“Corporate governance should go beyond the rules’

Peter Amangbo is the Group Managing Director/CEO of Zenith Bank Plc. Before now, he was a pioneer Non-Executive Director of Zenith Bank UK. With over 20 years of banking experience, he is well versed in various segments of banking from corporate finance and investment banking to strategic planning and operations. He is also known for his exceptional leadership, experience and expertise to meet the current competitive banking challenges. In this interview with Bertram Nwannekanma, he shares his experiences and thoughts on the Society for Corporate Governance Nigeria SCGN, as well as issues on Corporate Governance in Nigerian Banking sector amongst others.

What would you say is the state of corporate governance in the Nigerian Banking sector today ?
The Nigerian Banking industry and indeed most corporations in Nigeria, particularly the quoted ones have come a long way in terms of corporate governance practices. Compared to the past, there are a lot of emphasis being placed on corporate governance now. In terms of the way these practices are managed, the rules and mechanisms that govern the way they run their business and their structure. There is still a lot of room for improvement in terms of not just looking at the rules alone, but trying to internalize what the rules are about, and what they are intended to be, and actually having it at the heart of the way organisations are managed and governed. Over time, Corporate governance should go beyond the rules and become like second nature.

How would you describe the role of the Board with regards to increasing shareholders value, and ensuring good corporate governance practices?
Just like any board in a responsible corporation, essentially the role of the board is the same but the demand is more in financial institutions, because banks are highly regulated all over the world; and this places a lot of responsibility on the directors to ensure the institutions are run in a very safe manner. Banking is all about managing risks. The board should give direction, and also provide the appropriate challenge in ensuring things are done properly.

What, in your opinion, guides decision-making at the Board level?
The primary objective is to ensure that the bank runs in a safe manner. Safety is very important while managing risks is also important. As a business, we want to be profitable within the boundaries of the law, conducting business in a very safe manner where we make profit, but we do not jeopardise the interest of all the other stakeholders. That balance is always there, and we must strive to strike that balance between making profit and operating in a very safe manner.

What role has the Central Bank of Nigeria (CBN) played in ensuring good corporate governance practices in the sector?
The Central Bank of Nigeria (CBN) has done extremely well over the years in ensuring banks played by the rules. To be a director in a bank, you must go through a lot of due diligence such as character checks, credit checks and quite a lot of others. The goal is to get the appropriate and right calibre of people to be directors especially those that understand and appreciate what it means to run a business. You don’t necessarily have to be a banker, but you must appreciate what it is when we talk about corporate governance, best practices and risks in business. The CBN has done very well in terms of bringing in the appropriate policies, and also in monitoring the banks to ensure they are running in a safe manner. Kudos to the CBN for the great work they have done and continue to do. They are also still improving. Going beyond the board there are key positions today that before you can promote anybody to that level the CBN must approve. For example, head of compliance, head of internal control, etc. Before anyone attains that level, there are benchmarks each candidate must meet before they can be approved. We call it ‘Competency Framework’ here in Nigeria. It is in place to ensure we have the appropriate people, and that they are also empowered to provide adequate challenge, independent of the CEO and other things, in ensuring we run in a very safe manner.

What is your take on the recently released exposure draft National Code of Corporate Governance?
It is long overdue. This is what we have in most of the developed world. Companies definitely must operate within a certain minimum standard, and that is very brilliant. I have looked at the exposure draft code of corporate governance, and I want to say the Financial Reporting Council of Nigeria (FRCN), is doing a great job. What they have gone through by going into the different zones to hold these discussions with different stakeholders across the country is very laudable approach. It is a tedious process to go across the sectors to cuddle up with an acceptable code of governance.

Do you see any conflicts between the existing CBN Code of Corporate Governance and the National Code of Corporate Governance?
No, I do not see any conflict between the Financial Reporting Council’s (FRCN) Code of Corporate Governance and the CBN Code at all. If anything, the code of corporate governance is not industry specific, regardless of the industry you operate, it affects you. When you think about it, talking about governance, it is all about the corporation not the sector that you operate in. The FRC is focused on any organisation, not a particular sector. The CBN however, is focused on the financial sector, which is why I mentioned that banking is unique by the nature of what it is doing, and if anything, it needs a stricter code. The nature of what the sector is doing is highly sensitive. Holding Depositors’ funds; imagine if anything happens to any systemic bank, the impact will be on millions of account holders. From that perspective, banks are actually different. They are basically like public trusts. That is why when you see major challenges in banking sector, governments get involved because of the unique nature of the banks that touches the lives of the citizenry directly. The CBN rules strengthen the code of corporate governance. So in a way, they are actually aligned.

Regarding conflicts as it exists between the Board and management, how will you advice other bank Managing Directors to manage such conflicts?
You cannot avoid conflict in any situation, whether in the office or at home, so why will there be no conflict in the office space? Between Executive Directors and non-Executive Directors, to a large extent, the conflict is useful. Where you have people working and there is no conflict, something is wrong, either the non-Executives are not providing the appropriate challenge to the Executives, or the Executive Directors have found a way to get their own way. An organisation needs some measure of conflict, however, the key thing is to have the right type of conflict which I will call positive conflict.

