AN APPRAISAL OF THE APPLICATION OF CORPORATE GOVERNANCE PRINCIPLES OF COMPOSITION, DUTIES AND DISCLOSURE REQUIREMENTS OF DIRECTORS UNDER NIGERIAN LAW
Corporate organizations are engine of growth and development. They contribute to economic and social development of individuals, society and the nation in general as they produce goods and render services that improve the social and economic life of the people. In carrying out their businesses, they provide investment opportunities to the public and other social responsibility projects as well as contribute to national gross domestic product. Based on the above factors the survival of corporate organizations is of interest to both government and individuals hence the need for promoting good corporate governance. Corporate collapses have however, occurred around the world including Nigeria with devastating social and economic effects of loss of income, employment and revenue due to corporate governance lapses. The Nigerian Companies and Allied Matters Act like companies statutes in other countries of the world was found to be insufficient in stemming the increasing rate of corporate collapses around the world including Nigeria due to corporate governance abuses. The introduction of codes of corporate governance in Nigeria and around the world was meant to complement companies’ statutes in order to improve corporate governance. The Nigerian Securities and Exchange Commission Code of Corporate Governance was meant to apply essentially to all public companies that are listed on the stock exchanges in Nigeria. The Code has made far reaching provisions in respect of composition, duties and disclosure requirements of directors with the objective of ensuring that directors perform their duties and responsibilities in such a way that corporations are protected from abuses that resulted to their failures. The issue for consideration was whether the Companies and Allied Matters Act and the Securities and Exchange Commission Code of Corporate Governance in Nigeria have provided sufficient legal regime that would protect companies from directors’ abuses in performing their duties and responsibilities. Consequently, the objective of the research was to find out whether the Companies and Allied Matters Act together with the Securities and Exchange Commission Code of Corporate Governance in Nigeria have sufficiently addressed issues of corporate governance relating to composition, duties of directors and disclosure requirements. The research adopted a doctrinal research methodology which relied principally on existing statutes, subsidiary legislation and literature on corporate governance and made analyses which resulted to formation of opinions and findings. The study reveals that the category of persons prohibited from being directors on the basis of past fraudulent conduct is narrow which will continue to provide a leeway for some fraudulent persons to become company directors; It was also found that the SEC Code has failed to provide sanctions for failure to comply with the Code therefore making the Code to lack enforcement power thus making compliance to be voluntary and haphazard which will not achieve the desired best practices in the Nigerian business environment. It was further shown that the narrow scope and ambiguous definition of the concept of ‘connected persons’ to directors cannot achieve the objective of preventing conflict of interest transactions under the current corporate governance regime. The research therefore recommended among other things, the amendment of the Companies and Allied Matters Act to make the definition of fraudulent persons to be elastic enough to cover other areas beyond company affair. Fraudulent conduct should be made elastic enough to cover other areas like civil and public service; the SEC Code should be made mandatory for compliance by public companies and clear sanctions should be prescribed for failure to comply in order to enhance faster application and entrenchment of good corporate governance in Nigeria. It was further recommended that a clear definition of ‘connected persons’ to directors with an extended scope be made to cover other persons such as father, mother, brothers and sisters, father in-law and mother in-law who are more likely to promote the interest of directors in material transaction with the company.