Integrity in business is an issue that is key to companies becoming global brands. This virtue is believed to be in short supply in Nigeria’s business landscape. Experts believe there must be a paradigm shift if companies seek to become international brands, reports Assist. Editor Chikodi Okereocha
The World Economic Forum (WEF) Global Competitiveness Report’ for 2014/2015 period ranked Nigeria 127 of 147 countries. The country did not fare well on the issue of diversion of public fund. The country only performed better than two countries: Venezuela and Argentina at 142nd position.
This was a major source of concern for the Director-General of the Securities and Exchange Commission (SEC), Ms. Arunma Oteh, when she spoke at he 2nd Christopher Kolade Lecture series on business integrity, and the theme of the lecture, ‘The Business Case for Business Integrity’.
Ms Oteh, a former employee of the African Development Bank (AfDB), examined the ethical foundations businesses in Nigeria need to put in place to ensure that the net effect on all their stakeholders, including shareholders, government, regulators, business partners, communities of interest and the general public, is a positive one.
In her presentation, the Amazon of SEC said Nigerian firms ranked low on ethical behaviours. For instance, Nigeria, she disclosed, ranked 132, of 144 countries, on a study on ethical behaviour of firms. While South Africa ranked 35, China ranked 55, leaving India and Brazil with 58 and 107.
Ms Oteh said “We must focus on bringing about a paradigm shift in our country when it comes to proper conduct. To become competitive and remain relevant in today’s global economy, our companies and public institutions must not only imbibe international best practices, but exceed them by setting the highest standards of conduct.”
She added that this has become imperative for many reasons. First, integrity, she pointed out, is an enabler of sustainable profitability. She observed that businesses that act with integrity are long term sustainable businesses while those that do not– for the purpose of short term gains–will eventually run out of business. “There are several studies showing companies that pay greater attention to integrity actually having better financial performance even in the short run than companies who do not. It should not be a choice to be ethical or be profitable. There is no question that businesses can and must be both,” she said, stressing that integrity is absolutely critical in business, and is as important as the quality of a company’s products and services in shaping its reputation.
Secondly, integrity is valued by all categories of stakeholders of a business.
She said: “Shareholders clearly want their business to be properly governed, investors place a premium on companies that set and maintain the highest standards, the best talents want to work for ethically sound companies that they can trust, the government, regulators and civil society also appreciate and reward integrity in business. Above all, the customer who businesses aim to please values how a company conducts itself. When a company successfully builds a reputation of integrity the benefits flow from across the spectrum of stakeholders. It can enjoy customer preference when other companies’ products or services are available at a similar cost and quality. It can charge a premium for its products and services; count on support from stakeholders in times of controversies; and reap value appreciation in the financial markets.”
The SEC boss said integrity helps build up ‘reputational capital’ which is an important component of an organisation’s value. According to her, there is a growing list of empirical evidence proving that integrity, embedded in sound governance, is a game-changer for businesses. “An analysis of 1,600 top companies in the MSCI World Index found that well-governed companies who pay attention to integrity tended to outperform poorly governed companies by an average of 30 basis points per month between 2008 and 2013. Another recent study published on the Harvard Corporate Governance blog found that high levels of integrity in an organisation are positively correlated with good outcomes, in terms of higher productivity, profitability, better industrial relations, and higher levels of attractiveness to prospective job applicants.”
Ms Oteh believes that given Nigeria’s robust economic growth, large population, and rich human and material resources, companies can carve a niche for themselves by building corporate reputations anchored on integrity and adherence to international best practices. She observed, for instance, that apart from Nigerian companies being regional leaders operating in Africa’s largest economy and the world’s most promising region, there has never been a better time to be in business within the Nigerian economy that has enjoyed over 13 years of robust economic growth above seven per cent per annum. Also, Nigeria, she said, is home to Africa’s largest population with over 170 million people.
She explained further: “We have very promising demographics where the median age is just 18 and over 70 per cent of the population is below the age of 30. Nigerians are exceptionally enterprising and more than half of the population now lives in the cities. We have a growing middle class currently estimated at 23 per cent of the population – 39 million people. With the rich natural and human endowments at our disposal, our country has been listed among the Next-11 and the MINT (Mexico, Indonesia, Nigeria and Turkey) nations.
