A comparative analysis of codes of corporate governance and their impact on the boards of public companies in Nigeria and South Africa

• Jurisdiction: South Africa
• Author: Oluwadayisi, A.O.
• Citation: (2020) 7(1) Journal of Comparative Law in Africa 30
• Date: 30 October 2020
• Published date: 30 October 2020
• Pages: 30-62

30

A COMPARATIVE ANALYSIS OF CODES OF

CORPORATE GOVERNANCE AND THEIR

IMPACT ON THE BOARDS OF

PUBLIC COMPANIES IN NIGERIA

AND SOUTH AFRICA*

Akin Olawale Oluwadayisi†

Abstract

The growth of the economy of any nation requires that public companies, which

dominate the securities sector, are strong financially, and also requires that the

modality for their governance and operations should accord with acceptable and

beneficial standards. Corporate regulatory bodies prescribe codes of corporate

governance (CCG) that regulate the daily activities and performance of corporate

entities. However, it appears that despite the introduction of CCG in Nigeria and

South Africa, public companies are yet to deliver the desired results, due to non-

compliance, enforcement challenges and a lac k of internal mechanisms to implement

the spirit and content of CCG. This research provides a comparative analysis of

boards and the compliance level of public companies in Nigeria and South Africa.

The research methodology adopts a combination of doctrinal legal research and

qualitative analysis. The research aims to discover how the two countries can benefit

from each other. The objectives include determining the level of knowledge of CCG,

the level of accountability of boards, the level of responsibility, and enforcement and

compliance levels. The research identifies the gaps in the law and practice, while

offering solutions on how best to apply and enforce the codes in the two countries.

Keywords: boards of directors; codes of corporate governance; public

companies; Nigeria; South Africa

Résumé

La croissance de l’économie de tout pays exige que les entreprises publiques,

qui dominent le secteur des valeurs mobilières, soient non seulement robustes

financièrement, mais aussi que les modalités de leur gouvernance et de leurs

opérations soient conformes à des normes acceptables et avantageuses. Les institutions

de réglementation des entreprises prescrivent des codes de gouvernance d’entreprise

(CGE) adoptés pour les activités quotidiennes et l’exercice des responsabilités de

* This article is the product of a study conducted in 2018 at the Centre for Comparative Law in

Africa (CCLA), sponsored by the Olu Akinkugbe Business Law in Africa Fellowship and managed

by the CCLA, Faculty of Law, University of Cape Town, South Africa. The author graciously and

gratefully acknowledges the Olu Akinkugbe Fellowship and the management of the CCLA.

† BL ACIArb FIPMD LLM PhD and Notary Public, Lecturer, Department of Commercial

Law, Faculty of Law, Adekunle Ajasin University, Akungba Akoko, Ondo State, Nigeria. Email: akin.

oluwadayisi@aaua.edu.ng.

(2020) 7(1) Journal of Comparative Law in Africa 30

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A COMPARATIVE ANALYSIS OF CODES OF CORPORATE GOVERNANCE

AND THEIR IMPACT ON THE BOARDS OF PUBLIC COMPANIES IN

NIGERIA AND SOUTH AFRICA 31

l’entreprise. Cependant, il semble que depuis l’introduction de CGE au Nigéria

et en Afrique du Sud, les entreprises publiques n’ont pas encore obtenu le résultat

souhaité en raison de la non-conformité, des problèmes d’application et du manque

de mécanismes internes pour mettre en œuvre l’esprit et le contenu du CGE. Ce

travail de recherche est une analyse comparative des conseils d’administration et du

niveau de conformité des entreprises publiques au Nigeria et en Afrique du Sud.

La méthodologie de cette recherche adopte une combinaison de recherche juridique

doctrinale avec une analyse qualitative par le biais d’entretiens en face à face et

par e-mail. L’objectif de la recherche est de découvrir ce que les deux pays peuvent

apprendre l’un de l’autre. Les objectifs comprennent la découverte du niveau de

connaissance du CGE, de la responsabilisation des conseils d’administration, de

la responsabilité, ainsi que du niveau d’application et de conformité. Il identifie les

lacunes de la loi et de la pratique tout en proposant des solutions sur la meilleure

façon d’appliquer et d’appliquer les codes dans les deux pays sous étude.

