The accountability issues and corporate governance in small scale enterprise in nigeria.

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 In a converging world where the gospel of free markets and democracy is resonating more than ever before, and given the far- reaching impact of companies’ operations on the wealth of nations, its bio- diversity and the distribution of economic well- being; it is becoming increasingly clear that the governance of companies, corporations, family owned businesses, small and medium scale enterprises and business associations must matter, as does political governance [2],  Corporate Governance would entail, relationships between the shareholders and the company, the exercise of corporate powers by the two main organs of the company- the Board and the Annual General Meeting and executive management generally, directors’ responsibilities for accountability and rectitude, more so as detailed by different statutes and regulations. [3], Honest and fair trading by corporations, fair and equitable treatment of shareholders, minority shareholders alike, transparency and credible disclosure standards, products that take cognizance of the health of consumers [4], corporate citizenship [5] and the business judgment rule [6]

From the foregoing, it is clear that corporate governance is an all- encompassing concept that seeks to guarantee and institute credible bedrock governance standards, in the creation of wealth, in the light of the primacy that corporations have come to assume in privately- led economies. In support, Karugor Gatamah, Executive Director of Kenya’s Private Sector Corporate Governance Trust, sees good Corporate Governance as the lifeblood of a prosperous society. All these would make it compelling enough to examine the ‘CADBURY STORY’ 



In October 2006, the board of Cadbury Nigeria PLC notified the world, which would include its stockholders and regulatory bodies of the discovery of “Overstatements” in her accounts, which according to it, has spanned many years. It quickly appointed Price Water House Coopers, an independent accounting firm to investigate the “Overstatements”

Messrs Price Water House Coopers have since submitted their report to the board of Cadbury PLC, and the sum total was to confirm the charge of fraudulent accounting, categorized as “Overstatements”.  Also the company in its release stated that the overstatements could be between #13billion and #15billion.

Relatedly, Mr Bunmi Oni, The Managing Director, and Mr Ayo Akadiri, the Finance Director, were sacked from the company. Following suit, the Council of the Nigeria Stock Exchange barred the duo from running any publicly quoted company for life, whilst the apex regulatory body, The Securities and Exchange Commission, we understand is still undertaking a detailed investigation of the matter.

It is useful to point out that, these “Overstatements” were only discovered upon due- diligence undertaken at the prompting of Cadbury Schweppes PLC, the London confectionery giant, when it increased its stake in the company from 46% to 50%

As a result of the cooked accounts, CADBURY SCHWEPPES PLC, the parent company has had to make a provision of 15million Pounds sterling as impairment of the goodwill held in respect of CADBURY NIGERIA, as at 31st December 2006 [7].



a)      The Oversight Functions of the Board:

From communications so far, the impression one readily gets is that it is only Messrs BUNMI ONI and AYO AKADIRI that were culpable for the “Overstatements”. We would be making the point that the whole Board of CADBURY NIGERIA PLC should have serious explanation to make for this monumental fraud. To start with, MR BUNMI ONI and AYO AKADIRI were exercising delegated powers of the board of directors to which they are expected by law to be subjected to prudent oversight. The directors’ responsibilities for the accounts of the company remain sacrosanct, and this is not to be discharged perfunctorily and or under the “Conformance rule” [8 ]

After the corporate scandals in Enron, World Com and PARMALAT, directors must pay more than a passing interest to the accounts of their companies, if they are to escape sanctions under the law. In Nigeria, the combined provisions of S. 282,331 to 334 of the Companies and Allied Matters Act, 2004, imposes on the board, the obligation of due care and skill in the preparation of their financial statements.  One of the alibi of the directors of Enron was that they cannot be held responsible for what was concealed from them. This was flatly rejected by the United States Senate Sub- committee that investigated the role of the board of directors in Enron’s collapse. At the hearing the sub-committee identified more than a dozen red flags that should have caused the Enron board to ask hard questions, examine the company’s policies and steer it from collapse. Rather it relied on questionable management and auditor representations, without providing prudent oversight. In essence, the law would not expect the director to be passive in the governance of the company, particularly its financials that forms the bedrock upon which stakeholders deal with it. The director has a duty to undertake a prudent oversight that is not necessarily hinged on what the auditors and management feed him with. There is a fiduciary obligation to raise the bar of enquiriesAttorney Irwin Jay Robinson [9], argues with all passion and with an eye for the protection  of  corporations, shareholders, creditors, and the society at large from the type of ruin, witnessed in Enron, and Cadbury Nigeria, its Nigerian coin, that a director more than ever before needs to know all that he possibly can about the business and financial operations of the corporation on whose board he serves. He reckons that a director can no longer be a passive participant if he is not going to be accused of “Sleeping behind the wheels”. The relevance of a board will be in issue if the company’s accounts can be overstated by a whopping #15billion and yet it finds excuses for its negligence. Pertinently, we need to find out how Cadbury’s board discharged its oversight duty. The reliability of financial information, presented by companies would always remain unreliable if the board as a whole is not held accountable for falsifications by executive management, particularly, when exercise of diligence on the part of the board would have prevented or uncovered such falsifications.

