon v Salomon9, that is to say, that the shareholder/ parent is indeed separate from the company/ subsidiary or affiliate. Co-branding and logos do not override this principle. Only the exceptions that warrant the lifting of the corporate veil can at best look at attaching liabilities (not gains) to the shareholders, where appropriate or necessary.

The assumption is that the efficient use of company assets coupled with good governance invariably translates to higher probability of good returns on investments. Corporate governance impacts on the well being of a company, its economic performance and the ability to attract capital on a sustainable basis. These assumptions take for granted the behaVioural context of management — the Ethics of Business Dealings!

With the post banking sector consolidations in Nigeria (2005) that saw the number of banks reduce from 95 to 25, the nation’s capital market and the stock prices of quoted firms were positively impacted. The consolidations took the form of series of corporate mergers and acquisitions, private placements, initial public offers, and huge streams of foreign direct investments from foreign multinational banks and institutions in the form of debt financing and private equity. The dominance of banks in the Nigerian capital market, and the interdependence of other sectors of the economy on the banks make the strengthening of enterprises through appropriate and adequate corporate governance mechanisms an imperative to sustainable economic development.10

With the banking and financial services sector consolidations for instance, there emerged groups of companies (parents and subsidiaries) whose aggregate shareholders funds were needed to meet the regulatory minimum capital. This necessitated critical aspects of governance being identified and proactively addressed. The specific areas include the rights of shareholders including minority interests, duties, responsibilities and liability of directors, separation of powers between the general meeting and the board, and post-merger best practices, especially in large companies operating in groups. The importance of these aspects of governance lies in the value they can preserve in companies operating in these markets and the development of theory and practice. Insights from this research should aid the ability of firms to adopt those practices that are best suited to their peculiar socio-political and economic

9 (1897) AC. 2210 Following the completion of the 2005 consolidation exercises in the Nigerian banking sector, the Central Bank of Nigeria in 2006, issued a Code of Corporate Governance for Nigerian Banks. This Code was strengthened to meet the specific challenges facing the industry at the time, namely the concentration of shareholding and management of banks by single families, absence of risk management, and lack of effectiveness of Board oversight on management.

environment of business.

This paper will suggests specific ways of getting companies within a group to enhance corporate governance practices through the evolving concepts of use and separation of powers in the governance of enterprises, with particular emphasis on shareholder rights including protection of the minority, the responsibilities of directors and senior management at the parent level, and subsidiary level. Insights from this research should aid the provision of an appropriate direction of reform of corporate governance in Nigeria especially those operating the group structure.

Paper ScopeThe focus of this paper is the application of corporate governance principles to the operations of companies that operate under the group umbrella with particular emphasis on the post merger Nigerian companies. It will examine the suitability of standard models of corporate governance to situations where companies operate in the group structure, particularly with respect to behavioural problems, which fall under the sphere of ethics and fiduciary based relationships. I will review the transaction cost, agency theory and other economic theories that seem to focus on single entities, and try to determine whether those theories support the more complex situations that emerge in groups. The key focus would be — are these models of corporate governance adequate to cope with complex structures like groups?

I will therefore look at the precipitating questions of — - Can the corporate governance codes and models deal with

behavioural problems? - Can statute based codes or regulations including regulators’

reporting requirements effectively tackle the higher values-driven requirements of tmst-based relationships?

We will examine the crucial role of the Regulator in enforcing corporate governance practice. It will also examine scenarios where regulation fails, or the regulator and indeed the significant shareholders (institutional or otherwise) turn a blind eye to corporate greed and market manipulations enabled by remote control of the subsidiaries’ affairs by the parent, especially in high multiple stakeholder companies.

HowThe positions taken in this paper derive from collection of research data and the development of arguments on the subject, including reViews of existing literature, codes and legal framework of corporate governance in Nigeria. The seminars, roundtables, and symposia involving directors, chairmen, audit committee members, and regulators organized by the Society for Corporate Governance Nigeria in partnership with the Lagos Business School, as well as the first Securities and Exchange Commission Committee on Corporate Governance; provide the basis of stimulating debates on the key issues. Let me mention that the outcome touch largely on how the board is selected and evaluated, how independent the


directors are, the role of the chairman, the integrity of financial reporting, ethical behavior and how the subsidiaries function alongside the parent.

The Basic ViewpointsIn looking at the control factor and impact of corporate governance between parent and subsidiary companies, this paper takes the Viewpoint of the Cadbury Report that in essence, corporate governance is to do with the processes by which a company is directed, managed and controlled. Corporate governance is described as the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is said to include appointing the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place.11 The responsibilities of the board include —

setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations and the shareholders in general meeting.12

The Cadbury Report which greatly inspired the drafting of the Code of Corporate Governance of Public Companies in Nigeria placed much emphasis on the control side of things — the monitoring of, and accounting for board policies. Chambers takes the View that the emphasis ought to be on “the formulation of sound strategic board policies, which are the starting points of corporate governance”13. Tricker in emphasising governance over management put forward the process of corporate governance in the following actiVities, namely — direction, supervision of executive action, and accountability. He however recognises that ‘strategic management’ was one thing that was shared by management and governance as separate activities.14

Recent developments in Nigeria and the current financial and economic crises put the issue of sustainable development of enterprises at the centre of any economic growth plan and development strategy. It is for this reason that the proper governance of enterprises in Nigeria has become even more critical than ever to economic growth. With Nigeria being a predominantly extractive industry based economy15, enterprises play a significant role in supplying goods and services and in creating wealth and jobs. Corporate governance therefore plays a significant role in

