Olufemi Mosaku-johnson

The governance of institutions remains a complex subject despite the many advancements that have been made over the years. This complexity stems from the highly dynamic and constantly evolving nature of the corporate system.

With much at stake, board members must take seriously their responsibility to drive the corporate governance agenda forward. One important lesson we ought to learn is that weak governance causes the failure of institutions and obliterates the sustainability of such business. The costs of salvaging a failed institution far outweigh the costs incurred to prevent such a failure. Over the long term, the failure of institutions would also cause businesses and households that depend on those institutions for funding to be in a difficult position, erode public trust that would take many years to restore ie Nigeria Capital Market, and consequently result in more intrusive and prescriptive regulation of the industry.

As stewards of institutions, boards and senior management bear the responsibility of ensuring that regulatory policies translate into operational practices. Rules must be embedded into the day-to-day business and operations that suit an institution’s business environment. Good corporate governance will not emerge from mere compliance with regulatory checklists as each institution is different and unique. With careful introspection, each individual institution needs to continuously reflect on whether its governance arrangements, practices and business models are effective and still relevant. In doing so, each institution must continuously assess and take into consideration the nature, scope and scale of its business. In some instances, conventional and proven governance approaches might not work anymore and therefore new thinking and methodologies are required.

Real change cannot be dictated by regulation alone. This is neither sustainable nor possible. Instead, principles of good governance need to be deeply woven into the fabric – or DNA – of an organisation. Directors and senior management, are in the position to foster a positive organisational culture. The board and senior management should work in harmony to cultivate an environment which appropriately balances between performance and stability. For instance, the structuring of remuneration schemes should reward long-term performance and encourage sound risk-taking. There should always be a balance between innovation and excessive risk-taking. While an equilibrium is not easy to attain, it cannot be achieved accidentally. But an equilibrium can be realised through careful design, taking into consideration an institution’s internal structures and behavioural norms.

Needless to say, the accepted behaviour and values promoted and demonstrated by the senior leadership will influence the business culture and values throughout the organisation.

Talking about cultures and values, we should also be mindful about the need to educate and instil into the new generation of workers the importance of integrity, ethics, probity, accountability, honesty and professionalism.

Good governance ultimately depends on the existence of strong and competent boards and a pool of professional senior management. To remain effective, boards are often confronted with the challenge of achieving an optimal balance between the need for continuity and the need for fresh perspective.

Going back to Montesquieu,hewas one of the great political philosophers of the Enlightenment. Insatiably curious and mordantly funny, he constructed a naturalistic account of the various forms of government, and of the causes that made them what they were and that advanced or constrained their development. He used this account to explain how governments might be preserved from corruption. He saw despotism, in particular, as a standing danger for any government not already despotic, and argued that it could best be prevented by a system in which different bodies exercised legislative, executive, and judicial power, and in which all those bodies were bound by the rule of law. This indubitably is the root of modern day corporate governance.

Charles-Louis de Secondat, Baron de La Brède et de Montesquieu, was born on January 19th, 1689 at La Brède, near Bordeaux, to a noble and prosperous family. He was educated at the Oratorian Collège de Juilly, received a law degree from the University of Bordeaux in 1708, and went to Paris to continue his legal studies. On the death of his father in 1713 he returned to La Brède to manage the estates he inherited, and in 1715 he married Jeanne de Lartigue, a practicing Protestant, with whom he had a son and two daughters. In 1716 he inherited from his uncle the title Baron de La Brède et de Montesquieu and the office of Président à Mortier in the Parlement of Bordeaux, which was at the time chiefly a judicial and administrative body. For the next eleven years he presided over the Tournelle, the Parlement’s criminal division, in which capacity he heard legal proceedings, supervised prisons, and administered various punishments including torture. During this time he was also active in the Academy of Bordeaux, where he kept abreast of scientific developments, and gave papers on topics ranging from the causes of echoes to the motives that should lead us to pursue the sciences.

In 1721 Montesquieu published the Persian Letters, which was an instant success and made Montesquieu a literary celebrity. (He published the Persian Letters anonymously, but his authorship was an open secret.) He began to spend more time in Paris, where he frequented salons and acted on behalf of the Parlement and the Academy of Bordeaux. During this period he wrote several minor works: Dialogue de Sylla et d’Eucrate (1724), Réflexions sur la Monarchie Universelle (1724), and Le Temple de Gnide (1725). In 1725 he sold his life interest in his office and resigned from the Parlement. In 1728 he was elected to the Académie Française, despite some religious opposition, and shortly thereafter left France to travel abroad. After visiting Italy, Germany, Austria, and other countries, he went to England, where he lived for two years. He was greatly impressed with the English political system, and drew on his observations of it in his later work.

InThe Spirit of the LawsMontesquieu’s aim in The Spirit of the Laws is to explain human laws and social institutions. This might seem like an impossible project: unlike physical laws, which are, according to Montesquieu, instituted and sustained by God, positive laws and social institutions are created by fallible human beings who are “subject … to ignorance and error, [and] hurried away by a thousand impetuous passions” One might therefore expect our laws and institutions to be no more comprehensible than any other catalog of human follies, an expectation which the extraordinary diversity of laws adopted by different societies would seem to confirm.

According to him, In despotic states “a single person directs everything by his own will and caprice” Without laws to check him, and with no need to attend to anyone who does not agree with him, a despot can do whatever he likes, however ill-advised or reprehensible. His subjects are no better than slaves, and he can dispose of them as he sees fit. The principle of despotism is fear. This fear is easily maintained, since the situation of a despot’s subjects is genuinely terrifying. Education is unnecessary in a despotism; if it exists at all, it should be designed to debase the mind and break the spirit. Such ideas as honor and virtue should not occur to a despot’s subjects, since “persons capable of setting a value on themselves would be likely to create disturbances. Fear must therefore depress their spirits, and extinguish even the least sense of ambition” Their “portion here, like that of beasts, is instinct, compliance, and punishment”), and any higher aspirations should be brutally discouraged.

Montesquieu writes that “the principle of despotic government is subject to a continual corruption, because it is even in its nature corrupt” This is true in several senses. What is this if not conjecture of corporate governance? First, despotic governments undermine themselves. Because property is not secure in a despotic state, commerce will not flourish, and the state will be poor. The people must be kept in a state of fear by the threat of punishment; however, over time the punishments needed to keep them in line will tend to become more and more severe, until further threats lose their force.

If it is to provide its citizens with the greatest possible liberty, a government must have certain features. First, since “constant experience shows us that every man invested with power is apt to abuse it … it is necessary from the very nature of things that power should be a check to power” This is achieved through the separation of the executive, legislative, and judicial powers of government. If different persons or bodies exercise these powers, then each can check the others if they try to abuse their powers. But if one person or body holds several or all of these powers, then nothing prevents that person or body from acting tyrannically; and the people will have no confidence in their own security

For our country Nigeria to be great, we will need to ensure that no single individual is accorded such power that he/she will use to oppress others. We cannot expect any human being to check himself; we need to put machinery in place for institutionalization of every facet of operation in the government, commerce and industry. No one should be trusted with absolute power. He that fries the popcorn of the group should be whistling. Corruption of power is more than any form of corruption. Corruption of silence in the face of evil is the next.

OLUFEMI MOSAKU-JOHNSON, IFC CERTIFIED CORPORATE GOVERNANCE BOARD LEADERSHIP TRAINER. REGISTRAR/CEO, ASSOCIATION OF CORPORATE GOVERNANCE PROFESSIONALS OF NIGERIA
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www.acgpnigeria.org