30 January, 2014 /NSE
It gives me great pleasure to welcome everyone here to this Breakfast Briefing, on the Corporate Governance Rating System (CGRS), which is a joint project of The Nigerian Stock Exchange and the Convention on Business Integrity (CBi). The CBi was established in 1997 Nigeria to promote ethical business practices, transparency and fair competition in the private and public sectors. The CBi has a well-developed Integrity Rating System which has been peer reviewed by the Humboldt-Viadrina School of Governance in Berlin, Germany.
In my view, the best definition of corporate governance is that, corporate governance is the structures and processes for the direction and control of companies. There are several reasons to strive for good corporate governance.
A company that is regarded as having good corporate governance has access to a variety of financing options. Moreover, it is well established that companies with good corporate governance generally receive higher market valuations than those that are regarded as poorly governed.
As part of its on-going transformation program, The Exchange has made a commitment to the entrenchment of good corporate governance in the Nigerian business environment by implementing strong regulatory reforms. Sound corporate governance practices are also critical to earning and retaining the trust of all stakeholders, including investors, financiers, team members, customers, suppliers and the general public.
In addition to providing facilities for the intermediation of securities, one function of a stock exchange is to provide a forum in which one may measure the corporate governance health of an economy. This is because the rules, regulations and policies with which listed companies are required to comply with have a direct correlation to the structures and processes for their direction and control.
These rules and regulations provide guidance for the way and manner in which listed companies should be run. governance in Nigeria, The Exchange and CBi decided to develop a Corporate Governance Rating System (“CGRS”) for companies listed on The Exchange. Soji Apampa, the Executive Director of the CBi will make a presentation on the System later this morning.
Without pre-empting Soji’s presentation, I would like to impress upon you that significant thought, research, brain storming has gone into developing the CGRS. We anticipate the ratings and rankings to be of particular interest to issuers, investors, financiers, the media, academia, and the general public.
The Exchange and CBi expect that their collaborative effort with the CGRS will have several positive impacts, including the following:
• Listed companies will be better managed and governed in general. Their boards will be fully aware of their fiduciary responsibilities and operate by the highest standards of corporate governance ethics and processes.
• Listed companies will become more attractive to investors. This is because investors want to be sure that their investments are safe, there is awareness within the board about appropriate oversight, and that their interests are fully protected. Foreign and local investors will be attracted to these companies for long term investments as better managed companies are more sustainable. This will lead to the growth of the Nigerian economy as a whole.
Listed companies will be attractive prospects for cross-border listings as they are more likely to meet the listing requirements of target markets.
• Listed companies that have high ratings will typically have lower cost of funds.
• Listed companies will become more competitive in their industry and across geographies, as corporate governance is a strong competitive tool.
It is also important for you to note that the ratings and subsequent rankings will feed into two other important projects of The Exchange. In the short term, 2014, The Exchange intends to launch a Premium Board on which select listed companies currently on the Main Board as well as qualifying incoming companies may be listed.
The Premium Board will be comprised of companies that adhere to the highest corporate governance standards based on the ratings and rankings from the CGRS. Other factors to be considered for Premium Board qualification include a market capitalization in excess of 1 Billion Dollars as well as whether the listed company being considered for the Premium Board meets the applicable threshold fixed for market liquidity of its shares. In the longer time frame, The Exchange also intends to use the ratings to develop a tradable Corporate Governance Index.
Initial feedback has been positive, especially from foreign investors who want to trade Nigeria as a basket, and find the CG index a veritable vehicle for doing so.
Distinguished guests, we intend to get the CGRS off the ground with you, our listed companies that will be rated using the CGRS criteria. All of you present here represent listed companies that have being offered the privilege to be a part of history. After the public announcement and official launch of the ratings, we intend to publish the results by the end of the year.
At this point, let me hand you over to Soji to provide more in-depth information about the CGRS.
Distinguished guests, thank you and welcome to this briefing session.
8 Factors Contributing to Crash of the Equities Market 2008-2009-Presentation for Listed Companies
1. Macro-economic instability caused by large and sudden capital inflows
2. Major failures in corporate governance at banks
3. Lack of investor and consumer sophistication
4. Inadequate disclosure and transparency about financial position of banks
5. Critical gaps in regulatory framework and regulations
6. Uneven supervision and enforcement
7. Unstructured governance & management processes at the CBN/weaknesses within the CBN
8. Weaknesses in the business environment