My advise is to first focus on issues and not personalities. The important thing is to let the better reasoning prevail, therefore, articulate your points and try to be convincing, have back up and supporting points, and also try to listen. The mistake we make sometimes as executives is to think, “what are they telling me? They are not bankers, I am the professional here, and he knows nothing about banking”. Being on the Board of Zenith Bank since 2005, experience has shown me that it is not necessarily the bankers that will give you the appropriate challenge or novel ideas, it is people that are not even in the industry at all that will come up with novel ideas. They tend look at things innocently like a child and they come up with strong and powerful contributions. The key thing is to have an open mind as an Executive, that each of these directors come in with different perspectives. Hear them out, process what they have to say and make your point. When we focus on issues, at the end of the day even when we disagree, it is still very healthy. Over time, there is a consensus and we move on. Respect is still also very important. Once we respect each other’s views and what we have to bring to the table then we can work things out from there.

What unique challenges are being faced in the banking sector in practicing good corporate governance?
There are a lot of challenges that banks and the whole financial sector faces. Remember that Nigeria is a developing country, therefore, we face unique challenges. Especially when it comes to governance practices, you cannot separate what happens in our society really from what happens in the bank. The bank to a large extent is a reflection of what you have in the society. If you have a lawless and corrupt society, why do you think the bank will now be a saint? It is very unlikely. In the developed world, governance is like second nature because in many developed environments, it is already in their way of life. So we face peculiar challenges in an environment like this where quite a lot of things are not done appropriately. In as much as we have those challenges, you yourself must enthrone those practices, and it starts at the top. Make sure you follow the rules and do not bend them, do things appropriately.

There is also some of the competition we have in the industry where we know a particular thing is wrong, but because Bank A is doing it and you think it gives them a competitive edge, you also want to do it to make profits. However, Banking is a marathon, it’s not 100 yards dash. Banks have existed for two to three hundred years and that is what the focus should be on, not just today’s profits. Looking at just today, you will lose the point and it will push you to do many unethical things. In 1993 we had about 89 banks in Nigeria, while before 1993 we had up to 169 banks. where are they today?

Looking at the issue of consolidation in 2004, where the capital base was increased and the banks shrunk to 25. I think the industry is better for it, and we can do things properly. Banking is a slow and steady thing, if you do the right things, you will never regret it. It’s not about how profitable I am today, it’s about the long run. The banks that are solid today have discipline in common. I must tell you that it comes with a price. You will lose a lot of things, but at the end of the day it’s good to lose those things because better things will come; You will be better respected, there will be growth and at the end of the day, people will look at it and say this a quality organisation, one actually built to last. To me, that is the important thing. Do the right things consistently all the time irrespective of the price you need to pay.

In your opinion, has the subject of corporate governance been over emphasized?
Many people talking about corporate governance don’t know what they are talking about. It is not enough to just define the basics or structural things, but is corporate governance in your DNA as an organisation? The answer is no, there is still a long way to go, we have not even started yet. It is not for us to be hypocritical, we must entrench it in everything we do, and once you do, it shows. Sometimes we tend to over emphasize certain rules as against what is entrenched in an organisation. This tends to deviate from what should be focused on. In Nigeria, we still have a long way to go.

Should compliance of the code be mandatory ?
We have not even reached that stage yet. I am saying this because in Zenith Bank we operate in a major financial center in the world; we have a bank in the UK. In Nigeria, the code is mandatory, but in the UK, we are expected to explain. Here we are probably not ripe for the explain approach, it is a function of how developed the society is, and I do not think we are ready for that yet. So what we are doing now, is what we should do, it should be mandatory.

What is your take on the general practice of banking in terms of corporate governance, corporate performance and sustainability?
If you look at Banks as a public trust, it starts to make sense in terms of what the banks actually stand for. We are just like intermediaries, taking from the surplus unit and giving to the deficit unit, that’s banking. Whatever you’re doing, the questions you must always have in mind are, “am I optimizing value?” and “what are the risks and the down sides?” I think that once you can do that, it will be fine. Traditionally, banks have operated within certain rules, therefore, talking about corporate governance, it is relatively easier for banks to appreciate what you are talking about, than for other companies, because the way banks are structured, we have always been regulated.

Sustainability is a different matter entirely. Trying to do business in an environmentally friendly manner is one of the things all responsible organisations should look at in the way they do business. We don’t need to say we won a certification to say we are compliant. Make sure your certification is your way of life. Don’t just prepare for it, get it and go back to business as usual, you must be prepared to make it your way of life.

What is your opinion on corporate governance practices in Nigeria?It’s a very massive challenge particularly considering the fact the we are operating in a tough environment, where discipline is not necessarily our second nature. It is an environment where things are not done properly on different levels. All hands must be on deck not just the Society for Corporate Governance Nigeria alone. Everyone must get involved and lets appreciate that the journey is just starting, we have a lot to do and we must continue to sensitize others. I want to give kudos to the Society for Corporate Governance Nigeria, they are doing a great job but there’s still a lot more to be done.