John Maynard Keynes described Capitalism as “the astounding belief that the wickedest of men will do the wickedest of things for the greatest good of everyone”. Irony or not, it still holds the truest representation of capitalism, I have seen. It goes to say that people/companies wired to seek profit at all cost will somehow develop an enlightened self-interest.
A code of ethics which states that persons who act to further the interests of others (or the interests of the group or groups to which they belong), ultimately act to serve their own self-interest. The challenge here, of course, is that, while we collectively want to believe in the greater good of our fellow-men, we ought to have some established set of rules (code of conduct) to guide our interactions; in a bid to give everyone the equal opportunities to succeed.
Just in case you’re not aware, the Financial Reporting Council (FRC) has unveiled the draft of the Nigerian Code of Corporate Governance (NCCG) 2018, the outcome of a 15-member committee set up in January to review the October 2016 suspended National Code.
You may recall the suspended 2016 version, which unlike the new code doesn’t cover all public entities, private companies that are holding companies of public companies, concessioner and/or privatized companies as well as regulated private firms whose files return to any other regulatory authority other than the Federal Inland Revenue Services and the Corporate Affairs Commission.
If the proposed code has a goal, it is to increase national competitiveness and is in line with global best practices and while the Not-for-Profit code remains suspended, the separate code for the private sector is making the rounds across the country to gain valuable input from key stakeholders.
The 2016 code came with a few challenges which needed to be fixed and the 2018 version has gone a long way to fixing them.
For one thing, the previous code was, what at best could be described as a one size fits all bill, while the 2018 upgrade takes into account the uniqueness of individual growth stages of Nigerian businesses. Also, while compliance under the previous code was mandatory, the new code has adopted the ‘Apply and Explain’ principle; which assumes application of all principles and requires entities to explain how the principles are applied – thus, apply and explain.
However, it is to be noted that while the FRC still has powers superseding individual sector regulators in matters pertaining to corporate governance as seen in section 51c of the FRC Act, sectoral regulators will be able to issue guidelines that set out corporate governance practices consistent with the FRC code. The code will then act as a guideline to enforce compliance with appropriate sanctions that might be prescribed by the regulator.
Some cynics view fairness as nothing more than a cloak for self-interest. As the playwright, George Bernard Shaw put it, “The golden rule is that there is no golden rule.” But the cynics are wrong.
Research findings in many different disciplines, from behavior genetics to the brain sciences, anthropology, evolutionary psychology, behavioral economics, and even animal (primate) behavior have established that we do, in fact, have an innate sense of fairness. We regularly display a concern for others’ interests as well as our own, and we even show a willingness to punish perceived acts of unfairness.
It is to this that in its work of promoting high quality Financial Reporting, the FRC could be seen to promoting private sector growth and reducing volatility in the economy by strengthening the country’s financial reporting architecture and reducing the risk of financial market crises together with the associated negative economic impact, while also enhancing local and foreign Direct and portfolio Investment as investors are better able to evaluate corporate prospects and make informed decisions resulting in access to capital at lower costs. In simple words, they help determine the fair value in a market emerging from opaqueness.
While the buzz may not catch on for a while, it is important that the journey to lesser inequality add greater accountability be put forward within the Nigerian business community. So be it in protecting the investor and other stakeholder interests or in giving guidance on issues relating to financial reporting and corporate governance to professional, institutional and regulatory bodies in Nigeria, the FRC ensures a greater sense of accountability, which helps build confidence within the Nigerian business space