Judicial Report

Insights into the book, ‘Outcomes-Based Governance: Modern Perspectives to Corporate Governance’ by Prof. Mervyn King, SC and Prof. Fabian Ajogwu, SAN


The book, “Outcomes-Based Governance” had been in the works since 2018 and was finally published in April of this year and set to be presented on May 7 and 14 in Lagos and South Africa respectively, however, due to the pandemic, the dates had to be shifted and here we are presenting the book virtually. Our aim today is not only to share the book with you but also to stir some relevant discussions on the topic of the governance of corporate entities in our hearts. The common thread of the book which we can all tell by now is and “outcomes-centric approach to governance”. I am delighted as it has the ability to change how we all see corporate governance.

The business world has always been plagued with the blessing and problem of investment returns. This means that corners could be cut, best practices of corporate governance ignored if it would result in profitability and stockholder return. An outcomes-centric approach to governance has the ability to change this business logic as it ties corporate governance principles and practices to translated benefits which are also many times stockholder and wider stakeholder returns in the same breath. This is what the book seeks to do – open up the minds of business owners and runners to see the intended benefits of slated principles. We have particularly targeted developing economies as we understand that their success is crucial and there are only many crises that economies can take before crumbling.

Ranking of competing interests in corporate decisions remains an unresolved subject, with some school of thought giving primacy to shareholders’ interest in maximizing their returns and another school contending that shareholders’ other interests in corporate strategy, executive compensation, and environmental policies, for example; and the interests of other parties must be respected as well. This debate is highlighted by Harvard Professors Lynn Paine and Suraj Srinivasan in their 2019 article ‘A Guide to the Big Ideas and Debate in Corporate Governance’. I will proceed to highlight key governance trends that have been crucial in our world and become more crucial in the times we find ourselves.

The first is corporate culture; there is only so much a board can do. The board requires capable hands to carry its vision and this is where corporate culture comes in. The governance culture must be engrained into every fragment of an organization for success to be ensured. For this reason, there cannot be a misalignment between the values a company seeks to embody and the behaviours it demonstrates at every level. This ties into human capital and intangible asset development; which must be ensured on a continued basis.

Professor King has already shared some key points on the inclusive capitalism debate. Permit to add my own few words here. The role that businesses play the society and the expectations about the role it should play, has shifted dramatically in recent years. Businesses are called to “a higher purpose” or sensing that externalities can only be ignored at their peril; many businesses are increasingly open to the notion that they have a responsibility for creating a more inclusive economy.

I want us to bear in mind that shareholders are one part of the economy but stakeholders are the economy. This means that a business has a range of purposes beyond delivering returns to providers of capital. Off course, there is a lively debate about whether advancing the interests of customers, employees, creditors, etc. will naturally increase the share price or value of the enterprise or firm.

We must remember that business is about human purpose. Every attitude which tries to suggest that business is somehow separate from the human activity in the whole of society is perverse and it is perverse because it would lead to bad financial outcomes. Let alone it is perverse because it leads to bad social outcomes. Businesses must consider “higher purposes” by advancing human prosperity within the boundaries set by nature. Inclusive capitalism is closely tied with other notions such as corporate citizenship and sustainability.

Inclusive capitalism is a potentially powerful idea and crucial to its success is ensuring the development of mechanisms for its workings. They do not comprise a business-to-consumer movement, but a business-to-business movement, in which organisations seek to influence business directly. Many organisations pursue a ‘top-down’ approach to change through which they seek to influence individual business leaders or networks of leaders in order to catalyse change in organisations. Definitions of inclusivity abound, and organisations also turn to a wide range of other terms to describe the aims of their work.

Now to Risk governance especially in the wake of Covid19; competing against risk is a challenge plagued on every business. I would like to read a quote from the National Association of Corporate Directors: –

“There is clearly an intense focus on risk today. While risk management has been on the radar if not a priority for most companies and boards over the past several years, many are asking whether our current system of corporate governance and strategic decision-making ensures adequate risk assessment and management”.

