Corporate governance is key to survival of business, says Hassan
With more number of businesses downsizing due to corporate governance failure, founder of H.Michael & Co. Dr. Adeyinka Hassan, examined effects of corporate governance practices on private and government owned businesses. He also explained the advantages in best global practices to JESUTOMI AKOMOLAFE in this interview.
What is corporate Governance?
Corporate governance is simply how to administer businesses. And when we talk of governance, it is not every business that can have a structured board. Sometimes you have businesses that are micro or small businesses because there is also a cost attached to corporate governance. Sometimes, not all the time, such businesses don’t have structured boards.
What are you doing to ensure that business owners incorporate corporate governance in their enterprises?
What we are doing is that we are trying to bring corporate governance down to the level of such an organisation that for one reason or the other does not have such a structured board to understand all the policies and guidelines to run a business. When they take advantage of our kind corporate governance knowledge they will also be able to apply some of this to their various businesses. Corporate governance is key to every business. There are a number of businesses we knew when growing up and are no more today. Even the financial services industry. When we were young graduates seeking employment, we had many banks but what happened to these banks? I can name them one after the other. These banks are no more because of corporate failure. The essence of this event is how we investigate the cost of these corporate failures and what we do to be able to stem it because we cannot eradicate corporate failure due to other reasons. But what can we do to stem it and that is the essence of the programme we are putting in place and for me that is what corporate governance is all about.
How has government policies contributed to corporate governance failure?
If government policies do not create the right environment for businesses to survive, it is a challenge and when government policies are not friendly it poses serious challenges to businesses. Beyond indigenous businesses, we also want to attract foreign investors. So when government decisions do not give an enabling environment it will drive foreign investors out but beyond government policies there are several other problems. Social security is another major problem but all of these are intertwined. You cannot treat corporate governance in isolation. For instance, corruption and corporate governance are two different extremes. Where corruption thrives, there would be no corporate governance and when corruption thrives, what will follow would be problems of social security. And when all of these problems exist in a polity it makes it really difficult for foreign investors to come. Look at the problem we are having with kidnapping all over the nation. Who wants to set up businesses in Nigeria? People are interested in coming because they see a lot of opportunities but the environment is not enabling them to survive. That is why in recent times a lot of businesses which ordinarily should be in Nigeria are finding their ways to the West Coast like Ghana, Sierra Leone and several other places. There is a need for our government to always wake up to the realities and begin to create an enabling environment.
How important is corporate governance to Small and medium scale enterprises?
Research has shown that over 70% or more of businesses in Nigeria are controlled by small or medium enterprises and they are the ones creating employment the most in Nigeria. And this is the reason why we should bring corporate governance down to their table and level so that they can understand how to run business successfully. People make mistakes and think the matrix of measuring success is a financial matrix. Of course finance is part of the matrix for measuring success but it goes beyond that. There are several other things to use to measure success. And that is what determines how sustainable your business is. If you run your business in a manner that is not sustainable, you can make profit but how far are you making it sustainable and making it stand the test of time?
For the maiden edition of the Corporate Governance and Enterprise Development Conference, what should be expected?
At this maiden edition, we have business leaders, policy makers, representatives of the Financial Reporting Council, representatives from Security and Exchange Commission. These are policy makers, so the synergy that they are bringing together that we are going to elicit from the discussion of the day would be put together as a communiqué that we will share with various institutions, organisations and government departments. And we will continue to do this on an annual basis and see how we get the best out of it.
How will you classify the success rate of family business in the country?
There is nothing wrong with family members being involved in businesses. If we go beyond the shores of Nigeria, there are several businesses in Germany, China, where you will see family members running businesses. They started a family business and they have grown to become a huge conglomerate and we have such businesses in Nigeria as well. Maybe we do not have many of them but the truth is that they are thriving and doing well.
Again, there were times that family members were members of the board, but policy makers have ensured that certain controls have to be in place in getting families involved in businesses. For instance, for publicly quoted companies, we have the Nigeria code of corporate governance that gives guidance as to how corporate organisations should be run and part of such is the level of family involvement in running businesses. There are provisions about how much family involvement should be in a business. There are boards where they say no more than two members of one family should be members of the board. All of these controls put in place act as checks and balances to ensure that every organisation is well run.
Tell us about companies that existed but downsized because of corporate governance failure?
The one that readily comes to mind is Bata. When we were growing up, if you did not wear Bata shoes you would not have worn any shoes. But today where is Bata? it’s gone. Kingsway in those days we grew up to know, but Kingsway is no more today and more recently there are certain businesses that started and they are moving out of Nigeria. These are the things we need to understand and then provide solutions to stem corporate governance failure in Nigeria. I have an American client, who said to us that for about three years they have not had any new contract in Nigeria and part of the problems they are having is compliance issues and based on their level of compliance they are not able to do certain things people are demanding from them.
What this implies is that there will be no business and they will start laying-off staff and what that portends for our economy.
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