11 The Committee on The Financial Aspects of Corporate Governance ‘Draft Report’ issued for public comment (27 May 1992) pp — 7 — 8, paras 2—5, 2.6). Also cited in A. Chambers, Corpo-rate Governance Handbook, Tottel Publishing, UK, 2008, p.19612 The Committee on The Financial Aspects of Corporate Governance ‘Draft Report’ issued for public comment (27 May 1992) pp — 7 — 8, paras 2—5, 2.6). Also cited in A. Chambers, Corpo-rate Governance Handbook, Tottel Publishing, UK, 2008, p.19613 A. Chambers, Corporate Governance Handbook, Tottel Publishing, UK, 2008, p. 19614 R. Tricker, Corporate Governance 7 Practices, Procedures and Powers in British Companies and Their Boards of Directors (1984, Gower)15 Crude oil revenues account for over eighty percent of Nigeria’s annual revenues, making the oil sector the single largest sector. This sector however creates relatively the least number of direct jobs.16 LSE, (2007) Nigeria Capital Markets Day, The London Stock Exchange. Available at http://www.londonstockexchange.com/en—gb/products/irs/capitaldays/Nigeria/17 Now Africa Practice R&B18 O Amao, and K. Amaeshi, Galvanising Shareholder Activism: A Prerequisite for Efleclive Corporate Governance and Accountability in Nigeria, 2007, CSGR Working Paper Series 228/07: 1—22.19 S Apampa, Do Right, Do well: Compliance and the Market Mechanism, (CBi, Lagos, 2008)

the sustainable socio-political and economic development of the country.

In Nigeria, a majority of listed companies especially banks and other financial institutions have shown a commitment to good corporate governance by the positive acts of compliance with corporate governance best practices as enunciated in the Code of Corporate Governance. The Nigeria Capital Markets Day which was held in London on June 8, 2007 essentially signaled to foreign investors that it is indeed safe to invest in Nigeria. The London Stock Exchange (LSE) in conjunction with the Nigerian Stock Exchange (NSE) and Africa Practice, held the Capital Markets Day to provide an overview of investment opportunities in Nigeria with 10 of Nigeria’s leading banks presenting to London based institutional investors.16 In October of the same year, the LSE organized a similar programme in Lagos in conjunction with the NSE and Africa Practice17.

In addition, there is increasing acceptance that investor protection is being taken seriously especially in Nigerian banks, and as such this has enabled Guaranty Trust Bank Plc, one of Nigeria’s major banks, to become the first Nigerian company and first African bank to be listed on the LSE. Diamond Bank Plc and Access Bank Plc have followed suit. In addition Nigeria has been recently rated average in the World Bank investor protection index, which covers issues relating to transparency of transactions, liability for self-dealing and shareholders activism.18 Indeed having recognised the Vital contributions of the private sector in national economic development, partly as a result of the recent but substantial financial deepening of Nigeria’s capital market, the Nigerian government has also become more enthusiastic to attract foreign direct investments, and as such there has been a general renewed emphasis on corporate governance in Nigerian companies.

In the Nigerian market, governance structures are very important, in the sense that they have to be clear and as such understood to be effective, but their precise forms are less so understood. What really matters is the way in which companies, directors, officers and auditors put these structures to work, so that the enterprise is governed in a proper way. Apampa also expresses the sentiment that whilst the SEC Code appeared to have dealt with the core issues of corporate governance, it however lacked the mechanism for implementation and enforcement of compliance by the Regulators.19


Ajogwu recommends that compliance with the Code be made a condition for continued listing at the Stock Exchange.20 The point being made was to essentially transit from the existing model of comply-or-disclose-why-not, to a model that more or less has incentives for compliance, and direct or market response type sanctions for non-compliance. The socio-political environment of business in Nigeria and the key issue of business ethics and corporate social responsibility were also brought to the fore.

There is therefore a strong need for a critical examination of those indices, systems and practices that help enhance corporate governance from a functional perspective where a company operates within the group structure. The pyramid system of having all subsidiaries report to the chief executive officer of the parent company in a unitary control style is predicated on the opportunistic combination of several divisions and often unrelated products and services in a manner that seeks to gain from the resulting scale of economies.

What is not taken into consideration in this model is the impact of the functional relationships or reporting lines within the group on governance mechanisms. This certainly impairs what would have been well-defined governance structures that should go with individual entities. How the boards of the units discharge their statutory, contractual as well as trust-based duties to their respective companies and stakeholders has been the subject of much introspection when considering corporate failures. This challenge presents itself more particularly when the market has itself lost the power to be self-enforcing. What is required is a deep consideration of the drivers of corporate governance such as having an independent and effective board, ensuring integrity of financial statements, and a clear separation of ownership from management.

