Corporate Governance, Key To Business Success, Says Dr. Oladimeji Alo

Dr. Oladimeji Alo is the immediate-past Chairman of Berger Paints Nigeria Plc, as well as a Director at ARM Life Plc. He also served as the Managing Director/Chief Executive Officer of Financial Institutions Training Centre, where he contributed actively to the series of reforms in the Nigerian banking sector in a period of 13 years. Alo was also the President of the West African Bankers Association (WABA) and Chartered Institute of Personnel Management of Nigeria (CIPM). In this interview with HELEN OJI, he listed the benefits of sound corporate governance practices and how they affect operations of listed companies.
How would assess the depth of corporate governance principles in Nigerian companies?
It would be wrong to lump all the companies in Nigeria together. I have been privileged to serve on the board of some companies that take the principles of corporate governance to heart in everything they do. Today, those companies are strong and doing very well in their respective sectors. I have also encountered other companies that see any attempt to get them to do things in the right way as attempts to interfere in the way they run their businesses.
The owners would say it their money and ask: “why are you asking me to have a board of directors? Why do you say the board should meet four times a year? Why do you say I should submit this or that for the consideration of the board?.
Many of those companies do well in five years or 10 years and suddenly disappear once they face a major crisis or something unforeseen. They collapse easily because their foundations are weak. You find that in some of those companies, the Chief Executive Officer is often richer than the company he manages. Some of the owners steal the company dry, using all manners of schemes.
You find a company leading yesterday, and tomorrow it is gone. Incidentally some of those ‘rich’ chairmen or managing directors have wealth that do not last up to two generations. Those companies simply pay lip service to the principles of good corporate governance and simply tick the boxes to satisfy regulatory requirements, if any.
We also still have a large number of indigenous companies, especially in the Small and Medium Enterprise sector, where the owners do not even understand what corporate governance is all about. All we need to do for that group is to continue to educate them, that it is in their own best interests to create structures, create processes and adopt best practices in managing their enterprises.
In terms of how we are doing generally, I think Nigeria has come a long way. Now, everybody in the formal sector of the economy has a sense of what corporate governance is all about. Even though some people still have challenges in observing the spirit of the concept. Again, if you look at sectors, some of the sectors had gone very far.
For instance, sectors that are highly regulated, such as banking, insurance and pension, have gone very far in adopting good corporate governance practices, simply because they are highly regulated. The manufacturing sector is mid-way. Those of them that are listed have done fairly well, but they have not gone far enough. Many of the companies in the informal sector are yet to start. That is my assessment.
What factors are militating against the enforcement of corporate governance in the country?
You must remember that the country is currently working on producing a unified code of corporate governance for all companies in Nigeria. The Financial Reporting Council (FRC) is leading that effort. Prior to that, we had different codes for different sectors. We had the CBN code, the NAICOM code, the PENCOM code, the NCC code and the SEC code. The different regulators had done a lot of commendable work in educating the operators and enforcing the codes. In my view, the imposition of fines and other sanctions should not be the primary focus. There is need to get the operators know that it is in their best interest, in the long run, to adopt and implement the codes. There should also be a regime of incentives to reward companies that play by the rules. That, in my view, would promote voluntary adoption of the rules.
Specifically, how would quoted companies get it all right?
Quoted companies must operate with the highest standards of corporate governance. It is part of the post-listing requirements of the Nigerian Stock Exchange. The board of quoted companies play vital role to ensure compliance with the principles of corporate governance because there are sanctions for infringement. Let us examine the selection of board of directors. It is not enough to have a board. You have to carefully select those who would serve on the board. Those appointed to the board of a company must possess complimentary skills and knowledge that would benefit the organisation.
This would enable each director to add value to the company’s operations. The key issue is the value each director is bringing to the board. An effective board must have people with diversified skills, experience and competencies. A board could have lawyers, accountants, management experts, and engineers, among others. A board is not just about congregating persons. It is a group that must generate positive momentum and synergy that would ultimately benefit the company. A board would be a bloody waste of everyone’s time if the members were not able to generate lively debates and robust discussion that birth strategic decisions for the good of the company.
The other thing is how do you constitute your committees and how do you define the work of the committees and the board itself?. Most of the work of the board is done at the committee level, while the committee feeds the board with the ingredients for its own work. The relationship between the committees and the board must be carefully calibrated to ensure inclusiveness and the efficient use of the time of the board.
In your view, what should organisations do to promote capacity building of their employees and enhance output?
I think the first thing is that every company must have a policy on capacity building. Policy means that you have a clear statement of purpose and intentions that serve as a clear guide to all stakeholders on what you plan to achieve and how you want to achieve them. The next thing to do is to develop a plan for implementing the policies on an annual basis. You then proceed to allocate resources for implementing the plan and ensuring that it is effectively done. Let me give you an example with Berger Paints. When we got there, we noticed that the budget for training was low and that the low budget was not even fully utilised. We asked them to develop a clear policy on staff training and capacity building, which the board later approved.
Next, we tripled their budget on training and charged management to implement their training plan religiously. Part of the policy was to ensure that the executives attend one international training programme outside the country, at least once, in two years. The first executive to benefit from that policy was the CEO, who was sponsored to attend a short training programme at the Harvard Business School.
Apart from the knowledge, which he acquired from the programme, he was able to interact and network with other executives from 26 different companies in attendance. That matters a lot to me as the chairman of the company. We also organised a couple of industrial visits to factories in Europe for selected managers of Berger Paints, to learn from the operations of other companies, using the automated paint manufacturing plant we were building in Nigeria.

