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Telecom Investors Desire a Predictable Policy and Regulatory Regime

Permit me to once again welcome you all to this consultative forum on the Corporate Governance Code for the telecoms industry.

When in 2014 we jointly instituted the Code of Corporate Governance for the industry, the objectives were clear and the expected outcomes well defined. The Code, which consists of 12 principles, addresses areas such as effective risk management and internal control, discipline, fairness, conflict of interest and disclosure requirements, chairman/CEO duality, Board size and composition, Board leadership and ethic, self-evaluation, corporate social responsibility etc.

For reasons of expediency, we deliberatively came short of making the Code mandatory. We treaded cautiously in order to ensure better preparations for the days ahead.

Telecoms business operation is like no other; it requires extensive capital investment and commensurate mental capacity to cope with the dynamism of the industry. Typically, investors are comfortable with a predictable policy and regulatory regime which allows their investments to thrive with less intervention.

Two years down the line, we are here to review the effectiveness of the Code, particularly under a regime of voluntary compliance, highlight existing challenges and chart a new course.

As part of our routine review process, we conducted an industry survey to ascertain the level of compliance with the Code. We selected for a sample analysis, a total of 265 valid licensee companies across 28 licence categories. Out of the 265 companies selected, questionnaires and other survey instruments were administered to only 106 companies that were successfully identified and engaged. Some could not be located either due to change of address, while others had no web presence or active phone numbers.

The outcome of the survey was quite revealing. For instance, some companies complied with the requirements for Board size and composition, while some Board had just three members, contrary to the provisions of the Code, which stipulates a seven-member Board. Without necessarily arguing for a large Board, the advantage of a Board made up of many good heads with varied experience cannot be over emphasised. In our view, this will ensure the presence of high calibre individuals from diverse background, who will put the company in good stead and ensure consistent profitability for the benefit of all stakeholders.

Similarly, most Boards were seen to be passive during the period under review. The Code did not envisage the presence of a passive Board, but an active Board that meets regularly to issue quality policy directives on how to achieve company objectives and targets.

We also had companies whose Board met only once in a year, making it difficult for the Board to discharge its primary oversight duties. Some other companies breached the Chairman/CEO duality safeguard provided by the Code by combining the Chief Executive Officer’s position with that of the Board Chairman.

In all of these instances, it goes without saying that many companies may have technically constituted a Board as required by law, but failed to fulfil the essence or spirit of the Code.

It must be clearly stated, that the Board occupies a strategic position in the affairs of the company and as the policy drivers of the company, it has the responsibility of ensuring compliance with the provisions of the Code.

As we prepare to move from the voluntary regime to the mandatory era, the Commission will discourage the perfunctory practice of ticking the box and filing reports to beat regulatory deadlines in this regard. We will expect strict compliance with the spirit of the Code. This, in our considered view, will move the industry forward and ensure its future.

Under the new regime, there will be consequences for breaches. The revised Code will undoubtedly provide sanctions for non-compliance. However, it must be quickly pointed out that, the emphasis is not on sanctions, but in entrenching an abiding culture of good corporate governance practices that will sustain the industry beyond the present generation.

In this regard, we shall be instituting a reward and incentive system as an integral part of the Code to encourage compliance with the provisions of the Code.

On this note, I wish all of us a fruitful deliberation.

 

Felix Adeoye, Commission Secretary at the Nigerian Communications Commission, gave this address at the Corporate Governance Forum hosted by the NCC to review the Corporate Governance Code for the Telecom Industry.

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