Suspension of the FRC code
Efforts by the government to improve the culture of corporate governance in the country suffered a set-back with the suspension of the Corporate Governance Code that was recently launched by the Financial Reporting Council of Nigeria (FRC), a parastatal of the Federal Ministry of Commerce and Industry. The Code, which was issued in line with Section 50 of the Financial Reporting Council Act of 2011 was suspended at the instance of the Minister, Mr Okechukwu Enelamah. According to Enelamah, the suspension was intended to enable the government embark on extensive consultations with stakeholders and reconstitute the Council’s Board.
As envisaged, the Code is intended to define and enforce the standards required for the reporting of financial transactions and other processes in the administration of corporate organisations in the country in their capacities as public interest entities. However it would seem that issues arise over the application of the provisions of the Code across the gamut of public interest entities which include commercial outfits that run for profit and the wide range of non-profit organisations comprising churches, mosques and non-governmental advocacy agencies as well as sundry social organisations.
It is easily recalled that prior to the suspension of the Code, its launch had elicited mixed reactions in the public domain including the voluntary retirement from office by a frontline religious leader. That development was widely believed to have been instigated by the launch of the Code. The terms of the Code also put on line the prospects of cessation of the tenures of leaders of several faith-based organisations, with the threat of widespread social ripples, following their ‘forced’ exit from office.
Meanwhile along with the suspension of the code was the sack from office of the Executive Secretary of the FRC Mr Jim Obazee, and expression of intent by the government to reconstitute the Board. This sequence of events accentuated the fact that the policy measure may have been launched in circumstances that were suspect. Enelamah’s clarification on the suspension effectively confirmed the misgivings of the public over the tardiness of the policy initiative
FRC was established by the FRC Act of 2011 to replace the defunct National Accounting Standards Board (NASB), with the intention of providing guidelines for promoting robust practices in corporate governance in the country. Corporate governance is the system of rules, practices, processes and procedures by which a formal organisation is operated. Effective corporate governance facilitates the balance of interests among stakeholders in an organisation, leading to the mitigation of conflict among the complement of stake holders in the organisation which includes the owners, beneficiaries of its service delivery package, as well as the general public.
By the provisions of the FRC Code corporate organisations in the country are divided into profit making and non-profit categories. For the profit category the provisions of the Code are mandatory, while for the non-profit class they are required to comply or show justification for non-compliance. This caveat is intended to accommodate the peculiarities of the wide variety of organisations that fall into the latter category.
However, stiff opposition to the Code has been based on the argument that it is merely a repetition of existing codes of conduct already being administered by earlier agencies such as the Corporate Affairs Commission (CAC), which registers them in the first place. This is just as each individual organisation supposedly has its own bye-laws. Against the backdrop of the foregoing, the provisions of the Code are seen as superfluous and unnecessary.
Incidentally, both the defunct NASB and the FRC were established to address the decadence in corporate governance in the country especially the aspect of unlawful and often wasteful perpetuation of ownership as well as control of corporate organisations by their founders, a tendency that often included riding roughshod over the interests of other stakeholders and the sensitivities of the general public. This malady remains widespread in the country and is recognised as a major disincentive to the growth of viable corporate organisations that stand the test of time. Government should therefore fast track the return of the code with adequate safe guards for the improvement of corporate governance in the country.