Governance: Who Guards The Guardians?


Thursday, June 13, 2019   /   08.05PM   / By Olufemi Awoyemi   / Header Image Credit: Daily Gospel Truths


Being the address delivered by Mr. Olufemi Awoyemi, Chairman, Proshare NG at the Institute of Directors (IoD) Nigeria’s June 2019 New Members Induction held on Tuesday, June 11, 2019; at the Eko Hotel and Suites, Victoria Island, Lagos. 


Quis custodiet ipsos custodes


“The essential problem was posed by Plato in ‘The Republic’ - his major work on government and morality. The perfect society as described by Socrates, the main character in this Socratic dialogue, relies on labourers, slaves and tradesmen. The guardian class is to protect the city. The question is put to Socrates, "Who will guard the guardians?" or, "Who will protect us against the protectors?" Plato's answer to this is that they will guard themselves against themselves. We must tell the guardians a "noble lie" The noble lie will assure them that they are better than those they serve and it is therefore their responsibility to guard and protect those lesser than themselves. We will instil in them distaste for power or privilege; they will rule because they believe it right, not because they desire it”.


I had intended for this to be a talk about the role of directors in a company, using the above maxim to demonstrate the age-old expectation of the fiduciary duties of those charged with managing an entity.


It was my expectation that I would be able to weave a narrative around how the expectations has since turned from a privilege into an ethical assessment for the holder; from a right into a responsibility; and from a status symbol into a leadership obligation and burden.


Three unrelated events in the last few days have however compelled me to take a detour and reflect on the very essence of what it means to be a director of a company in Nigeria today; and perhaps open a wider conversation around the changing landscape, especially the foundations upon which these expectations are premised, administered and determined; with the hope that I can offer you both a compelling reason to appreciate what you have signed up to. as well as, - the things you must address your minds to - going forward.


I have an unyielding faith in; and far greater expectation from the new members of our esteemed institute as representatives of the oasis IoD Nigeria represents, as the future of ethical, conscientious and integrity based leaders of our sovereign entity(ies).


The first event was a development around the Independent Directors of Diamond Bank Plc, especially their letter to the Central Bank of Nigeria (CBN) published by my firm, Proshare to the effect that in the discharge of their role as “independents” certain things occurred which, in their view, ought not to be; and beyond the normal processes opened to them within the bank and extant rules; they felt compelled to write formally.


That they were subsequently side-stepped (in person and on issues); spoke volumes about the expectations we place on Independent Directors in the discharge of their functions. It is instructive that NO institutional body spoke up for them – and I mean no one; especially those entities who preach corporate governance, ethics, business integrity and most definitely, not the regulators.


The question must therefore be asked – what should others in similar situations do or contemplate doing? What would you have done or believe should be done in such a situation?



The second event was the development last weekend when the Securities & Exchange Commission (SEC) issued a public notice on May 31, 2018 and wrote to The Chairman of Oando Plc on the findings of the forensic audit conducted by Deloitte & Touche; and its decisions therefrom.


Directors of Oando Plc were implicated (directives included the resignation of Directors from the Board) for several corporate governance lapses stemming from poor ‘Board Oversight’; catalogued as follows:


1.       Irregular Approval of Director’s Remuneration;

2.      Unjustified Disbursements to Directors and Management;

3.      Failure of the Audit Committee to hold meetings with Management, Internal Auditors and External Auditors;

4.      Directors’ participation in matters they had ‘disclosed’ conflicted interest;

5.      Failure of Internal Controls;

6.      Incidental Issues arising from the sale of a Subsidiary; 

7.      Suspected Market Abuse and Insider Dealings;

8.     Related Party Transactions;

9.      Payment of Interim Dividends despite liquidity constraints;

10.  False Disclosures;

11.   Non-disclosure of Beneficial Ownership; and

12.  Tax-Related Issues.


Oando Plc has since responded to the contents of the letter; subsequent upon which two executive directors approached the courts and got an injunction against the decision; even as two independent board members tendered their resignations from the company.


Without prejudice to the on-going court, regulatory and shareholder engagements going on; a few things should jump at you from the above.


One - the range of issues that Directors are liable for is justifiably lengthy, yet unexhausted especially when juxtaposed against a regulatory regime whose laws, rules and directives have a longer shelf life than business practice and evolving trends.


Two - in a regulatory clime that assumes the role of accuser and judge (as the rules currently stand), the need to update one’s knowledge of the rules of engagement can no longer be optional. There is a huge premium on assuming things based on intent/ions, general practice or/and best practice.


Three and most importantly, the lines between your private life and public role become blurred once you find yourself on the wrong side of regulatory actions. The new media does not take prisoners.


I have been asked about my thoughts on the substance of the issue (the drama, tales and conspiracy theories offers me no benefit), given Proshare’s deep-dive into the initiating action(s) in 2017; to which my response has been one of restraint given the facts already established in our Memo to the Market.


That said, I should point out a few inconsistencies; albeit technical, that stands out.


Item 7 on the list of infractions against the directors of the company spoke about ‘suspected’ insider dealings. This coming off a forensic report that should affirm or negate the suspicion, raises diligence concerns and places necessary scrutiny on the forensic report/exercise unnecessarily.


Item 5 on the same list spoke about the failure to establish an effective system of internal controls as required under Section 61 if the ISA 2007, over its financial reporting thereby compromising the integrity of the company’s financial controls and reporting; is a open-ended indictment that can be applied to almost any company. It is trite knowledge that all companies have internal control lapses yearly and depending on the materiality; escalating such to the level of directors’ indictment needs further evidence.


