The Securities and Exchange Commission, (SEC), is to roll-out an updated corporate governance code to regulate the governance structures of listed firms in the country.
The revised code also seeks to improve market regulation as well as build the capacity of players.
The last time the Commission came out with a code was in 2010. The code back then was titled 'Corporate Governance, Guidelines on Best Practices.'
The current 24-page 2018 draft edition of the Securities and Exchange’s Code on Corporate Governance spells in clear terms a number of issues relating to the governance structures of firms.
The code which is divided into seven sections spells out roles and responsibilities as well as the composition of the board of directors, framework for the appointment of directors, remuneration, financial statements and controls, relations with shareholders and other areas that deal with penalties for breach of regulations.
Though a draft and subject to revision, it spells out in clear terms how far, for example, the different committees on a Board of Directors should be organized and headed.
Committees
For example, the revised code seeks the establishment of Committees of the Board: “The Board shall establish an audit committee, a risk committee, a remuneration committee and a nominating committee as prescribed in this Code.”
On the audit committee, the code states that “The audit committee which shall consist of at least three directors. Independent nonexecutive directors shall constitute a majority on the committee. At least one of the independent non-executive members shall be a Chartered Accountant with recent and relevant financial experience. The chairman of the committee shall be an independent non-executive director.”
Whistleblower
The code also provides for whistleblowing mechanisms for channelling concerns with management practices, the company or employees.
It states that “The Board shall appoint a person to whom disclosures may be made in good faith by employees and others who have concerns that any behaviour or activities of the company, its management or its employees or agents may be improper.”
According to the draft code, “The arrangements shall include: (a) the ability of the whistleblower to make reports anonymously if he or she so chooses; (b) a facility to investigate the concerns and to prepare a report to the Board or one of its committees; (c) protection for the whistleblower against retaliation by the company, management employees or agents; (d) penalties for reports made by whistleblowers for malicious purposes.”
Listed companies will have a period of up to one year to comply with this directive when it is published and failure to comply will attract some penalties.