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Surf boards: Riding Public and Private Sector waves

This week on Street Talking in NEXT, I argue that the time has come for public companies on the Nigerian Stock Exchange to lay down rules on the extra-company activities of directors, particularly those which involve regulatory responsibility or political involvement.

I have just finished reading a stimulating piece by Femi Awoyemi of ProShare on the potential conflicts of interest Senator Udo Udoma, the City grandee and chairman of the Securities and Exchange Commission (SEC), will be exposed to in his latest appointment as the chairman of UAC. To calm public concerns over any ethical risks he may run, Senator Udoma, who also sits on the boards of Nestlé and Linkage Assurance, has issued a staunch defense on the correctness of his appointment. The last time this subject provoked a passionate debate was over the position of Professor Ndi Okereke-Onyiuke, director-general of the Nigerian Stock Exchange, as chairman of Transnational Corporation, a quoted company.

The topic of bipolar commitments by board members is one that should concern companies. The full stature of a director with alternate roles, in the public and private sectors, cannot be attained through a technical loophole in the statutes. Until now, the leading voices in the debate have been public interest advocates who seek to ensure that the private interests of company directors who also occupy positions of public or regulatory responsibility do not receive undue favour nor interfere in the dispatch of their duties. In contrast, little is heard from the company and shareholder perspective on the limits of partisan commentary and regulatory participation by directors. It is high time public companies address the high profile external interests of non-executive directors.

Directors, as prominent private citizens, wear several hats. The riddle lies in disentangling their various civic and business identities from one another since actions taken in one sphere may reverberate in others. Meleveeti Damodaran, the widely-respected former chairman of the Securities and Exchange Board of India (SEBI) is one of those who feel that business leaders should not be inert to their political environment. According to him, ‘the complete alienation of corporate India from the political system has been unfavorable to either parties and going forward corporate India should substantially augment its role in the Indian political system.’ If the devil is in the details, then the demon is in telling political involvement apart from interference.

Only last week, Atedo Peterside, chairman of Stanbic IBTC and director on the boards of Cadbury (Nigeria), Nigeria Breweries and Unilever, published an open letter to the Federal Executive Council (FEC) with recommendations for resolving the logjam that has threatened government business since the departure of President Yar’Adua for medical treatment in Saudi Arabia (‘Open Letter to the Federal Executive Council: How to Resolve this Political Impasse by Atedo Peterside’). In the letter, the author who did not state under which identity his comments were made was careful to absolve public officials of his acquaintance from any foreknowledge. Remarkably, he did not dissociate fellow board members of the public companies on whose boards he sits from its prior knowledge neither did he state explicitly that the views expressed do not represent those of the boards on which he sits.

Atedo Peterside, who has a reputation for standing up for his principles when he believes government policy is ill conceived or plain hazardous, was one of the few senior bankers who had the courage to go public with dissenting opinion after the Central Bank of Nigeria announced its N25 billion capitalization agenda in 2004. At that time, he expressly wrote in his capacity as the chief executive of an institution of interest.

When a personality of Peterside’s eminence makes pronouncements of unmistakably political colour it brings to sharp relief several questions over the limits of expression on politically sensitive issues by public company directors. Some may argue that Peterside’s letter was timely, relevant and motivated by noble patriotic sentiments. No quarrel there. But that would be missing the point.

The point is not the content or intention but the character of such pronouncements, which are unambiguously political, by a public company director. The issue properly shaped is not about whether a board director should have political interests or lend support to political campaigns but how vocal he can be in the proclamation of such inclinations.

If we accept Atedo Peterside’s letter as being in order, then we must be equally embracing to one from Oba Otudeko of First Bank to the Independent National Electoral Commission (INEC) on the primaries selection process in Ogun State and just as receptive to a missive from Aliko Dangote of the Dangote Group to the Kano State chapter of the Peoples Democratic Party (PDP) campaigning for a candidate as the party’s gubernatorial flag-bearer.

Sooner or later, Nigerian companies must deal squarely with this subject. Governance codes cannot remain silent on the activities of board members who wear both public- and private sector hats. The liberty of individual discretion has proven a weak restraint.

The original article may be read here on the NEXT website.

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