Corporate Governance Code and Corporate Governance Implications for Business: A Critique of Nigeria’s 2016 and 2018 Codes

Abstract

Corporate governance is the system by which companies are directed and controlled. Board of directors are responsible for the governance of a Nigerian company. However, the shareholders of a Nigeria company have power of oversight over the board. This power is exercised by a majority of shareholders. It is this separation of ownership and control that makes good corporate governance imperative to protect shareholders against corporate board misbehaviour, as well as to protect minority shareholders against the opportunism of corporate insiders (board of directors and majority shareholders). Even though corporate law is the primary legislation that regulates the corporation, corporate governance codes have become important corporate governance standards that helps to guide the board and promote effective managerial engagement with shareholders to promote corporate accountability. The Financial Reporting Council of Nigeria (FRCN) issued two corporate governance codes in two years - the National Code of Corporate Governance 2016 and the Nigerian Code of Corporate Governance 2018. This shows a clear intention to promote good corporate governance in the country. This essay identifies the peculiar corporate governance challenges in Nigeria, and reviews the two corporate governance codes to show how they address the peculiar challenges. The paper undertakes a criticism of the 2018 and compares to the 2016 Code and corporate governance regulations in other regulations. This criticism highlights the weaknesses in the code and the need for a review. The essay thus suggests a review of the 2018 to provide for Independent Non-Executive Directors dedicated to the interest of minority shareholders as an important first step towards providing access to corporate boards for minority shareholders, as a strategy for promoting corporate accountability. The paper concludes that since the very essence of a corporate governance code is to promote good corporate governance and accountability, any corporate governance Code for Nigeria must address the peculiarity of the Nigerian corporate environment for it to be able to achieve this purpose.