The conflict between functional reporting lines across entities and the age long principle that a company is a different legal entity from its shareholders makes it imperative that these drivers be put in place to reduce or manage the incidents of abuse of corporate power and control. There is also the need to examine critically the influence of ownership, control and the interest of the managers of the business which sometimes disconnects from those of the shareholders and other stakeholders. Herman states — ‘the basic question of establishing who has power over key decisions, as a practical matter, revolves ultimately on determining who has power to name the top executives of the corporation.21

In Nigeria, the expressions ‘holding company’, ‘subsidiary company’ and wholly-owned subsidiary’ are given a rather broad

20 Fl Ajogwu, Corporate Governance in Nigeria: Law & Practice, n.421 ES Herman, Corporate Control, Corporate Power, Cambridge, 198122 Companies and Allied Matters Act [CAMA], Cap. C.20, Laws of the Federation of Nigeria, 2004, section 338(5)23 Ibid. Section 338(5)24 O Orojo, Company Law & Practice in Nigeria, Butterworths, London, 2006, p. 34825 [1977] 5SC, p. 23526 The Alberzo [1977] AC. 744, CA.27 [1998] 11 Nigerian Weekly Law Reports pg 12128 AA Berle and GC Means, The Modern Corporation and Private property, (New York, 1967). Also cited in F1 Ajogwu, Corporate Governance in Nigeria: Law & Practice, p. 4

definition that cover strict share ownership as well as control factors. The substance is given preference over form. A company is deemed to be a holding company if the other is its subsidiary.22 A company is deemed to be a subsidiary of another if that other company is a member of it and controls the composition of its board of directors or holds more than half of its nominal equity share capital.23 The composition of the board of directors of a company is said to be controlled by the holding company where in exercise of the powers conferred on it as a shareholder, it can, without the concurrence or consent of any other person or shareholder appoint or remove a majority of the directors of the subsidiary company.24

In Seaways Ltd v. Nigeria Dredging R and G Ltd,25 the court stated that —

… it is clearly a necessary incident of company law that the concurrence of a holding company is a sine qua non to the acquisition of shares in its subsidiary, and a holding company is no more than a controlling shareholder of its subsidiary.

The fact of control by itself does not in any way make the holding company the principal of the subsidiary. They are still treated as separate companies. Under Nigerian Laws, there is no general principle that all companies in a group are to be regarded as one. On the contrary, the fundamental principle is that ‘each company in a group of companies is a separate legal entity possessed of separate rights and liabilities’.26 In M.O Kanu & Sons vs. FBN PLC27, the legal status of a holding company and its subsidiaries was considered and the Court of Appeal stated thus:

A holding company and its subsidiaries are each a distinct and separate legal personality. Each owns its own assets and properties. Therefore any argument that the applicant is the owner of any company whether limited by shares or otherwise is inappropriate.

The classical monograph of Berle and Means, ‘The Modern Corporation and Private Property’ continues to have a profound influence on the conception of corporate governance in scholarly debates today.28 The thesis describes a fundamental agency problem in modern firms where there is a separation of ownership and control. The authors express such separation as follows:

It has often been said that the owner of a horse is responsible. If the horse lives he must feed it. If the horse dies he must bury it. No such responsibility attaches to a share of stock. The owner is practically powerless through his own efforts to affect the underlying property. The spiritual values that formerly went with ownership have been


separated from it the responsibility and the substance which have been an integral part of ownership in the past are being transferred to a separate group in whose hands lies control.29

Origins of Corporate Governance in NigeriaIn the late 1990S, in Nigeria, the investing public and the Securities and Exchange Commission reacted negatively to allegations of financial misrepresentations or misstatements on the part of Lever Brothers. What followed was the establishment by the Securities and Exchange Commission of a Committee on Corporate Governance, which produced its report as well as Nigeria’s first Code of Corporate Governance and Best Practices in 2002. The Committee drew its membership from the Central Bank of Nigeria, the Institute of Chartered Accountants of

Nigeria, Corporate Affairs Commission, Nigerian Stock Exchange, Institute of Directors, Shareholders Associations, Institute of Chartered Secretaries and Administrators, etc.30 The Securities & Exchange Commission set up the Committee in June 2000, with the objective of identifying weaknesses in the current corporate governance practices in Nigeria with respect to the public companies, examining practices in other jurisdictions with a View to the adoption of international practices in corporate governance in Nigeria, and making recommendations on necessary changes to current practices. The terms of reference of the Committee can be summed up thus -

To review the practices of corporate governance in Nigeria and thereafter, recommend a Code of Best Practices to be followed by public companies and all other companies with multiple stakeholders registered in Nigeria in the exercise of power over the direction of the enterprise, the supervision of executive actions, the enthronement of transparency and accountability in the governance of these companies within the regulatory framework and market.31

Recently, allegations of impropriety were levelled against Cadbury PIC of Nigeria, with the result that the Securities and Exchange Commission began conducting investigations and hearings on the allegations of misstatement (over-statement) of Earnings on the part of Cadbury’s Chief Executive Officer.32 In what is set to be a major milestone in the development of Corporate Governance in Nigeria, the reaction of the Board of Directors of Cadbury Plc was to relieve the Chief Executive Officer and the Chief Financial Officer of their positions, and ordered an investigation by Pricewaterhousecoopers. Aggrieved shareholders quickly filed a class action lawsuit at the Federal High Court, seeking general and punitive damages against

29 AA Berle and GC Means, The Modern Corporation and Private Property, (New York, 1967).30 FI Ajogwu, Corporate Governance in Nigeria: Law & Practice31 Report of the Securities and Exchange Commission Committee on Corporate Governance, 2001 — 3, Lagos, Nigeria, see www.secng.org32 Source: Guardian Newspaper, http://www.financialnigeria.com/NEWS/newsiitemidetailiarchive.aspx?item=1865, accessed March 10, 201033 Source: Economic Confidential , April 9, 2008, http://www.economicconfidential.com/maybizsec08.htm, accessed March 10, 201034 Source: G Egene and E Abiodun, ThisDay Newspaper, April 10, 2008, http://allafrica.com/stories/200804100289.html, accessed March 10, 201035 Faced with an estimated N2.3 trillion bad loans for the entire Nigerian financial system, the Governor of the Central Bank of Nigeria and other proponents of the Asset Management Company of Nigeria (AMCON) bill believe that it has great potentials to stimulate growth activities and stimulate the Nigerian economy. A Ogbonna believes that ‘a key motivation for this initiative, according to financial experts, was that AMCON as a crisis resolution vehicle could soak the toxic assets of heavily exposed banks to release liquidity to oil their operations, while assisting in their recapitaliza-tion programmes.’ A Ogbonna, How AMCON will clean up N2.3trn banks’ toxic assets, NBF News, July 26, 2010, http://www.nigerianbestforum.com/blog/?p=55581, accessed, July 30, 201036 For example the Central Bank of Nigeria Code of Corporate Governance for Banks, and the Sarbanes Oxley Act.37 For example the UK Code.

