Gender diversity in the boardroom is one of the global best practices in corporate governance, The G20/OECD Principles of Corporate Governance recommends that countries should consider measures such as setting diversity goals, disclosure requirements, boardroom allocations and private initiatives that will improve gender diversity on boards and in senior management.
The International Labor Organization also recognized the importance of having a diverse board room, the organization states that having diversity in the board rooms and in senior managerial positions makes for a more all-encompassing and gender balance board, which brings diverse perspectives to the board room and understand client preferences better and ensures a better range of due diligence.
The ILO also has a department specialized for promoting gender equality, inclusion and respect for diversity and the department is called the Gender, Equality, Diversity and Inclusion Branch (GEDI)
The board of directors play an important role in running the affairs of the company, this can be seen in Longe v First Bank of Nigeria Plc were the court held that the board of directors are responsible for directing and running the activities of the company.
Thus, due to the importance of the board of directors in the running of the affairs of company it is importance the board should be diverse in terms of skills, expertise, knowledge and also gender.
Hence, there is a need to examine Nigeria’s corporate governance approach to gender diversity to examine if it meets international best practices. This article will examine the Codes of Corporate Governance that are applicable to the banking industry and public companies.
The Nigerian code of corporate governance 2018
The Nigerian Code of Corporate Governance 2018 applies to all public companies whether listed or not, all private companies that are holding companies of public companies or other regulated entities, all privatized companies and all regulated private companies being private companies that file returns to any regulatory authority other than the Federal Inland Revenue Service (FIRS) and the Corporate Affairs Commission (CAC).
Hence, the code applies to all companies in Nigeria whether a private or public company. The code extensively provides for the need of gender diversity in the composition of boards of companies in Nigeria. Principle 2 of the Nigerian Code of Corporate Governance 2018 provides that for the effective discharge of the responsibilities of the board and its committees is assured by an appropriate balance of skills and diversity (including experience and gender) without compromising competence, independence and integrity.
The code further provides that the board should promote diversity in its membership across a variety of attributes relevant for promoting better decision-making and effective governance. However, though the Nigerian Code of Corporate Governance provides for gender diversity, there still exists a limitation on the enforceability of the code of corporate governance with the apply and explain approach in reporting compliance with the code.
Hence, companies are not mandated to follow the principles of the code strictly, if the company fails to adhere to any principle of the code, the company will give sufficient justification on the reason why it failed to comply with the code. Thus, the company has two options when it comes to the enforcement of any of the principles of the code, either the company ‘apply’ the principle of the code or it ‘explains’ why it failed to apply the principles of the code.
The corporate governance guidelines for commercial merchants, non-interest, payment services banks and financial holding companies 2023
The banking industry in Nigeria in terms of regulation and policy is known to embrace gender diversity in board rooms and senior managerial positions.
The guidelines for commercial merchants, non-interest, payment services banks and financial holding companies 2023 aims to improve on the earlier issued code of corporate governance for banks and discount houses 2014.
The Code of Corporate Governance for Banks and Discount Houses 2014 even though it adopts the comply or else approach to enforcement of the code, which means that bank and discount houses are mandated to ‘comply’ with the provisions of the code or ‘else’ they will face the consequences and penalties of non-compliance, the code failed to mention any noteworthy provision on gender diversity on the boards of banks and discount houses.
However, the new guidelines try to correct the omission of the Code of Corporate Governance for Banks and Discount Houses 2014 on gender diversity and inclusion. The guideline provides in Principle 1.8 that no bank shall consist of only one gender, Principle 1.9 further provides that to achieve gender diversity and promote a gender inclusive board, banks shall take a practical approach to women’s economic empowerment in line with Principle 4 of the Nigerian Sustainable Banking Principles.
The Nigerian Sustainable Banking Principles also requires that microfinance banks should have a minimum level of 30% female employees.
The guidelines adopt a comply or else approach to the enforcement of the code and states in Principle 27 of the Code that failure of any financial holding company (banks) to comply with any of the requirements under the guidelines and recommended practice in The Nigerian Code of Corporate Governance constitutes a regulatory breach and shall attract a penalty from the Central Bank of Nigeria (CBN).
Hence, the code not only mandates that financial holding companies (banks) must comply with the guidelines but also mandates that banks must also comply with the Nigerian Code of Corporate Governance.
Hence, provisions on gender diversity in both the corporate governance guidelines for commercial merchants, non-interest, payment services banks and financial holding companies 2023 and the Nigerian Code of Corporate Governance 2018 are both mandatory to be complied with by banks.
The CBN has also issued a policy that requires a minimum of 30% of female representation on boards and 40% at the top management level in the Banking Industry. Hence, the banking industry can be considered has receptive to gender diversity.
Code of corporate governance for public companies in Nigeria 2011
The code is applicable to all public companies whose securities are listed on a recognized securities exchange in Nigeria, all companies seeking to raise funds from the capital market through the issuance of securities and all other public companies.
In terms of its policy on gender diversity, the code provisions and enforceability could be considered poor. Even though the code stipulates in Principle 4.1 that the board of directors should be composed in such a way as to ensure diversity, however the code did not specifically mention gender diversity neither did it mention the percentile of females that must be on the board of directors of a public company.
The codes provision is also not mandatory in Principle 1.3(a) it adopts an ‘apply’ and ‘explain’ provision to enforcement that means the company may apply the provisions if possible and if it fails to apply the provisions the public company will ‘explain’ the reasons why it failed to apply the code.
Conclusion
The banking industry in terms of its policy in regards to gender diversity adopts a comprehensive policy that makes it mandatory for financial holding company to adopt policies and strategies to embrace female representation in the banking industry not only for senior managerial roles in the industry but also to increase female representation in the industry in total.
managerial roles in the industry but also to increase female representation in the industry in total. The same praise given to the banking industry may not be given to other public companies. Generally, public companies are not mandated by the code of corporate governance to embrace gender diversity in senior management roles or in female representation in the company in total. Hence, improvements need to be done in that sector.