SEC Set To Rate Companies On Corporate Governance
By Michael Eboh
 21st DEC 2006

The Securities and Exchange Commission (SEC) is set to commence rating companies on good corporate governance.

The Director-General of SEC, Mr. Musa Al-Faki, who made this disclosure recently, added that SEC will also give formal recognition to deserving companies for their efforts and contribution to the economy in this regard.

According to him, “Good corporate governance is simply those mechanisms at work within a company that conforms to the principles of transparency, fairness, accountability and responsibility.” He said it is the responsibility of the board of a company, made up of both non-executive and the executive directors, to implement corporate governance in an organization adding that the non-executive directors have responsibility for the overall determination of the corporate objectives, formulation of policies and general plan for the co-ordination of finance, production and distribution among others, while the executive directors, which form the basis for the implementation of corporate governance, are saddled with the responsibility of ensuring the efficient execution of the corporate plans and business daily to achieve specific targets over defined time frame.

He further stated that a company that adheres to good corporate governance will conduct its business in an ethical manner, thereby building a good reputation for the company by increasing investors' confidence in the company and making it credit worthy, which will in turn lead to increased profits, sustainable growth, value creation and wealth generation for the company in particular and the country as a whole.

He stated that “SEC expects the Boards of Directors of companies to be committed in doing the right thing the right way first time and every time and enforce same in their organizations.”

He further stated that the Board should design internal strategy to ensure compliance with the code of corporate governance, review Board structure and composition and ensure the separation of the office of the chairman and chief executive officer and better corporate communication and enhanced disclosure of information.

He stated that the Federal Government’s economic policies and initiative of promoting the private sector as the engine of growth can only succeed if the private sector adhere to good corporate governance. According to Musa, “nations that are perceived to have imbibed international best practices in corporate governance attract a large proportion of international capital in the form of foreign direct investment, portfolio investment or even direct loans.”

He stated that the greatest challenge facing corporate governance is finding the best ways to optimize wealth creation in the long-term without imposing unnecessary costs on their parties or society such as agency costs imposed on investors as reflected in excessive CEO remuneration and externalized costs like pollution, crime, corrupt practices aimed at giving a company unfair competitive advantage over rivals.

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