Cadbury. The Securities and Exchange Commission launched an enquiry into the allegations against Directors of Cadbury Plc, and found the company and board guilty.33 The SEC imposed various sanctions and penalties on the directors, management, auditor, and chairman for different degrees of wrong doing or negligence.34

Emerging PhenomenonRecent bank and company large scale failures across several jurisdictions have put to question the efficacy of standard models of corporate governance especially in relation to companies operating the group structure. The assumption seemed to be that where regulation is based on prescriptions and well written codes, there ought to be stable companies with good practices of corporate governance. However the reverse has been shown to be the case. Neither the big-stick wielding regulation approach, such as the United States’ Sarbanes Oxley Act, nor the United Kingdom’s prescriptive Code approach has prevented the large scale bank failures that occurred in both jurisdictions between 2008 and 2009. Nigeria’s Central Bank Code of Corporate Governance, which was a tighter prescription for banks specifically, also did not prevent the bank failures in Nigeria that necessitated Government bailouts, and the move to establish an Asset Management Company to take up the toxic assets (bad loans) of those banks.35 A number of questions therefore emerge, namely —

- Were those recent instances of corporate governance failures really a result of absence of regulation or were they more of behavioural problems?

- Can reporting requirements really deal with behavioural problems by the delineation of relationships?

The force of codes vary from jurisdiction to jurisdiction, with some codes taking the comply or explain model; others taking the mandatory compliance approach36 Some governance codes are linked to listing or legally mandated disclosure requirements.37 Others are purely voluntary in nature. However, despite their origins, corporate governance codes have more or less the same principles. The Central Bank of Nigeria in reviewing its code of corporate governance for banks in 2010 essentially drew from the United Kingdom’s Walker Report. It essentially sought to maintain the “comply or explain” principle, taking the View that that the chief deficiency of banks and financial Institutions ‘was behaVioral problems rather than organizational problems’. It sought to get corporate boards challenged by requiring that non-executive directors (NEDs) should be charged to focus on risk issues separately from the executive risk committee process. It


also required that fund managers and other shareholders should engage more productively with their investee companies over long-term objectives; and that there should be enhanced attention on remuneration policies in respect of variable pay, disclosures and incentives. Finally it looked to having board risk committees, and remuneration committees; and demanded communication and engagement of institutional shareholders.

Control Factor in Parent — Subsidiary DealingsThe existence of parent-subsidiary relationship was previously determined by the narrow consideration of percentage ownership.38 It is now based on the control concept. It must be stated that under Nigerian law, control per se (without 51% equity holding) does not convert the relationship into a parent-subsidiary relationship. Where the controlling shareholder company is the largest single shareholder able to muster the highest votes, by reason of the other shareholders having become so fragmented as to be unable to muster up a block vote, then the controlling shareholder is at best a de facto parent, but not a parent de jure.

The Companies and Allied Matters Act39 only allows consolidation of group accounts where the parent holds a minimum of 51% equity. It is pertinent here to mention that all that is required to appoint and remove the directors of a company is a simple majority (more than 50%) of the general meeting of shareholders. Conglomerates, which Williamson looks at as miniature capital markets arising from the combination of ‘internalisation’ and ‘divisionalisation’40 (the formation of profit centres as business divisions), are holding companies whose subsidiaries engage in unrelated lines of business.41

The crucial governance issue here is - what is the corporate governance impact, where a significant shareholder in a group wears several hats (e.g. shareholder, creditor, supplier, manager and franchisor) in relation to the company or companies? Does this situation not create conflicts between the functionality of the group and best practices of corporate governance? It is important to put forward the argument of Schulze, Lubatkin, Dino and Buchholtz to the effect that -

private ownership and owner management not only reduce the effectiveness of external control mechanisms, they also expose firms to a ‘self-control” problem created by incentives that cause owners to take actions which ‘harm themselves as

38 Under Nigerian law, a company that owns 51% of the shares in the capital of another company is said to be the parent.39 Laws of the Federation of Nigeria, 1990 (now 2004)40 OE Williamson, Markets & Hierarchies, 1975, cited in N Kay, Corporate Governance and Transaction Costs, in J McCahery, S Pocciotto and C Scott, Corporate Control and Accountability, Clarendon Press, 1993, London, p. 13941 FI Ajogwu, The Relationship between a Parent Company and its Subsidiaries, 200842 WS Schulze, MH Lubatkin, RN Dino and AK Buchholtz, Agency Relationships in Family Firms: Theory and Evidence, Organization Science, Vol. 12, No. 2 (2001), pp. 99—116, URL: http://www.jstor.org/stable/3086050, Accessed April 9, 2009.43 This took the form of allowances, questionable contracts awarded for branch renovations and head office projects, and other forms of questionable payments. http://www.modernghana.com/news2/257526/1/more—troubles—for—cecilia—ibru—as—efcc—exposes—mor.html. Accessed January 26, 201044 JE Parkinson, Corporate Power and Responsibility (Issues in the Theory of Company Law), Clarendon Press,Oxford, 1993, p. 20045 Fine Industrial Commodities Limited v. Powling, (1954) 71 RFC 253, at 257 also cited in IE Parkinson, Corporate Power and Responsibility (Issues in the Theory of Company Law), Claren-don Press, Oxford, 1993, p. 200

