The Benefits of Adhering to Corporate Governance Standards – Series 4

Introduction

In today’s diverse and competitive business landscape, Nigerian companies that embrace corporate governance standards stand to gain numerous advantages. These principles go beyond mere regulatory requirements and serve as powerful tools for driving long-term success and sustainability. In this article, we will delve into the benefits of adhering to corporate governance standards, with a focus on their positive impact on stakeholder trust, investor confidence, access to capital, decision-making, risk management, and overall long-term sustainability. Furthermore, we will showcase how Highlaw Chambers’ expertise in corporate governance and secretarial services can guide Nigerian companies in realizing these immeasurable benefits.

Scope of Application of the Nigeria Code of Corporate Governance

The Nigeria Code of Corporate Governance does not explicitly define its scope of application. However, on February 18, 2019, the Minister of Trade and Investment issued a regulation stating that the provisions shall apply to the following entities:
a. All public companies, whether listed or not.
b. All private companies that act as holding companies of public companies and other regulated entities.
c. Concessioned and/or privatized companies.
d. All regulated private companies that submit returns to any regulatory authority other than the Federal Inland Revenue Service (FIRS) and the Corporate Affairs Commission (CAC).
The code does not apply to private companies that solely file returns with CAC and FIRS. Companies are required to adopt the “Apply and Explain” approach when implementing the code and monitoring compliance. This approach assumes that all principles have been applied and requires companies to demonstrate how their specific activities best achieve the outcomes intended by the corporate governance principles specified in the Code.

The Benefits of Corporate Governance Standards

Effective corporate governance goes beyond compliance; it acts as a catalyst for the growth of any company. Nigerian companies that embrace the principles of corporate governance enjoy several key benefits:

1. Enhanced Transparency: Transparency forms the bedrock of trust. By strictly adhering to corporate governance standards, companies become more transparent in their operations, fostering trust among stakeholders and yielding additional profits for the company.
2. Accountability Among Employees: Clear roles, responsibilities, and reporting structures ensure that individuals within the company are held accountable for their actions, reducing the risk of misconduct.
3. Attraction of Quality Talent: Companies with robust governance structures are more likely to attract and retain top-tier talent, as professionals seek stability and ethical workplaces.
4. Legal Protection: Compliance with governance standards can shield companies from legal disputes and regulatory penalties, saving substantial resources in the long run.
5. Building Stakeholder Trust and Investor Confidence: Stakeholder trust and investor confidence are pivotal for any business. Companies adhering to corporate governance standards create an environment of trust by:

a. Protecting Shareholder Interests: Transparent financial reporting and fair treatment of shareholders demonstrate a commitment to safeguarding their interests.

b. Reducing Information Asymmetry: Investors appreciate the predictability and reliability of well-governed companies, making them more willing to invest.

c. Fostering Ethical Practices: Ethical business conduct enhances a company’s reputation, attracting ethical investors and partners.

d. Case Study: The Nigerian Banking Sector – After implementing corporate governance reforms following the 2009 financial crisis, Nigerian banks witnessed increased investor confidence and foreign investment.

6. Improved Decision-Making, Risk Management, and Sustainability

Proper corporate governance practices lay the foundation for informed decision-making, effective risk management, and long-term sustainability:

a. Informed Decision-Making: Governance structures provide access to critical data, enabling management to make informed decisions that drive growth.

b. Effective Risk Management: Robust governance identifies and mitigates risks promptly, reducing potential losses and reputational damage.

c. Long-Term Sustainability: Sustainable practices are integral to good governance, ensuring that companies thrive well into the future.

d. Case Study: Dangote Group – By prioritizing corporate governance, Dangote Group has achieved remarkable sustainability, becoming a global leader in various sectors.

Conclusion

Our Expertise in Corporate Governance and Secretarial Services: At Highlaw Chambers, we recognize the significance of corporate governance in Nigerian businesses. Our team of experts specializes in guiding companies towards achieving the following benefits:
i. Tailored Solutions: We provide corporate governance solutions that align with the unique needs and challenges of Nigerian companies.
ii. Regulatory Compliance: Our firm ensures that companies meet all regulatory requirements, reducing legal and financial risks.
iii. Ongoing Support: We offer continuous support, helping businesses adapt to evolving governance standards and market dynamics.

Embracing corporate governance standards is not just a legal requirement but also a strategic tool for the development of Nigerian companies. The benefits, including stakeholder trust, investor confidence, access to capital, improved decision-making, risk management, and long-term sustainability, are invaluable to their success.