Experts renew call for strengthening shareholders rights

Proshare

By Ifeanyi Onuba

 

Experts have advocated the need to strengthen shareholders’ rights, particularly their power to hold the board accountable in the areas of risk management and executive compensation.

 

The experts, comprising directors of banks and financial consultants made their position known in a communiqué, which was issued after their continuous education programme with the theme, “Enhancing the effectiveness of the board.”

 

The communiqué, which was signed by the Managing Director, Financial Institution Training Centre, Dr. Oladimeji Alo, on behalf of the 105 directors of Nigerian banks, stated that currently the contact between the shareholders and the board of directors was limited.

 

To address this, the communique recommended that the boards should communicate more regularly with shareholders on the affairs of the company through newsletters, e-mails and corporate websites.

 

While calling on the Securities and Exchange Commission to develop and enforce strict regulations to guide the formation, management and activities of shareholders’ associations, it said that some current practices and infrastructural inadequacies in the country appeared to prevent them from having a say in the affairs of their companies.

 

It urged SEC and other regulatory authorities in the capital market to strictly enforce existing laws on insider trading , as this would further enhance the confidence of investors in the capital market.

 

The directors also called on SEC to develop strict guidelines for the registration and practice of rating agencies in Nigeria, adding that only rating agencies licenced by SEC and approved by the CBN should rate banks.

 

According to the communiqué, “The Central Bank of Nigeria should prohibit banks from receiving awards from unauthorised rating agencies, especially media houses, as this tends to distort information and create confusion in the minds of the public.”

 

It added, “Providing strategic direction to the management should be a major concern of the board. To this end, they should create structures for constructively engaging management in the process of developing strategies and for monitoring the effective implementation of approved strategic plans.”

 

On the global financial crisis, it said, “Given revelations from the current global financial crisis, there is a need to take an active interest in the compensation of the executives through the collection of relevant industry data from independent consultants.”

 

The communiqué also stated that given the responsibilities placed on the directors of banks, there was an urgent need to revisit existing regulations that limited the remuneration of non-executive directors to sitting allowance in line with best practices. - Punch

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