well as those around them.42

The 2009 incidents of bank failures in Nigeria bring to the fore this issue. For instance in one of the banks, the parent in relation to the subsidiaries wore many hats. It stood as the dominant shareholder. It also stood as creditor, and in some instances, as the supplier/contractor. It also dealt through other entities owned by the dominant shareholder of the parent itself. The shares in the dominant shareholder of the parent company, was in fact held by the chief executive directly and indirectly. What emerged was a web of conflicts of interest which manifested in the dominant investor (also controlling shareholder and head of the management team) taking out “returns on investments”43 (albeit wrongfully) well before the profit line in the form of expenses of questionable standings.

It is an integral part of corporate governance to address the issue of conflict of interest especially where the person in the conflict situation is a dominant shareholder, director or chief executive officer. This is particularly important in the light of discoveries that recent corporate governance challenges did not arise because of an absence of rules, laws, codes or systems, but arose more out of uncontrolled behavioural issues. Behavioural challenges or deviant behaviour have been the most contributing factors in corporate failures. Put more bluntly, greed and the quest for more power have been largely responsible for the alleged failings of over five large banks in Nigeria in 2009 alone.

A number of conceptual problems arise here in dealing with this problem simply because it is a human factor and difficult to pin point with any degree of precision. The best that can be done is to provide the boundaries for corporate dealings and behaviour in a framework that can be monitored and enforced if breached. Parkinson44 takes the View that in all cases of self dealing there is a risk that the directors will give way to what Danckwerts J, referred to, in Fine Industrial Commodities Limited v. Powling, as -

that businessman’s standard of morality which easily blinds the possessor of it to the distinction between right and wrong where the interests of the possessor are affected.45

Parkinson’s argument is that a governance structure that involves no independent element between management and the dispersed and largely passive body of shareholders, creates considerable difficulties for the effective regulation of self dealing, which he


sees as inherent in any situation in which one person has control over the assets belonging to another, and which is to be actively managed for the benefit of that other.46 It is therefore clear that in some of the Nigerian banks situation, it was an inherent problem, which required a governance structure that dealt with framework for ethical behaViour, defined the boundaries and prohibited managerial self aggrandisement and illegal transfer of wealth from the company or its subsidiaries to managers.

This brings to the table the issues of business ethics and fiduciary responsibilities of managers and directors in the practice of corporate governance. Nigerian law regulates self dealings by means of codification of the ‘fiduciary principle’47. The fiduciary principle dictates that —

A person in a fiduciary position is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his duty and interest conflict.

In plain terms, directors should not make secret profits in the execution of their duty to the company. It does not matter that the company has indeed suffered no damage. What is important is to make managerial decision making to be free of the bias which self interest brings. In looking at parent — subsidiary dealings and the duty of directors, the case of note is Regal (Hastings), Ltd v. Gulliver,48 where the parent company formed a subsidiary for the purpose of acquiring the leases of two cinemas. Somewhere in between the transactions, the directors came to the conclusion that the parent company did not have enough money to capitalise the subsidiary to the levels required, and decided to take the outstanding shares themselves. Subsequently, the parent sold off its shares, and the directors also sold theirs, and made considerable profit. The court held that the directors were liable to account to the parent company, Regal.

Directors’ Fiduciary DutiesIt is extremely important that board fiduciary responsibilities be enforced through setting up high ethical standards of behaviour by the board. A responsible board should see to it that a code of ethics or statement of business practices are drawn up for the company, published both internally and externally, and most importantly, enforced. In drawing up these rules, it drives the point home to employees if board members themselves provide examples of ethical leadership. Leadership drives ethics.

46 JE Parkinson, Corporate Power and Responsibility (Issues in the Theory ofCompany Law)47 Laid down by Lord Herschell in Bray v. Ford [1896] AC 44, HL, at p. 5148 [1942] 1 A11 ER 378, at p. 39249 Trenco (Nig) Ltd. v. African Real Estate and Investment Co. le.(1978) All NLR 124; (1978) 1 LRN 146; (1997) II NSCC 220, pp. 21650 Ibid51 Ocean Steamship (Nig) Limited v. Soliminu 1997 2 [NWLR] pl. 487pg. 284 at 29452 JE Parkinson, Corporate Power and Responsibility (Issues in the Theory of Company Law)53 Section 279 (1) CAMA54 Section 279 (3) CAMA. Also Hassan (Nig.) Ltd. v. AGE [2002] 12 NWLR (Part 782) 623 at 644, para. A-C55 FI Ajogwu, Corporate Governance in Nigeria: Law & Practice, Centre for Commercial Law Development (CCLD), Lagos, 2007, cap. 756 Section 279 (5) CAMA57 Ibid58 Section 279 (6), CAMA

The term ‘fiduciary’ refers to serving the interest of other persons rather than one’s own personal interests.49 This requires fiduciaries not to misuse their position. The personal interest of fiduciaries must not conflict with the interest of those persons they are serving; or knowledge-fiduciaries must not use knowledge and opportunities to their own or a third party’s advantage.50 Under Nigerian law, directors owe a duty of care to the company, the breach of which renders him liable in an action for damages.