b)      Internal Control and Organisational Integrity

As a governance student and Practitioner, the first feel one has of this nauseating development is that the internal control and organizational integrity of CADBURY NIGERIA, is weak. In this regard, it is poignant to note that CADBURY Schweppes is a leader in the good governance business. It has a code of ethics, which frowns against padding of accounts as we are dealing with.

Does this not tell us those statements of intent, without more does not guarantee the robust application of corporate governance?

Here, we will pose the question as to how probable it is, that it was only BUNMI ONI and AYO AKADIRI that knew of this panel beating of the accounts. What about the first line officers, whose duty it was to generate the reports and accounts that were reportedly doctored? What about the managers who oversee these line officers and would ideally have to interface with Mr. ONI and AYO AKADIRI at the executive management level? What kind of organizational structure was in place in Cadbury Nigeria that would allow two persons to mindlessly, as reported, affect the financial health of the company? It was to this kind of scenario that Prof. Rosa Beth Moss Kanter of the Harvard Business School noted, [10] ” if a few rotten apples can spoil the barrel, I think we have to look at the barrel not jut the apples. Organizational design, structure and culture do play a role and almost have in corporate scandals. Companies that get into trouble often do so because of minimal internal connections between many parts of the organization. With deficient information and knowledge, you cannot pull all the pieces together or understand when something might be going wrong”.

The internal control and organisational   integrity in this circumstance bears semblance to an opaque environment .An opaque environment can never produce credible financials. We submit that a conscientious and rigorous application of S.331 (4) of C.AM.A, by the directors of CADBURY may have prevented this crushing scandal. A purposive approach is to consider the guidelines and cautions for directors by Attorney ROBINSON, which should prove useful in instituting a credible governance structure that would guarantee reliable financial information for the investing public, regulators and shareholders.

c)      Audit committee and External Auditors

The audit committee was an innovation introduced by S. 359 of the C.A.M.A. to nip in the bud incidents of this nature. Can the Audit Committee of CADBURY be said to have exercised its oversight functions in a prudent manner?, given the magnitude of what was uncovered by the shadow director of CADBURY Schweppes? The same question would apply  for the reputable  firm of Akintola Williams Deloitte. It is clear so far, that the conformance culture has again permeated   the Audit Committee system, to make it a cosmetic surplus sage since its introduction into financial governance in Nigeria. It would appear that the three systems- the board, audit committee and the external auditors, upon which the veracity of financials rest, see no evil when executive management is on rampage and do fail to fly any red flag. We observe that the present process of appointment of audit committee members cannot guarantee their independence.S.359 (4) of C.A.M.A. should be amended to allow for only 1 representative of the board, and whose participation in the committee’s work would be limited to furnishing the committee the insight of the board on relevant queries without prejudice to the right of the committee to meet with the internal auditor in the absence of management and whose appointment should be made by the audit committee.

For the auditors of public companies their appointment should be made by the audit committee subject to possible review by the regulatory authorities, like the S.E. C. for example if members have sufficient grounds to object to their appointment. Also that the scope of the audit committee’s work be expanded in a manner that would bring the review of the company’s financial systems and information within its purview.

d) Shareholder Governance

      Nothing emphasizes, the weakness of shareholder governance than scandals of this magnitude. Because of the seemingly opaque nature of business and the paucity of information arising therefrom, he knows so little, and can do so little, more often than not, before the bubble bursts.