Mots-clés: conseil d’administration; code; gouvernement d’entreprise;

public; entrepr ises; Nigéria; Afrique du Sud

Introduction

Codes of corporate governance (CCG)1 are the embodiment of rules,

regulations and guidelines that determine the control, management and

administration of companies in order to achieve the best result. A code

is the legal framework that forms the basis for decision-making and

corporate governance (CG) in any business or non-business organisation.

The fact that there are different amendments of and updates to CCG in

Nigeria and South Africa at different times points to the fact that poor

CG still occurs in some companies and needs to be addressed by such

amendments or updates. Poor or weak CG can weaken the efficiency of a

company with negative consequences for share value and the company’s

reputation.2

This article presents the reasons for conducting research on public

companies’ engagement with CCG in Nigeria and South Afr ica, the

aims and objectives of the research, the research questions that drive the

research goals, the research methodology adopted and the justification for

adopting it. The article reviews the available literature on the major aspects

of the research topic. The literature is not limited to works in Niger ia

and South Africa but also covers other countr ies where the principles

of CG are applicable. The findings made during the research are then

presented in two ways: the qualitative analysis of the research findings, and

1 See Secur ities and Exchange Commission Codes of Corporate Governance for Public Companies

(2011); IoDSA King IV Report on Corporate Governance for South Africa (2016).

2 Pearse Trust ‘The core of good corporate governance’ available at https://www.pearse-

trust.ie/blog/bid/108866/the-core-principles-of-good.corporate-governance [Accessed on 18

September 2018].

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32 JOURNAL OF COMPARATIVE LAW IN AFRICA VOL 7, NO 1, 2020

the contextual analysis of the doctrinal approach. Both analyses are done

by comparing the two jurisdictions, and highlighting the similarities and

differences in the legal principles and practice. These findings are further

discussed in the light of the prevailing legal regimes on CG as well as the

reports and opinions of experts. The article draws conclusions and makes

useful recommendations on how compliance with CCG can be improved

upon in both countries.

Literature review

Works on the core principles of corporate governance in Nigeria

Since the inception of the idea of CG, various theor ies have developed.

What perhaps remains is to adopt a standard model acceptable regionally

or internationally, since CG is an internationally accepted practice.3

But adopting a model for CG will necessarily depend on predictability,

validity and objectivity, because ‘the relevant question to ask about the

“assumptions” of a theory is not whether they are descriptively “realistic”

for they never are, but whether they are sufficiently good approximations

for the purpose in hand.’4 Bainbridge believes that the central problem

of CG is the control that the board has in making decisions that are in

the board’s interest.5 This is common to most public companies where

there are large numbers of shareholders, who do not understand company

management, compared to pr ivate companies where most shareholders

double as directors. A deeper consideration of the philosophy behind

CCG will further reveal that the problems of CG transcend the issue of

the board’s control and include share value, corporate value and benefits,

and the interests of the general public, the community and the state.

Corporate governance is defined by Ugoji and Isele as ‘the process by

which managers provide leadership and direction, create [an] enabling

climate and link [the] … collaborative efforts of [the] work group’.6 In an

earlier work, I defined cor porate governance as comprising three aspects:

(i) the internal governance of a company; (ii) the company’s responsiveness

to policies that favour shareholders; and (iii) acts that benefit society.7

Gourevitch and Shinn state that corporate governance structures and

3 Inter view with S.A. Osamolu Esq., head of corporate law practice, Nigerian Law School,

Abuja on 3 September 2018; Interview with Terry Booysen, CEO of the CGF Research Institute,

Cape Town, South Africa on 11 October 2018.

4 Fr iedman, M. ‘The methodology of positive economics’ in Essays in Positive Economics (1953)

23 at 27.

5 Bainbr idge, S.M. The New Corporate Governance in Theory and Practice (2008) 6.

6 Ugorji, E. & Isele, G. ‘Stress management and corporate governance in Niger ian organisations’

(2009) 27(3) European Journal of Scientific Research 437.

7 Oluwadayisi, A.O. Synopsis on Corporate Law Practice, Property Law Practice & Law in Practice

(2016) 156–164.

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