The duty would however depend on the nature of the company’s business; the manner in which the works of the company are distributed among the directors and other officials of the company; and the express provision of the Articles of Association.51 It is important here to examine the provisions of the law supporting director’s duties as would guard against self dealings and ‘managerial self enrichment.’52

Duly to act in good faithA director stands in a fiduciary relationship towards the company and must observe utmost good faith towards the company in any transaction with or for the company.53 A director must at all time act in what he believes to be the best interest of the company.54 Under Nigerian law —

…directors generally owe fiduciary duties to their company and not shareholders and creditors. Directors are required to act bona fide in what they consider to be in the best interest of the company.55

Proper purposeDirectors must exercise their powers for the purpose for which it is specified and not for a collateral purpose.56 If directors exercise their powers for purposes other than those for which they were conferred by the company’s Memorandum and Articles of Association, they may be liable and accountable to the company for any loss, which it suffers. Furthermore, the transaction may be set aside, even if the directors honestly believed such an exercise was in the interest of the company. 57

Duty not to fetter their discretionAlthough directors must act in good faith and for proper purpose, this duty requires them not to fetter their discretion to vote in a particular way.58 Similarly directors must not so delegate their

1 0 | w w w. k e n n a p a r t n e r s . c o m

powers as to amount to any abdication of those powers.59 Ajogwu concludes that -

directors cannot validly contract as to how they will vote at future board meetings. To do so would amount to fettering their discretion which may be against the interest of the company.60

Duty not to allow conflict of his duties with his personal interestsDirectors as fiduciaries must not place themselves in a position in which there is a conflict between their duties and responsibilities to the company and their personal interest or duties to others.61 The common law and statutory requirement of “good faith” must not only be done but must manifestly be seen to be done, and the law will not allow a fiduciary to place himself in a position in which his judgment is likely to be biased and then to escape liability by denying that in fact it was biased.62

Transactions with the companyIt is evidently established that the trustee-like position of directors was liable to vitiate any contract which the board entered into on behalf of the company with one of their members. This principle received it clearest expression in the case of Aberdeen Railway v. Blaikie63 in which a contract between the company and a partner was avoided at the instance of the company, notwithstanding that its terms were perfectly fair.

(i) Statutory duty to declare interest.A director’s personal interest must not conflict with any of his duties as a director. There is a conflict of interest where the director is put in a situation where he may sacrifice the interest of the company, which is his duty to protect, for his personal interest.64 For example, if a director gained information about a business opportunity solely through his position, then he cannot use that information to his own advantage even if the company would not have entered into the contract itself.65

(ii) Disclosure of misconduct.Section 280(6) of CAMA provides that -

…where a director discloses his interests before the transaction and before the secret profit are made before the general meeting, which may or may not authorize any resulting profits, he may escape liability, but shall not escape liability if

59 Section 283 (1), CAMA60 FI Ajogwu, Corporate Governance in Nigeria: Law & Practice, n.461 FI Ajogwu, Corporate Governance in Nigeria: Law & Practice, n.462 Davies L.Paul, Gower Principles of Modern Company Law, 1997, 6th Edition, pp. 610.63 (1854) 1 Macq.H.L 461.H.L.Sc.64 Section 280 (1), CAMA65 Section 280 (4), CAMA66 Section 280 (6), CAMA67 Section 280(2) (a) & (b), CAMA68 Section 280(5), CAMA69 FI Ajogwu, Corporate Governance in Nigeria: Law & Practice, n.470 Section 282. See generally Regal Hastings Ltd. v. Gulliver[1967] 2 AC. 134771 [1993] B.C.C. 646, also cited in R Smerdon, A Practical Guide to Corporate Governance, 2007, Sweet & Maxwell, London. p. 8272 [1991] 1 B.C.L.C. 498, also cited in R Smerdon, A Practical Guide to Corporate Governance

he discloses only after he has made the secret profits, and in this case, he shall account for the profits.66

Use of corporate property, opportunity or informationIn line with the fiduciary duties imposed, a director must not without the informed consent of the company use for his own profit the company’s property as if it was his own. A director may not in the course of management of the affairs of the company or in the utilization of the company’s property make secret profits. He will be accountable to the company where he makes such secret profits.67 The duty of a director not to misuse information obtained from the company by virtue of his position continues even after he has ceased to be a director or officer of the company.68

Competing with the companyA director may be said to be competing with a company where a conflict arises between the directors’ interest and his duties or where he carries on or is associated with a business competing with that of the company.69

Duty of care and skillIn addition to their fiduciary duties, directors also have a duty to exercise such reasonable skill and care as might be expected of persons with their knowledge and experience. Every director of a company shall act honestly, in good faith and in the best interest of the company.70 The modern statement of the standard of care required in corporate governance was laid down by Hoffmann LJ. in Re D’Jan ofLondon Ltd71 thus -

It is the conduct of a reasonably diligent person having both (a), the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company, and (b), the general knowledge, skill and experience that that director has.

In Re Barings Plc (N0. 5), Secretary of State for Trade and Industry v. Baker, it was held that —

a director is entitled to trust the competence and integrity of persons to whom responsibility has been reasonably delegated, to a reasonable extent, but (s)he has a duty to supervise the discharge of the relevant functions.72

The cases above on the standard of duty of care confirm the judicial


supervision of managerial actions through clearly defined duties of the board, in the areas of self interest that Parkinson argued was the independent element that was necessary to avoid a self enrichment and illegal transfer of wealth from the company to the managers. As Smerdon succinctly puts it,

To the broad duty of care statement of Hoffmann L.J. there were signs that the judiciary was beginning to add more contemporary benchmarks of corporate governance as necessary to be included in the standard.73

Directors should know what their responsibilities entail, and that they are in a fiduciary relationship to their companies.

