Corporate governance can be described as the practices and procedures by which a company is directed and controlled. It involves a set of relationships between a company’s management, its board, shareholders, and other stakeholders.

Corporate governance provides the structure through which the objectives of a company are set, and the means of attaining those objectives and monitoring performance are determined.

Good corporate governance provides proper incentives for the board and management to pursue objectives that are in the interests of the company and its shareholders and should facilitate effective monitoring.

Benefits of Good Corporate Governance

Good corporate governance is essential for the long-term success and sustainability of any organisation, regardless of its size or industry. Good corporate governance:

  • Enhances the reputation of the company: by building trust and confidence among stakeholders, which includes customers, employees, investors and regulators. It reinforces the company’s reputation and elevates its credibility within the marketplace.
  • Improves financial performance: companies that adhere to strong corporate governance practices typically exhibit improved financial performance, making them more attractive to investors and enabling them to benefit from lower costs of capital.
  • Reduces the risk of fraud and misconduct: effective corporate governance policies and procedures play a crucial role in mitigating fraud and misconduct. By establishing transparent and ethical operations, these policies and procedures create clear lines of accountability and responsibility within the company.
  • Ensures compliance with legal and regulatory requirements: robust corporate governance practices aid in ensuring the company’s compliance with relevant laws and regulations. This, in turn, minimises the risk of legal and regulatory penalties and safeguards the company’s reputation.
  • Facilitates better decision-making: sound corporate governance structures establish a framework that promotes effective decision-making. They guarantee that decisions are aligned with the best interests of the company and its stakeholders, adhering to principles of risk management and financial management.

Principles of Corporate Governance

Guidelines on corporate governance can vary widely between countries, making it challenging for multinational companies to navigate the different legal and regulatory requirements across different jurisdictions. To address this issue, the Organisation for Economic Co-operation and Development (OECD) a global intergovernmental organisation that promotes policies to improve economic and social well-being, has developed a set of principles on corporate governance that provide a global standard for companies to follow.

These principles are recognised as best practices for corporate governance and are widely adopted by many countries as a basis for their own national codes of corporate governance.

The OECD principles aim to promote accountability, transparency, responsibility, and fairness in corporate governance practices, while also supporting economic efficiency, sustainable growth, and financial stability. The OECD outlined six principles which a good corporate governance framework should promote, namely:

  • Basic standards for a good corporate governance framework: the corporate governance framework should promote transparent and fair markets, and the efficient allocation of resources. It should be consistent with the rule of law and support effective supervision and enforcement.
  • Rights and equitable treatment for shareholders: the corporate governance framework should protect and facilitate the exercise of shareholders’ rights and ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights.
  • Institutional investors, stock exchanges and other intermediaries: the corporate governance framework should provide sound incentives throughout the investment chain and provide for stock markets to function in a way that contributes to good corporate governance.
  • The role of stakeholders in corporate governance: the corporate governance framework should recognise the rights of stakeholders established by law or through mutual agreements and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.
  • Dissemination of information and transparency: the corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company.
  • Responsibilities of the board of directors: the corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.

These principles outlined by OECD are primarily geared towards publicly traded companies. However, these principles can also provide guidance to privately held companies seeking to enhance their corporate governance practices. It is important to note, however, that each company’s specific circumstances, such as size, industry and country of operation, may affect how the OECD principles can be applied.

Individual companies should therefore determine the most appropriate approach for their business. This may involve tailoring the principles to fit their unique needs or supplementing them with additional practices that are better suited to their specific context.

Ultimately, the aim of corporate governance is to ensure that companies operate in an ethical and transparent manner while maximising long-term value for all stakeholders, and it is the responsibility of each company to determine how best to achieve this goal within their unique circumstances.

In Nigeria, the corporate governance space also has a few corporate governance codes applicable to publicly listed companies and certain regulated companies, the most recent being the Nigerian Code of Corporate Governance (the “NCCG”) which was first published in 2018 and provides a framework for the governance of companies operating in Nigeria. Some of the key provisions in the NCCG Include:

  • Board of Directors and Officers of the Board: the NCCG emphasises the importance of an effective board of directors in corporate governance. It sets out principles regarding board composition, independence, diversity, and competence and empowers a company to determine the size and composition of its boards considering the scale and complexity of their operations. It encourages the separation of the roles of the chairman and the chief executive officer (CEO) and discourages the transition of CEOs or executive directors to the role of Chairman.
  • Board Committees: the NCCG recommends the establishment of board committees to oversee specific areas of corporate governance, such as audit, risk management, nomination, and remuneration. These committees should have clear terms of reference and should operate independently. The code also recommends that the board committees comprise of only non-executive directors, the majority of whom should be independent where possible.
  • Transparency and Disclosure: the NCCG emphasises transparency and requires companies to provide accurate, timely, and relevant information to shareholders and stakeholders. The NCCG requires companies to ensure that their financial reports and disclosures are transparent using clear understandable language.
  • Risk Management and Internal Controls: the NCCG emphasises the importance of effective risk management and internal control systems. It recommends that companies establish appropriate frameworks to identify, assess, and manage risks and ensure the integrity of financial reporting.
  • Ethics and Corporate Social Responsibility: the NCCG promotes ethical conduct and encourages companies to demonstrate good corporate citizenship. It highlights the importance of corporate social responsibility and sustainable business practices.
  • Remuneration: the NCCG provides guidelines on executive remuneration, advocating for fairness, transparency, and performance-based incentives. It recommends the establishment of remuneration committees to ensure appropriate oversight.

Axxela’s Corporate Governance Framework

Axxela regards corporate governance as a fundamental component of our business strategy and places great importance on good corporate governance across all our operations.

At Axxela, we aim to cultivate an ethical culture and hold our employees to the utmost ethical standards, which are firmly rooted in our core values.

Our code of business conduct and ethics delineates the expected standards of behavior for employees, directors, and stakeholders. In addition to our code of conduct, we have implemented various corporate governance policies that guide our decision-making processes, risk management strategies, and overall operations.

Some of the corporate governance policies we have implemented are:

  • Whistleblowing Policy: outlines the procedures for reporting instances of illegal or unethical behavior performed by employees or directors within the organisation. Reporting can be done either anonymously or with the disclosure of the whistleblower’s identity.
  • Related Party Transaction Policy: establishes the principles governing the identification and disclosure of transactions involving related parties. Its primary objective is to ensure that company transactions are entered into on arm’s length terms.
  • Code of Business Conduct and Ethics: defines the expected behavior and conduct for employees and directors. It mandates that employees uphold the utmost standards of ethical behavior and foster an ethical culture rooted in the organisation’s core values.
  • Anti-Corruption Policy: expresses Axxela’s opposition to bribery and corruption. The policy requires that Axxela, its employees and its business partners comply at all times with applicable national and international laws and conventions relating to corruption.
  • Know Your Customer Policy: requires that appropriate KYC is carried out on third parties Axxela deals with, to avoid dealing with a potential business partner that may be involved in corrupt practices.
  • Gifts and Benefits Policy: outlines the principles and regulations governing the offering or acceptance of gifts or benefits by employees during the course of their professional responsibilities. The primary objective of the policy is to prevent employees being improperly influenced in the performance of their duties.
  • Procurement Policy: establishes the framework for the acquisition of goods and services by Axxela, providing guidelines and principles to ensure proper and effective procurement practices.
  • Delegation of Authority: defines the boundaries of authority within Axxela, specifying the extent to which individuals are empowered to make decisions and take actions within the organisation. The Delegation of authority ensures that decisions are taken at the appropriate levels.
  • Child and Forced Labour Policy: establishes Axxela’s zero tolerance to the use of child or forced labour by the company or its third party vendors.
  • Diversity Policy: expresses Axxela’s commitment to equality and diversity and ensuring there is no discrimination within Axxela on the basis of ethnicity, gender, age, religion, etc.
  • Charitable Donations Policy: outlines the principles and criteria governing the allocation of charitable donations. The policy also prohibits political donations by Axxela, consistent with the provisions of the companies and Allied Matters Act.
  • Offences and Sanctions List: enumerates the violations that go against Axxela’s Code of Business Conduct and Ethics. It outlines the suitable punishments that will be enforced when an employee is proven guilty of such violations, in accordance with the disciplinary action procedure.

Axxela’s corporate governance policies are designed to promote transparency and accountability in financial reporting and prevent fraud, corruption and other unethical behaviour, and demonstrate Axxela’s commitment to compliance with applicable laws, regulations and industry standards. Collectively, these corporate governance policies enable Axxela to operate responsibly and sustainably while safeguarding the interests of all stakeholders, including shareholders, employees, customers and the broader community.

In summary, Axxela recognises that good corporate governance is critical to building trust and fostering mutually beneficial relationships with our diverse stakeholders. We firmly believe that upholding strong corporate governance practices not only strengthens our relationships with these key stakeholders but also bolsters the long-term sustainability of our business.

Conclusion

Ultimately, the cornerstone of corporate governance is a commitment to doing what is right, even when it is not easy or popular. As companies continue to operate in an increasingly complex and interconnected global marketplace, the importance of corporate governance will only continue to grow. Companies like Axxela that prioritise good governance practices will be better equipped to navigate the challenges and achieve sustainable growth.

To this end, Axxela will continually take proactive measures to strengthen its corporate governance practices and ensure they align with best practices and regulatory requirements.