Lastly, what responsibility does the auditors to the company bear in such developments? How did we get to this point without professionals engaged by the company as the first line of defense for shareholders, not have their role(s) in the outcome(s) a subject of interest or mention?


Perhaps; curiously, what does it say of a regulator that gives a catch .22 instruction to a company  i.e. all directors should resign and hold an extra-ordinary general meeting on a Friday, yet comes up on the immediate Sunday with a change in the board via the announcement of the appointment of an interim Chairman without members of a reconstituted board? This may be an administrative convenienve but does little to offer comfort in regulatory intervention.


More recently, the regulator caused to be issued a press release where it equated fair hearing with cooperation during an investigation in contrast with the spirit of s63 of the ISA (now under review by SEC) that emphasizes an exit process by ‘auditors’, specifically - obtaining written representations and communicating weaknesses….?


It is my hope that the IOD will retain a watching brief on developments with a view to coming out with learning guidelines around the pain points of this case study when the dust finally settles. It would be worth the wait.



The third event was the observation arising from an integrity review organized by a  frontline integrity entity around some companies last year. In the course of the review, a listed entity operating in the insurance sector was found to have as a major shareholder a foreign company listed in its annual report under a corporate name. A simple online search about the company revealed that the directors were the current Managing Director, his wife and a member of the Audit Committee. This fact was not disclosed in the annual reports for the company at any point over the years. A notification sent to the listing platform did not elicit any follow-on reaction or compulsion for compliance with best practice governance ethos.


A second listed entity in the mortgage sector had impaired loans of about N1.2bn in its financials of which N800m was directly related to entities owned by Directors of the board. This amount was subsequently written off in its financials for the following year without any consequence; or regulatory inquest.



Proshare Nigeria Pvt. Ltd.



From the above, it should offer no comfort to any of you that there evidently appears to be, either an absence of clarity on what is acceptable practice or we are in a process of change where conflicts in practice, precepts and premises are coming into the open space.


My sense leans towards the latter prognosis of the current state of director responsibility, regulatory guidance and enforcement of best practice, corporate governance.


This situation unfortunately is further exacerbated by the lack of, absence and the perception that those empowered to exercise such oversights themselves have serious issues of corporate governance to contend with.


Others believe it has to do with man’s Hobbesian state - Thomas Hobbes, an English philosopher, considered to be one of the founders of modern political philosophy best known for his 1651 book Leviathan where he propounded the philosophy that human beings are, at their core, selfish creatures.


So, where do we begin to reset our sovereign corporate governance issues? Which comes first?


Do we start with restructuring the regulatory architecture – laws, institutions and executive oversight principles OR focus on the operators, directors and operating environment OR simultaneously do both through proper and scalable reform management!


While this debate struggles with traction, It is my considered view that, Directors are better served by immediately availing themselves with best practices; upgrade their knowledge, understanding and application of their roles and responsibilities to render unto themselves and society a risk-based discharge of their functions. Waiting for clarity brings with it unintended consequences.


Permit me therefore, and I crave the indulgence of the host; to recommend to the audience, the following entities ready and able to help you if you so choose to pursue this path:

  • The Business Network for Ethics and Integrity in Nigeria (BNEI) – An initiative of the Chartered Financial Analysts (CFA) Society in partnership with the Institute of Directors (IoD), Nigeria;
  • The Convention on Business Integrity (CBi) – an initiative established in 1997 with the mission of promoting ethical business practices, transparency and fair competition in the private and public sectors. Signatories of the Convention undertake to observe the values of the Code of Business Integrity, both within their own organizations and in their dealings with customers and partners. The code includes both sanctions and incentives for the organizations involved; and
  • The Financial Reporting Council (FRC) code on corporate governance; recently adopted for entities operating in Nigeria.


The above is by no means exhaustive, but offers a veritable starting point for your consideration; apart from the numerous training programs the IoD offers in its training calendar. The price for lack of adequate knowledge is steep; but far severe is the price for ignorance of the rules that will influence your success or failure.


Since this is a dinner talk and I have taken a bit off my allotted time slot to which I apologise, permit me to end here by leaving you with this quote from the late Prof. Moses Olorunfumi Adeyemi (Feb 1942 – June 2019); Fmr Director-General of Nigeria Insurers Association (NIA), fmr Legal Adviser of National Insurance Corporation of Nigeria (NICON) and visiting Professor of Insurance, University of Gambia, who passed on yesterday:

I want you to be seasoned. I can pardon slips from any numerate professional, but not from you as a director of a company; holding the shareholders trust in sacred faith”.


Let me join others in congratulating and welcoming you to the IoD Nigeria.


Thank you.




June 11, 2019, Lagos, Nigeria.



NB: Download Powerpoint Presentation



Proshare Nigeria Pvt. Ltd.



Proshare Reports - Oando Investigation

1.       Oando PLC’s Official Response To SEC’s Suspension Of Its 42nd AGM

2.      SEC Suspends OANDO’s Prior Approved AGM Scheduled To hold on June 11, 2019

3.      Memo to The Market: The Oando Corporate Journey – At the Regulators Gate – Nov 22, 2017

4.      Download Full (PDF) Report - Memo to The Market: The Oando Corporate Journey – At The Regulators Gate – Dec 2017

5.      Review of the SEC Technical Committee Recommendations, Opinion and Final Report – Dec 08, 2017



Proshare Nigeria Pvt. Ltd.



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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.


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