Ethics in Business DealingsBusiness ethics, an aspect of applied ethics, focuses on applying ethical theories of right or wrong, to real-life situations on such questions as how people should act in a company in order for it to be successful and provide fulfilment to all its stakeholders. In examining the recurring question of the impact of behaviour on business, Adam Smith opined that ‘people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices74. In stressing the importance and laying the foundation for the concept of stakeholder interest in a business, AA Berle, and GC Means, in their 1932 book, The Modern Corporation and Private Property, observed thus:

Corporations have ceased to be merely legal deVices through which the private business transactions of individuals may be carried on. Though still much used for this purpose, the corporate form has acquired a much larger significance. The corporation has, in fact, become both a method of property tenure and a means of organizing economic life. Grown to tremendous proportions, there may be said to have evolved a ‘corporate system’ — as there once was a feudal system, — which has attracted to itself a combination of attributes and powers, and has attained a degree of prominence entitling it to be dealt with as a major social institution. [. . .] We are examining this institution probably before it has attained its zenith. Spectacular as its rise has been, every indication seems to be that the system will move forward to proportions which stagger imagination today [...] they management] have placed the community in a position to demand that the modern corporation serve not only the owners [. . .] but all society.75

RC Solomon describes ethics in a succinct manner -Ethics is the quest for a life worth living: Putting every actiVity & goal in its place ..... , Knowing what is worth doing & what is not worth doing,...It is also, within business itself, keeping in mind what is ultimately important and essential & what is

73 R Smerdon, A Practical Guide to Corporate Governance, p. 8274 A Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations, Chicago, IL, University of Chicago Press, 1776/ 1952, p. 5575 AA Berle & GC Means, The Modern Corporation and Private Property, New Jersey: Transaction Publishers, 1932, p.176 RC Solomon, Morality and the Good Life: An Introduction to Ethics Through Classical Sources, New York: McGraw—Hill Book Company, 198477 JM Elegido, Fundamentals of Business Ethics, Criterion Press, Lagos78 Ibid79 Ibid

not, what serves our overall career goals & what does not, what is part of business and what is forbidden to business, even when increased profit — the most obvious measure of business success —is at stake.76

For most organizations, effective board leadership develops an organizational culture that guides the day-to-day actions of its management and by implication, the outcomes as reasonably expected by its stakeholders. Leadership will guide by integrating the rules, principles, or values that are acceptable. Juan Elegido outlines the essence of being ethical in business, certain factors that can turn out to be sources of competitive advantage to an organization:

- Enabling its members lead good lives in the real sense of the word.

- Easily acquiring good business reputation within its business environment,

- Winning the trust of its stakeholders (shareholders, customers, employees, creditors, tax authorities, and society.)

- Fostering among its employees an attitude of commitment to the firm’s interests.77

Value Based Ethics is therefore necessary for an organization ‘that cannot reliably monitor the quality of its employees work that is critical to success’,78 especially when it runs a multi branch or multi location operations network. It is also necessary for an organization that ‘seeks to rely on fast & accurate information management within and outside’ of the organization,79 of one that is not large, but plans on the long term. Ethical dealings require commitment to a purpose — the desire to achieve the corporate goals in such a way that is consistent with its values, through the behaviour of employees and the culture that results there from. There are few examples to point at as the gains of proper ethical standards but a look across the globe reveals otherwise. They are:

- Strengthen Financial Performance: A 1999 DePaul University study of 300 large companies found that firms making an explicit commitment to follow an ethics code provided more than twice the value to shareholders than companies that did not. A 1997 study carried out at the same university found that companies with a defined corporate commitment to ethical principles outperformed (based on annual sales/revenues) companies that don’t.

- Improve Sales, Brand Image, and Reputation: A 1999 survey of consumers in 23 countries by Environics International, the Prince of Wales Business Leaders Forum, and The Conference Board found that more than one-third of consumers in 15 of the countries surveyed believed that an important role of larger companies in society is to “set higher ethical standards and help build a better society.” The same study found that 40


percent of consumers had considered punishing a company based on its social actions and that nearly 20 percent had actually avoided a company for that reason.

- Strengthen Employee Loyalty and Commitment: A U.S. employee survey carried out in 1999 by Walker Information and the Hudson Institute found that only 9 percent of employees who thought their senior management was unethical were inclined to stay with their companies, while 55 percent who believed their leaders were ethical wanted to stay. A multisector survey carried out in the United States by the Hudson Institute in 2000 found a positive correlation between high ethical standards, work commitment, and loyalty, and concluded that “employees who believe they work in an ethical environment are six times more likely to be loyal than workers who believe their organization is unethical.”

- Limit Vulnerability to Activist Pressure and Boycotts: Companies perceived to behave unethically toward shareholders, employees, the community, or other stakeholders are more likely to find themselves the target of activist pressure, boycotts, or “denial of service”. Conversely, companies with a demonstrated commitment to ethical behavior can accrue a kind of “integrity capital” among stakeholders and the general public. This can help them weather an individual episode of misconduct or other crisis without lasting damage to their credibility or reputation.

