Company Secretary Effectiveness In Promoting Good Corporate Govenance With Focus On The Nigerian Jurisdiction

Elizabeth O. Idigbe1

Originaly published January 2015

INTRODUCTION

Under the provisions of the Companies and Allied Matters Act Cap C20 2004 (CAMA) of the Federal Republic of Nigeria the management of a company is squarely vested on the Board of Directors. They bear primary responsibility for directing management, and on any associated liability. Usually the law allows the Board to delegate its management powers to a committee or management usually headed by the Managing Director/Chief Executive Officer.

The 1990 CAMA, perhaps to improve effectiveness of management, created the statutory position of Company Secretary, which hither to was an optional practice among fairly large companies. In some other countries the officer is referred to as the Chief Governance Officer. At times the holder combines the position of legal adviser and is therefore referred to as Company Secretary/ Legal Adviser or General Counsel.

This paper will focus on this all-important office; discuss the duties of the Company Secretary and allude to the challenges of the office as well as make suggestions on strategy and practices that would engender the Company Secretary‟s effectiveness in promoting good corporate governance.

STATUTORY BASIS

Section 293 (1) of the CAMA provides that every company shall have a Company Secretary. The Corporate Affairs Commission (CAC) by its public notice of 27th of January, 2011 called on all companies to appoint Company Secretaries and duly file same with the Commission to avoid penalty. Therefore the position of the Company Secretary is mandatory for proper compliance under CAMA. Additionally, the responsibilities attached to the position will undeniably impact on the company‟s business.

DUTIES OF THE COMPANY SECRETARY

Section 298 of CAMA enumerates the duties of the Company Secretary as follows:

Attending the meetings of the company, Board of Directors and its Committees, rendering all necessary secretarial services in respect of the meeting and advising on compliance by the meetings with applicable rules and regulations. Maintaining the registers and other records required to be maintained by the company under this Act; and Rendering proper returns and giving notification to the Commission required under this Act. Carrying out such administrative and other secretarial duties as directed by the directors, or the company. CORPORATE GOVERNANCE FUNCTION

One major function of this office is ensuring compliance with applicable rules and regulations; in other words, ensuring that the principles of corporate governance as enshrined in relevant codes are complied with by the Board and Management. In some jurisdictions the Company Secretary is called the Chief Governance Officer.

"The proper governance of companies will become crucial to the world economy as the proper governing of countries"2. This underlines the importance of corporate governance.

Modern corporate governance can be defined as including the laws and regulations that affect the private ordering of corporate activities, necessary for efficient and competitive performance and the fair treatment of those who depend on the corporation and are impacted by its actions.3 In simple terms, corporate governance is how the Board of Directors runs the affairs of companies through the Management by being accountable and transparent to the shareholders and other stakeholders. Corporate governance has been described in so many ways, including that it is about risk, return, reputation and relationship. It certainly has a lot to do with good commonsense; as any business run with good corporate governance policies would be around for a long time, as long as other parameters required are in place.

Enforcement of corporate governance is essential and therefore backed by several statutes and statutory documents which include the Memorandum and Articles of Association of organizations, Companies and Allied Matters Act (CAMA)CapC20 2004 and the reviewed 2011 Code of Corporate Governance for Public Companies of the Securities and Exchange Commission (SEC). There is also the Code of Corporate Governance for Banks and Discount houses in Nigeria (2014) as well as the Code for Good Corporate Governance for the Insurance Industry 2009. However, while the Code for the Bank is mandatory the other two are encouraged and persuasive.

It is the responsibility of the Company Secretary to ensure that the Board and Management work with these codes and even set up corporate governance policy for the company based on the existing Codes. In truth, a Company Secretary is more effective and the Board and Management run smoothly with content shareholders and others stakeholders if indeed corporate governance principles are in place. Note however that these are based on certain assumptions that there is in place first and foremost a supportive board and supportive key shareholders. These assumptions are also derived from the provisions of the code as corporate governance has moved from mere competence of board and management to integrity of the persons.

Section 4.1 of the SEC Code of Corporate Governance (2011) states thus,

"The Board should be of a sufficient size relative to the scale and complexity of the Company's operations and be composed in such a way as to ensure diversity of experience without compromising independence, compatibility, integrity and availability of members to attend meetings." Also Section 4.4 of the same code expects that members of the board will not only be competent but have integrity and be committed to the task of good corporate governance. Section 2.2.2 of the CBN Code also emphasizes integrity as a key characteristic for directors and Management. In fact, Section 36.3 of the SEC code also provides for "internal monitoring and enforcement of a well articulated Code of Conduct/ethics for directors, management and staff‟‟.

Other provisions to guide good governance practice include:

Separation of position of Chairman and MD/CEO as provided for in Section 5.1(b) and (c) of the SEC Code and Section 2.3.1of the CBN Code.

Appointment of a minimum of one independent director to the Board of public limited liability companies (PLC) as stated in Section 5.5 of the SEC Code.

From the above it is clear that there are detailed statutory provisions guiding good corporate governance practice in Nigeria. The fundamental question; however is how can this be achieved?

The SEC Code in Section 8 recommends that implementation of good corporate governance falls on the Company Secretary. The Corporate Affairs Commission as earlier mentioned also makes it mandatory for every company to have a Company Secretary. For cost effectiveness and efficiency it is recommended that smaller businesses appoint company secretarial companies as Company Secretary. Furthermore, the SEC Code Section 8 states that this officer of the company must be competent and that the selection process for his/her appointment or employment must be as rigorous as that of appointment of new directors. Suffice to say, this confirms the importance of the position of Company Secretary.

Other recommendations for enforcement of good corporate governance are as follows:

Description and importance of different Committees of the Board are stated in Section 9 of SEC Code and Section 5.3.12 of the CBN Code. Both Codes also recommend appraisal and evaluation of members of the board. SEC code (Section 9) also provides in detail on meetings of both the...