Recently the Federal Government was embarrassed when it appointed dead persons into its organisations, thus stoking the controversy over the non-constitution of many organisations in the country. In this piece, BAMIDELE OGUNWUSI, CHRIS EBONG, IKECHI NZEAKO, ISAAC ASABOR and SEGUN KOIKI write on why the boards have not been constituted after the government has just two years more and its implications on the nation’s economy.
The President Muhammadu Buhari administration is gradually running to an end as it has already run through two and half of the four-year tenure. Within this period in the life of the administration, it has been observed that some of the government agencies are still running without a constituted board of directors.
Some of the agencies currently running without constituted boards include the Securities and Exchange Commission (SEC), National Pension Commission (PenCom), Central Bank of Nigeria (CBN) in the financial subsector, and Nigerian Civil Aviation Authority (NCAA), and Federal Airports Authority of Nigeria (FAAN) in the aviation, among others.
While it is viewed in some quarters that the extant laws that established some of these agencies are fragmented and overlapping with multiplicity of obnoxious enactments whereby rendering system ineffective and inefficient, some are contending that the purpose of having a constituted board is majorly to check infractions and overbearing influences of the chief executive officers designated as director generals and the executive management and ensure checks and balances.
A typical instance is the feud between the immediate past Director General of the SEC; Mr. Mounir Gwarzo, and the Finance Minister, Mrs. Kemi Adeosun, which eventually cost the later his job. A school of thought has it that such scenario would have been averted if there was a board of directors in place.
Also, the overbearing influence of the former CBN Governor, now an Emir, Mallam Lamido Sanusi, who occupied the position of a chairman and the chief executive of the apex bank, is another case in question.
Another instance where the board plays significant role in an agency structure is to guarantee a smooth-running of the system without a hitch was the case of PenCom, where the board was dissolved in late 2016 and the director general relieved of her job. It was said that the system was running abnormally due to the failure of the government to constitute a substantive board. The entire system is currently being run in an acting capacity.
To provide continuity for the organisation by setting up a corporation or legal existence, and to represent the organisation’s point of view through interpretation of its products and services, and advocacy, select and appoint a chief executive to whom responsibility for the administration of the organisation is delegated, including: – to review and evaluate his/her performance regularly on the basis of a specific job description, including executive relations with the board, leadership in the organisation, in product/service/programme planning and implementation, and in management of the organisation and its personnel and to offer administrative guidance and determine whether to retain or dismiss the executive.
The board governs the organisation by broad policies and objectives, formulated and agreed upon by the chief executive and employees, including assigning priorities and ensure the organisation’s capacity to carry out products/services/programmes by continually reviewing its work, acquire sufficient resources for the organisation’s operations and to finance the products/services/programmes adequately and Account to the stockholders (in the case of a for-profit) or public (in the case of a nonprofit) for the products and services of the organisation and expenditures of its funds, including:- to provide for fiscal accountability, approve the budget, and formulate policies related to contracts from public or private resources and to accept responsibility for all conditions and policies attached to new, innovative, or experimental products/services/programmes.
Roles And Responsibilities Of Corporate Board Of Directors
There are a variety of views about the roles and responsibilities of a board of directors and most of these views share common themes. Depicting various views, a board of directors is a group of people legally charged with the responsibility to govern a corporation.
In a for-profit corporation, the board of directors is responsible to the stockholders — a more progressive perspective is that the board is responsible to the stakeholders, that is, to everyone who is interested and/or can be effected by the corporation. In a non-profit corporation, the board reports to stakeholders, particularly the local communities, which the non-profit serves.
According to experts, core company law is concerned with addressing three main sets of principal/agent problems.
These arise out of the relationships between the management and the shareholders as a class; between majority shareholders and minority shareholders; and between the controllers of the company (whether managers or majority shareholders) and non-shareholder stakeholders.
Following the three propositions, the rules relating to board composition, structure, duties and powers (‘board rules’) are capable of being utilised to address any one or more of these sets of agency problems.
However, there is a swap in-between if the board rules address more than one set of the agency problems; and their effectiveness in relation to any one set is reduced.
Experts have also added that the focus of the recent corporate governance movement has been on enhancing the board’s effectiveness in addressing the management and shareholders as a class and in consequence the burden of addressing the other two agency problems, that is, between controllers and non-shareholder stakeholders.
Core company law addresses three sets of principal/agent problems, which are inherent in the structure of large companies: those arising between management and the shareholders as a class; between majority shareholders and minority shareholders; and between the controllers of the company (whether managers or majority shareholders) and non-shareholder stakeholders. Within a particular company the first two sets of problems are mutually exclusive (at least at any one point in time) and which predominates depends upon the structure of shareholdings. Where shareholdings are dispersed, the principal/agent problem, which emerges is that between shareholders as a class and the management of the company.
No matter what the formal governance rights of the shareholders may be, their collective action problems may make it in practice impossible or very difficult for the shareholders to exercise effective control over the management of the company.
In consequence, management may give priority to non-shareholder interests, including the interests of the managers themselves.
The question for company law, therefore, is what contribution it can make to reduce the costs of diversified ownership and the principal/agent problem generated by such diversification.
The post How Agencies Struggle With Corporate Governance Without Boards appeared first on Independent Nigeria.
How Agencies Struggle With Corporate Governance Without Boards
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