- Avoid Fines, Court-Imposed Remedies, and Criminal Charges: Companies and their employees must comply with local, national, and international laws governing their operations. Unethical conduct can result in increasingly substantial fines. For example, the European Commission, which has the power to impose fines of up to 10 percent of a company’s worldwide revenues, fined Volkswagen more than $90 million in 1998 for Violating competition rules. In 2010, Halliburton was ordered to pay fines in the United States for wrong doings traced to the company’s operations in Nigeria. In some cases unethical conduct may even result in court-ordered remedies, such as the 2000 ruling that Microsoft be broken up for anticompetitive activities.

- Avoid Loss of Business: As large companies increasingly look beyond their own ethics practices to those of their suppliers as well, supplier firms that have poor ethics practices may find contracts cancelled or future business lost. For example, in 1998 Royal Dutch/Shell cancelled 69 contracts with companies that failed to adhere to its ethical, health and safety, and environmental policies. Governments may also cancel contracts or otherwise punish companies perceived to be unethical.

ConclusionCorporate governance and ethics have become real necessity for enterprise development in Nigeria. Company executives can no longer afford to pretend that business is not bound by any ethics other than abiding by the law. The Friedman position that corporations have the obligation to make a profit within the framework of the legal system, nothing more; and that the only

80 M Friedman, The Social Responsibility of Business is to Increase Profit, The New York Times Magazine, 1970.

duty of the business leaders is, ‘to make as much money as possible while conforming to the basic rules of the society’80 can hardly stand in the face of several business failures where the companies were paying lip service to technical compliance with regulations. Compliance should embody observance of statutory provisions, codes of corporate governance, as well as ethics. The isolation of ethics or ethical behaViour from business dealings have in so many instances in the past led to business and system failures with catastrophic consequences.

It is true that legal procedures are technical, bureaucratic, and obligatory, but then ethics is conscientious, voluntary choice beyond normatiVity, to what is considered to be right or wrong. Law, especially criminal law, is reactive in nature and approach. That is why for instance criminal codes only criminalize an offence after it must have taken place once or twice. Corporate governance is leadership driven. Leadership largely shapes business ethics in any organization; and that way helps us consider the interest of others, and in so doing lead the good life in the real sense of the word.


References

AA Berle & GC Means, The Modern Corporation and Private Property, New Jersey: Transaction Publishers, 1932

AA Berle and GC Means, The Modern Corporation and Private Property, New York, 1967

A. Chambers, Corporate Governance Handbook, Tottel Publishing, UK, 2008

A Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations, University of Chicago Press, Chicago, IL, 1776/ 1952

Companies and Allied Matters Act [CAMA], Cap. C.20, Laws of the Federation of Nigeria, 2004

Davies L.Paul, Gower Principles of Modern Company Law, 6th Edition, pp. 610.

ES Herman, Corporate Control, Corporate Power, Cambridge, 1981

FI Ajogwu, Corporate Governance in Nigeria: Law & Practice, CCLD (Centre for Commercial Law Development), Lagos, 2007

FI Ajogwu, The Relationship between a Parent Company and its Subsidiaries, 2008

G O’Donovan, A Board Culture of Corporate Governance, Corporate Governance International Journal, 2003, Vol. 6. Iss. 3.

H Hansmann, & R Kraakman, The End of History for Corporate Law, Georgetown Law Journal (89), 2000

JE Parkinson, Corporate Power and Responsibility (Issues in the Theory of Company Law), Clarendon Press, Oxford, 1993, p. 200

JM Elegido, Fundamentals of Business Ethics, Criterion Press, Lagos

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R Smerdon, A Practical Guide to Corporate Governance, 2007, Sweet & Maxwell, London

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AboutProfessor Fabian Ajogwu, SAN, FCIArbProfessor Fabian Ajogwu is the Principal Partner of Kenna Partners, a Senior Advocate of Nigeria, and a Professor of Corporate Governance at the Lagos Business School. He is an Alumnus of both the Saïd Business School of Oxford University and the Lagos Business School. He holds a doctorate degree in Law from the University of Aberdeen, Scotland; an MBA from the IESE Business School, University of Navarra, Barcelona; and Law degrees from the University of Nigeria, and University of Lagos.

The Learned Senior Advocate has been Lead Counsel to the Federal Government of Nigeria and its Agencies in several cases of national importance. He has extensive experience in deal structuring and has advised on complex transactions in several industries including Energy, Maritime, Banking and Financial services, Real estate and Infrastructure. He chairs the Board of the Novare Group in Nigeria (owners of the Novare malls), ARM Harith Infrastructure Ltd (Nigeria’s pioneer infrastructure fund), and NES Global, amongst others. He is a Non-Executive

Director of Stanbic IBTC Holdings Plc, a Non-Executive Director of Guinness Nigeria Plc, and has served as Honorary Counsel to the State of Israel and the Republic of South Africa, in Nigeria. He assisted the Securities and Exchange Commission in drafting Nigeria’s pioneer Code of Corporate Governance. He chaired the Nigerian Communications Commission Committee (NCC) on Corporate Governance that produced the pioneer NCC Code of Corporate Governance for the Telecommunication sector in the year 2014 and assisted with the Code’s review in 2016. He also served on the Committee of the Financial Reporting Council of Nigeria that produced the 2018 National Code of Corporate Governance.

He is a member of the Editorial Board of the ‘Journal of Corporate Governance’, a publication of the Society for Corporate Governance Nigeria and a member of the Editorial Board of the ‘Journal of Law Practice’ of the body of Senior Advocates of Nigeria.


Lagos8, Ogunyemi Road,Palace Way, Oniru,Victoria Island, Lagos, Nigeria

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