“Nigeria is projected to have a nominal Gross Domestic Product (GDP) of $4 trillion by 2050, overtaking countries like Italy, Spain and Canada. Government reforms have engendered a macroeconomic stability, which is supportive of robust economic growth. Inflation has remained in single digits for over two years now, fiscal prudence is maintaining enviable debt-to-GDP and budget deficit levels, while buffers have been built to support a more stable exchange rate for the Naira.”
Despite these intimidating credentials that are capable of boosting Nigeria’s competitiveness provided businesses are built on sound integrity, Oteh expressed regrets that corruption and illicit financial flows remain two issues hindering the nation’s progress. “Corruption has been identified as the second most problematic factor to doing business in Nigeria ahead of factors including access to finance and terrorism. This year, the G-20 is focusing on combating illicit financial flows especially considering the fact that poor countries (Nigeria inclusive) are losing over $1 trillion every year to such illegal activities as money laundering, tax evasion, transfer pricing and embezzlement,” she said.
While lamenting that this is money desperately needed for the Millennium Development Goals (MDG), as it could prevent as much as 3.6 million deaths annually in the world’s poorest countries, she said Nigeria has lost more to illicit financial flows than any other African country between 2002 and 2011, even being listed in the top 10 globally. She disclosed that while Nigeria needs an estimated $50 billion investment to ensure stable electricity, the country lost over $140 billion to illicit financial flows within a period of nine years.
“A lot of it was lost through the illicit commercial activities of multinational companies. We now have a situation where these illicit outflows are not only depriving our country of desperately needed capital but are also being used to finance terrorism abroad and within our shores,” she disclosed, adding some pieces of intelligence from a security expert who recently trained her staff at SEC indicate that the dreaded Islamic sect Boko Haram received over $70 million between 2006 and 2011 through shady activities like money laundering, oil bunkering, kidnapping and dealing in drugs.
The intelligence also listed Boko Haram as the 7th richest terrorist organisation in the world. Oteh however, said efforts have been made to strengthen the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime in Nigeria. She added that to correct the reputational deficit, which Nigeria suffers as a result of lack of integrity in doing business, “We must make the cost of doing the wrong thing high.”
While participants at the forum expressed divergent views on how to advance business integrity, a common thread that ran through their presentations was that integrity in business is an idea whose time has come, and that it is non-negotiable. For instance, while the Company Secretary/Chief Compliance Officer of Oando Plc, Ms. Ayotola Jagun, during the panel discussions, said that Nigerian businesses that performed well should be rewarded and given incentives like preferred supplier status, Vice-Chancellor of Pan-Atlantic University, Prof Juan Elegido, said such approach only reinforces the love for incentives and not necessarily the love for integrity.
The Managing Director of Siemens Nigeria, Mr. Michael Lakota, said organisations must be able to reinvent themselves. He said Siemens corporation has adopted sound corporate governance practices. He said such practices have been recognised, as Siemens came first for the fourth year running on the Dow Jones Sustainability Index.
But can firms in Nigeria imbibe the culture of integrity in business and leverage the country’s abundant human resources and natural endowment to play a dominant in the global economic arena? Ms Oteh says “yes.”
Her recommendation: “Regulation and adequate enforcement are proven ways to make people to do the right thing. In addition, we need an overhaul of the justice system because an assurance of speedy justice goes a long way in instilling discipline. I also strongly believe we need a vibrant civil society that is willing to ask the tough questions and hold the feet of politicians and institutions to the fire. We equally need strong social and religious institutions to bring in more clarity on the sometimes vague issue of integrity.”
She also suggested that there is need to focus on the family and go back to the homes from where a person’s character is molded.
“My personal story validates the importance of an early foundation. If today I am considered as a principled and disciplined person because of my stance for what is right and proper no matter the costs, I attribute this reputation to the early foundation laid by my parents,” she said, adding that focusing on molding the character of young people is certainly a powerful investment for the future that will help Nigeria tackle present day challenges of social cohesion, insecurity and inclusive growth. It will be a game changer capable of reversing the reputational deficit our country suffers from.”
Organised by Convention on Business Integrity (CBi), a company limited by guarantee, the lecture was attended by industry leaders/operators, regulators, and the academia. Soji Apampa, Executive director of CBi, explained that it was named after Kolade because he exemplified business integrity as practiced throughout his distinguished career in the private and public sectors. He said the outcomes for this year will provide a springboard for the discourse for the third instalment next year.
