SEC reaffirms need for good corporate governance

THE Securities and Exchange Commission (SEC) has reaffirmed the need for financial institutions to embrace the tenets of  good corporate governance.
Acting Director General of the SEC, Ms Daisy Ekineh stressed that poorly governed financial institutions do not only pose a risk to themselves they do so to others and could indeed pull down financial markets.

According to her,  For instance, the poor governance of a systematically important financial institution would pose a threat to the financial system and as a matter of fact, to the economy. Irrespective of how sound macroeconomic policies are, if entities especially financial institutions are not well governed, the macro economic objectives may not be attained . Recent domestic and global happenings attest to this and have further reinforced the importance of good corporate governance.”

She noted that corporate governance issues have taken centre stage in major global discourse,  while various reforms are being undertaken by governments and regulators across the globe.  “As you well know, one of the most contentious reforms has been the perceived excessive compensation which is said to have encouraged excessive risk taking by corporate managers and have in-turn put entities and financial markets at risk.. There is no gainsaying that good corporate governance strengthens confidence in capital markets and therefore help their development. In the same vein, capital markets engender good corporate governance through their disclosure, reporting and transparency requirements.

While delivering a paper on “Disclosure and Internal Control issues”, Ekineh stated that any meaningful reforms in the capital market and indeed the financial market must of necessity include the reform of the governance of entities and players in the market, adding that such governance reforms must not only be beamed at public companies but should also focus strongly on regulated entities.

According to her “  For the SEC, recent reform agenda has included the review of the 2003 Corporate Governance Code in order to address observed weaknesses in current practices and strengthen governance and disclosure in public companies.  A new code by the A. B. Mahmoud Committee on corporate governance has been reviewed by the SEC and was recently exposed to the public for comments.  The code is quite extensive touching on a very wide range of corporate governance issues.

“ Apart from the SEC corporate governance code, there are also codes issued by the Central Bank, PENCOM and NAICOM resulting in silos of codes in the financial market. A listed insurance company or bank for instance, is expected to comply with both the SEC and NAICOM/CBN code.  It is worthy of note however that work is on, under the aegis of the Financial Services Regulation Coordinating Committee (FSRCC)  to harmonize the codes into one single body of corporate governance codes for the entire financial market which  should eliminate existing contradictions when the provisions of the different codes are compared.”

On whether corporate governance codes should be voluntary or mandatory, she said, “ I believe this is a debate which cannot be won by either side.  My candid opinion however, is that given recent events, corporate governance codes should be mandatory. Voluntary compliance is discretionary although disclosure of level of compliance and reason for non -compliance with any of the provisions are usually expected in annual reports. Voluntary compliance presupposes that the market will discipline non-compliance and consequently pressure companies to comply.”

She disclosed that the  SEC has also reviewed the Code of Conduct for Market Operators to align it with current realities and with sanctions for violation.
According to her, “ The code is to ensure that all categories of registered operators conduct their activities with the highest level of integrity, professionalism and ethics required of capital market business. The provisions of this code are mandatory.”