This quote was written in 2009! but still echoes a familiar refrain today but back then the world was much simpler. For instance, the concept of terrorism involved airline hijackings and shoe bombers, instead of today’s “lone wolf” attackers and ISIS cells, use of cloud services to cause terror i.e. “cyberterrorism in the cloud”. we need to look at risk in a new way, given the challenges of the 21st-century environment. We need to put risks and their management front and centre as part of our day-to-day operations.

We should always be on the look-out to not only to mitigate to also find opportunities to the extent that we are better able to manage and absorb them than others. Remember that risk and reward are two sides of the same coin. If we can do this, we have a better chance of ensuring our company’s short-term profitability and long-term sustainability.

I will move on to what I will like to call the “cool kids approach”. Remember that corporate governance is an ever-changing concept, influenced by cultural, political, educational, and societal occurrences as well as development and innovation; once of which is the introduction of blockchain technology to facilitate the relationship between corporate actors.

For instance, the AGM of Shareholders is the age-long tool that provides the shareholders with a monitoring capacity, however, most shareholders especially institutional and short-term investors have become uninterested in the platform. If a private blockchain, managed by the company and only accessible to shareholders is made available, the company can use such a platform to present information to shareholders who may then exercise their voting rights through the same platform.

The OECD Directorate for Financial Enterprise Affairs Corporate Governance Committee has identified that an AGM under a blockchain design will have several material benefits such as easier voting (not mere electronic but digital voting), certainty in the tabulation of votes and making it harder to manipulate board elections and can eradicate all intermediaries in the relationship between shareholder and company, thereby fostering allegiance and accountability and reducing costs.

For the fear of not wanting to turn this into a lecture (as if find that I always tend to do given my love for the classroom) and to allow you continue on with your lovely afternoon, I’ll stop here with my final remarks.

The challenge is that for many corporate actors, corporate governance begins to sound like a broken record and the hype around is often taken for granted. It is our hope that with the book Outcomes-Based Governance: A Modern Approach to Corporate Governance we have been able to rejuvenate the principles underlying corporate governance and importantly how its benefits can be achieved through decision-making and structural implementations. We hope that the book will help corporate actors walk the talk.

My gratitude goes to my co-Author, Professor King, SC, and to all who assisted with the research, logistics and brainstorming sessions which birthed the book (Okey Ekweanya, Chinonye Nnaji, Dolapo Makinde, and Ruth Barnett). I must thank the publishers, Juta, for their thorough handling of the book and specifically the peer review process which provides independent views on the book; and Chinonye Nnaji, and Donae Hurst and Sarah of Echo for planning and executing the virtual presentation in a very short time. We appreciate the guidance provided by Ms Koosum Kalyan formerly of Standard Bank Board and Ms Lele Modise of MTN South Africa.

A number of institutions deserve special mention – Central Bank of Nigeria, South African Reserve Bank, Securities & Exchange Commission, Financial Reporting Council of Nigeria (FRCN), Johannesburg Stock Exchange, Nigerian Stock Exchange, the Institute of Directors South Africa, Society for Corporate Governance Nigeria, Nigerian Communications Commission, etc. The works of the FRCN Committee on the National Code of Corporate Governance and the King IV Code Committee have been a helpful resource.

Special thanks to Mr Sim Tshabalala, Group Chief Executive Standard Bank Group for writing the Foreword; and Mr Pascal Dozie, former Chairman of MTN Nigeria, Mr Oscar Onyema, CEO of the Nigerian Stock Exchange, and Mrs Sola David-Borha, Chief Executive of Africa Regions, Standard Bank Group for their contribution to the debate.

Professor Fabian Ajogwu, SAN
Via zoom, July 14, 2020

Report By Mike Ojo,
Lagos. Nigeria.


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