Corporate Governance: Empiricism in the Face of Half-Truths and Misinformation

Recently, I had the pleasure of reading Dr. Yemi Omodele’s insightful article on corporate governance, titled “Assessing the Revolving Door: Legality and Best Practices”. In this article, he expertly examines the practice of former regulators working with companies in sectors they have previously regulated. While delving into the underlying concepts and dissecting the issues, he also addresses the ongoing discussions surrounding the MTN Nigeria board, which is led by a former regulator. Indeed, I must say that this OpEd serves as a masterclass on the subject, providing invaluable insights and international best practices, along with clear and instructive case studies from leading organizations worldwide.

Without a doubt, corporate governance forms the foundation of every successful organization. It serves as a comprehensive toolkit that empowers both management and the board to navigate challenges effectively, ensuring robust decision-making processes and controls. This, in turn, guarantees a delicate balance of interests among all stakeholders, including shareholders, employees, customers, and the community. Corporate governance also comes to mind when you consider the processes through which a company’s objectives are set and pursued within the complex web of social, regulatory, and market environments. Moreover, it encompasses a wide array of practices and procedures aimed at meticulously steering a company towards the realization of its goals, while concurrently fostering unwavering confidence among stakeholders in the company’s integrity and reliability.

But what would be the case if individuals with prior government service experience transitioned into private roles? What value do they bring? Should there be a cause for concern? These are some questions that may come to mind.

Dr Omodele’s article notes that there are no legal barriers preventing individuals with regulatory experience from entering private practice in sectors they once regulated. This transition called the “revolving door,” is a common practice globally, including in well-regulated markets like the United States, where former government officials frequently move to private sector roles. These transitions allow companies to benefit from the officials’ deep understanding of regulatory frameworks and governance, thereby enhancing corporate effectiveness.

To address the worry of potential conflicts of interest in post-public employment there exists the “cooling-off period.” These are time-limited restrictions preventing former regulators from taking private sector jobs within the same sector. The idea is that, over time, the potential for a former official to influence decisions for a new employer diminishes significantly.

The regulations regarding post-employment restrictions and their duration vary across different countries. For instance, Canada enforces a one-year cooling-off period for public officials and a two-year cooling-off period for ministers. The cooling-off period for cabinet ministers has been extended from two to five years. In the Netherlands, a specific cooling-off period is applicable to officials in the defence sector. In the UK, members of the government are barred from engaging in lobbying activities for a period of two years after leaving public office.

Addressing the ongoing conversation about the composition of MTN Nigeria’s board of directors, which includes former government officials and raises questions about the propriety of their appointments, it is important to first note that all concerned individuals have met the “cooling-off period” requirements, with some having cooling-off periods as long as eight years.

As posited by Dr Yemi Omodele in his article, Dr. Omobola Johnson served as Nigeria’s Minister of Communication from 2011 to 2015. After a four-year cooling-off period, she joined the MTN board in 2019. Similarly, Dr. Ernest Ndukwe waited seven to eight years after leaving the Nigerian Communications Commission (NCC) before becoming the chairman of MTN’s board. This extended cooling-off period ensured that any potential influence they might have had would have diminished, making the idea that they could use their former position to benefit MTN highly unlikely.

Secondly, this transition is a widely accepted practice with numerous examples to back it up. In the USA, Linda B. Bammann, a former Federal Reserve Board Governor, served on JPMorgan Chase’s board from 2004 to 2013. William E. Kennard, who served as the chairman of the Federal Communications Commission (FCC) from 1997 to 2001, joined the board of directors of Sprint Corporation (now part of T-Mobile US) after his tenure.

Additionally, Mary L. Schapiro, who was the chairwoman of the U.S. Securities and Exchange Commission (SEC) from 2009 to 2012, subsequently joined the boards of General Electric Company and Morgan Stanley. In Nigeria, Flutterwave, a leading payments technology company, recently appointed Dipo Fatokun, a former CBN director, as Board Chairman, citing a commitment to maintaining the highest regulatory and operational standards. These examples illustrate how regulators, after their time in public service, often join the boards of companies within the sectors they once regulated.

It is perplexing that well-educated critics would entertain concerns and cling to falsehood about MTN Nigeria’s board composition without verifying if the requirements are met or recognizing the benefits of having seasoned professionals with regulatory experience. There are precedents, and drawing parallels with established practices in other developed economies shows that the involvement of former government officials enhances corporate governance rather than detracts from it. Their insights and experience are instrumental in navigating complex regulatory landscapes and ensuring compliance. It is crucial to focus on performance, corporate governance, adherence to regulatory rules, and the track record of the companies involved.

Dr. Ndukwe’s leadership of the MTN board has been highly beneficial, as evidenced by MTN winning the award for the most compliant listed company. This award is given to the listed company that demonstrates the highest level of compliance with the Rules of the Exchange (Issuers’ Rules) without incurring any penalties during the review period. Therefore, it is clear that MTN’s compliance is due to having a leader who understands and prioritizes the importance of adherence to these regulations.

All the former regulators on MTN Nigeria’s board provide strong guidance in compliance and fiscal responsibility. Their invaluable insights enhance the company’s governance practices. MTN Nigeria’s excellent tax record demonstrates the effectiveness of this expertise. In 2022 alone, the company contributed N326 billion in taxes to Nigeria, and to date, has paid nearly 4 trillion Naira in taxes and levies across all government levels.

The true focus should be on corporate governance, and MTN Nigeria’s record in this area speaks volumes. The company has consistently demonstrated excellence in governance, reflected in its remarkable achievements and substantial investments across various sectors of the economy. This has positively impacted millions of lives, driving meaningful change and fostering economic growth—clear dividends of corporate governance that should serve as a standard for other private companies in Nigeria.

The diversity of a board, blending public sector experience with private, is a strength. It fosters a rich mix of perspectives that drive innovative solutions and sound strategic decisions. This diversity should inspire confidence and set a standard of practice, free from misinformation and half-truths.

Finally, the concerns expressed about the MTN board, insinuating the likelihood of undue advantage, are an indictment of the regulators, as they express distrust in the regulators’ ability to ensure fairness in the sector. Any active regulator would not remain idle in the face of such insinuations within its industry, as they suggest that entities can act arbitrarily. The regulator should come out and clear the air regarding whether MTN Nigeria, given its current board composition, enjoys an unfair advantage. This would clear up any misconceptions!

Kehinde Padonu-Awobono is a commercial and governance law practitioner and Principal at Kehinde Padonu & Associates.