What is your take on the raging issues about the number of women and appointments to board?

The first thing about size of the board is that there is no prescription as to the number of directors a company must have. The right size is dictated by several factors, some of which would differ from one company to the other. Of course, a board must neither have too many directors or too few.  A board is expected to have at least three or four committees. Assuming that a company has four committees, it would have difficulty constituting the committees. Again, there are rules on the class of directors that should serve on some major committees. That further makes the task of constituting the committees difficult if you do not have a certain minimum number of directors on the board. So, often times, a board may need to have a minimum of seven directors.
On the question of if we need gender balance on board, my answer is yes. Women bring a unique perspective to issues and so if you have an all-male board, you are losing out on that perspective. If we were to re-constitute the board of Berger Paints today, we certainly would ensure we have some gender balance.
What was your impression on joining the board and the corporate governance structures put in place during your tenure?
When I joined the board of Berger Paints, I met a company that had a very good brand. The company was established in 1959 and was the first paint manufacturing company to be listed on the Nigerian Stock Exchange (NSE). Besides, the company was a pacesetter and had recorded many feats in that segment. Today, the company’s products are known in the market for their high quality and dependability. The first puzzle I confronted, therefore, was finding out why a company with such intimidating profile was not realising its full potentials. I did not have to search too long for answers to that puzzle. I quickly identified a number of issues that needed to be addressed to free the company from what might be described as “self-inflicted” stagnancy.
Under my leadership, the board took a number of initiatives aimed at strengthening the company and modernising its operations. The first of these initiates focused on strengthening the structure of corporate governance in the company. In that regard, we developed governance charters for the board and its committees. We increased conversations on the board and encouraged all directors to take active interest in the affairs of the company. We introduced mandatory continuous education program for all our directors. We also engaged the services of an international consulting firm to conduct a governance audit for the company, as well as evaluate the performance of the board and that of individual directors. Feedback from these studies was used to improve our governance practices.
The second initiative we implemented was to strengthen the capacity of the management team. We appointed a new Chief Executive Officer and appointed highly skilled managers for the different strategic business units. We adopted best practices in sourcing these managers, thereby, sending a signal to all the staff that merit is paramount in consideration of all matters by the board. To complement that initiative, we tripled our investment in staff training. In the process, we prioritised training for all categories of executives, managers and staff of the company.
The third thing we did was to give new focus to risk management. We developed an enterprise risk management framework, which implementation, the board monitored closely. We also introduce a culture of strategic management and increased the involvement of the board in the development of strategic plans around which we anchored all our reform efforts. The plans also gave us a framework for monitoring and evaluating the performance of the company.
The fourth major initiative we implemented was the upgrade of our production facilities. This included the installation of a new fully automated water base paint manufacturing plant that is nearing completion. What was remarkable in that initiative was that we professionalised our procurement process, thereby recording significant savings for the company.
Source: The Guardian