Painfully, he has to rely on rogue financials of this nature in making his investment decisions, which as in this case could cause him a combination of financial, physical and emotional distress. The only way by which effective shareholder governance can be instituted is to have adequate disclosure standards put in place by both statute and internal management and also to allow for significant input of stockholders in the nomination and appointment of directors and audit committee members.

e) Whistle Blowing

In the WORLDCOM scandal, it was someone that blew the whistle. What happened to the line officers and managers in CADBURY Nigeria who generated the initial figures that were later inflated by the executive management? What prevented them from blowing the whistle? The relevance of a Whistle blowers Act, which would guide responsible whistle blowing is needed. Whistle blowing we submit, is a core governance value in corporate governance.

f) Bank Governance

The banks have a role to play in the governance of the companies they lend to. A forensic scrutiny of the accounts of their debtors would assist the banks themselves as some of the statement of values made by companies upon which credits are granted may turn out to be false as in this instance. It would be interesting to know how the board of Cadbury Nigeria was able to finance its dividend payouts over the years when the company was not making as much as it claimed to be making.



The greatest challenge that we reckon with in this matter, is that apart from the communications from the board of Cadbury Nigeria, the details of the scandal which can offer a roadmap for Corporate Nigeria, and indeed the entire world, as did Enron, belong to the realm of conjecture. We submit that because of the principle of fair hearing, (NEMO JUDEX IN CAUSA SUA) the Board of Cadbury Nigeria, cannot investigate a matter in which it may be implicated. The issues are too serious to be dealt with by the corporate communications of an interested party particularly in view of insinuations that BUNMI ONI and AKADIRI were victims of a vicious power- play. ARE THE “corporate raiders” around us? A proper learning process to first of all ascertain the truth of the matter would entail a public hearing, advisably to be conducted by the National Assembly Committee on capital market, with the reports of investigation of both N.S.E. and S.E.C. as resource documents.

Eminent scholar and Director – General of the Financial Institutions Training Centre, Dr. Oladimeji Alo, in his contribution to the debate [11] believes that, this requirement to have more than what the board has offered thus far, goes to the root of transparency, which is a close cousin of accountability in the corporate governance lexicon.

We also observe that the Corporate Affairs Commission has the powers to investigate [12], the affairs of Cadbury if it applies to court as appropriate.

Perhaps more fundamental is the response of the regulatory authorities so far. The S.E.C. we are told is still conducting its investigation five months after!!!  It is important to note that erosion of investor confidence, which S.E.C.[13] is expected to guide against, is one mischief that can easily undermine the markets in a transitional economy like Nigeria. Without pre-empting the outcome of its investigation, S.E.C. should have moved instantly to the “scene of crime”, once the matter broke out, in order to emphasize and enforce the public interest content of the matters in issue. This is the crucible and challenge of corporation governance, which all proclaim and celebrate!

At this point it should also be manifest enough that we need very strong laws and institutional framework to protect investors against inaccurate and fraudulent falsification of accounts. In the United States of America, where the infrastructure of democracy is available, the financial scandal of Enron prompted the Congress to enact a very strong corporate governance law[14], which prescribes stiff penalties for crimes under the law [15].  The enforcement provisions of our Companies and Allied Matters Act and the Investments and Securities Act are just too weak and outdated.

In conclusion, corporates must be ready for more stringent checks and balances, which they also demand from governments; in order to safeguard the veracity of their financials. Shareholders, creditors, the pubic interests, and what is generally referred to as the civil economy must join the fray. There are a lot of governance schemes that can be put in place to guard against occurrence of this nature, and Corporate Nigeria must appreciate this, in order to prevent the occurrence of ” bubbles” in companies and inevitably safeguard the markets.


1 Oladele Solanke is the principal partner of the commercial law firm of O.O. SOLANKE & Co, and Consultants on Corporate Governance and Transparency

2 James Wolfensohn, President of the World Bank notes that in the future the governance of companies would assume as much importance as that of nations

3 For example see generally the Companies and Allied Matters Act 2004, and the regulations of the Nigeria Stock Exchange and Securities and Exchange Commission

4 The good manufacturing benchmark of NAFDAC for example, is geared towards this.

5 John D. Sullivan, executive Director of Centre for International Private Enterprise, in an interview in the Economic Reform feature service argues that corporate governance mean a different thing from corporate citizenship. We disagree, as the way the companies perceive their roles in the society, including environmentalism, consumer satisfaction, workplace issues, significantly affect corporate behaviour.

6 This is a rule in America that states that companies and directors in particular have a duty to exercise their best judgment, and if they fail to do this, as it happened in Enron, significant penalties are attached to it. We make the proposition that this can find accommodation under Nigeria Law

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