Beyond the hard façade of law and economics, good (corporate) governance ultimately comes down to the soft but “real” issues”.
“When beggars die, there are no comets seen” according to Shakespeare, but then added, “heavens themselves blaze forth the death of a prince”. Suffice that there are beggar businesses in town and there are the princes. By their clout they define what corporate governance is. For when a member of the Fortune 500 drops out of the business skyline definitely there must be some buzz in the media and a telling reverberation in the business community. Exactly what definescorporate governance from “company management.”
After the earth-shaking news about MTN’s $5.2billion sanction on tax remittance fraud hit Nigeria’s news stand last week, there was firsta shrill that felt like many hearts sinking and then a sigh, before the little whimpers began and the comments that definitely jolted the businesscircuit back to institutional memory… yes, to Enron!Does anyone still remember? And that underlines the mammoth baggage of disappointments that rang through the Nigerian socio-political and economic spheres. It is unprecedented, second only to the global impact once of Enron and the domino effects that followed in the 1990s.
Icons and crashes
Enron (U.S.) of the 1990s and MTN (Africa) in the 2000s were the big “mascot” companies of their times respectively. Both reigned and raked-in accolades for global best practices. Both were/are savvy, the defining culture for the term “corporate”, they were involved in CSR that showed great human/earth considerations. They provided ideal trajectory for corporate profiles both for HR and company, became practically the swear word in growth industry, they represented the icon and hope and raised the bar of aspiration for the next generation. So the thought of crash for them was not just undesirable it was unconscionable.
But Enron crashed into the exacting hands of corporate governance and now MTN is teetering from its foundation that is terribly undermined. Ironically one goodof their mutual fate is thatnow either canplay the role of the corporate goon to illustrate many of the winding issues under Ownership and Control for the remaining “Fortune 500” companies still in the market. Moreover the Nigerian polity is still totting on the steps of an emerging economy trying to grapple with the waves of micro-macro market interlocks, the MTN debacle will come as a timely beau to explain how corporate governance works.
Premium Times, the online news channel claimed to have followed the investigation for 11 years and wrote, “In a rare disclosure in 2013, MTN admitted it made unauthorized payments of N37.6 Billion to MTN Dubai between 2010 and 2013. The transfers were then “on-paid” to Mauritius, a shell company with zero number of staff and which physical presence in the capital Port Louis is nothing more than a post office letter box. The disclosure amounted to a confession given that MTN made the dodgy transfers without seeking approval from the National Office for Technology Acquisition and Promotion (NOTAP), the body mandated to oversight such transfers.”
Corporate scandals don’t just happen like accidents, they are “planned”. They begin like seeds in the mind of men, sometimes from the gestation of the company. But most often they are sheened in some assemblage of words that encode the agreements as men sit down to conceive the end of that matter from the beginning. That is why as the structure progresses in a system there is naturally a differential of growth which no one can perfectly predict, hence the need of a progressive interpretation, but while in transit the motives of men dilute the process and the end-result is affected. The issue of Motive is very crucial at every level in corporates set-up.And the motives of a venture-capitalist minded corporate can be so dangerously tilted in carrying out even great policies.
We are reminded about the case study on Enron, “In October 2001the company admitted there had been a number of accounting irregularities over the period 1997 to 2000. It became clear that a number of complex partnership structures had not been recognised in the balance sheet. In effect these structures had been used to keep debt off the balance sheet. Although the accounting treatment complied with the accounting rules in the US at the time they were clearly intended to mislead investors.”
Last week as the regulator’s hammer went up in Nigeria against MTN, there were more comparisons flooding back from those archives, “In 2000 Enron was an energy trading, natural gas and utilities ….top ten largest companies in the US.. a market capitalization of over $70 million; revenues of over $100 billion and for five consecutive years had been named “America’s Most Innovative Company” by Fortune Magazine. It had over 20,000 employees around the world”
Locally in Nigeria, the Premium Times went on: “MTN has consistently prided itself as the foremost telephone company that is getting Nigerians talking the most. Now….it has routinely been shipping billions of naira overseas to avoid paying its fair share of tax in Nigeria… MTN has been running circles around Nigerian revenue authorities using a complex but noxious tax avoidance scheme called Transfer Pricing.”
Competence or diligence is no respite, Enron was serviced “by one of the top five professional firms in the world”, Arthur Andersen, with revenues in excess of $9 billion and notably “a reputation for outstanding auditing integrity and competence”. They were imperiled along with Enron, losing reputation, clients and business. Princely corporations don’t ever fall alone they carry collateral damages that are most often transferred onto friendly companies and collaborators.
Before their scandal corporates do often start with the rule but soon step aside for a ruse that could yield a crude advantage. What MTN devised as Transfer Pricing was a creative genius, “For any economy, it is a slow death.” Just like it was for Enron which Chief Financial Officer, Andrew Fastow devised “a series of complex partnership structures known as special purpose vehicles (SPVs) through which the assets of Enron were sold out variously for cash, borrowed from a third party bank, but those partnerships were not reflected on the balance sheet.
In the end, “although the partnerships generally met the strict legal requirements they were outside the ‘spirit’ of the regulations and were clearly designed to mislead shareholders. As for MTN Premium Times informs, “The red flag was raised the moment it was revealed that MTN Nigeria has been making payments to two overseas companies – MTN Dubai and MTN International in Mauritius – both located in tax havens….. In 2013 for example, MTN set aside N11.398billion from MTN Nigeria to pay to MTN Dubai. A similar transfer of N11.789billion was made by MTN Ghana to the same MTN Dubai, making it a total of N23.187 billion that was shipped to the Dubai offshore account.
The reach and spread of corporations across nations which is an element of globalisation, and now terribly enhanced by ICT is probably more terrible in the hands of a communications trader. “In a rare disclosure in 2013, MTN admitted it made unauthorised payments of N37.6 billion to MTN Dubai between 2010 and 2013. The transfers were then “on-paid” to Mauritius, a shell company with zero number of staff and which physical presence in the capital Port Louis is nothing more than a post office letter box.”
Growth must come else the economy die.But there is a price to pay for the differential of growth. Strategy of traction is therefore very important to the works of a Regulator especially in a knowledge economy as the world is right now, but the undoing of a young emerging economy as Nigeria’s and most of Africa mentioned in the MTN network, is the start-up structure. Callous macro-economic players take undue advantage to introduce out-large instruments from that environment, often in collusion with unpatriotic local player to defraud the local economy and create more gaps in growth.
MTN made those dodgy transfers without seeking approval from the stakeholder involved which is the ”National Office for Technology Acquisition and Promotion (NOTAP), the body mandated to oversee such transfers.The disclosure amounted to a confession” unwittingly.
As it is often said, “Beyond the hard façade of law and economics good (corporate) governance ultimately comes down to the soft but “real” issues”. Evidently the two corporates, Enron and MTN ran/run a good structure on paper and the system was celebrated as world best practices, however their strategy or devices of achieving their strategic goal was tinctured to provide what was unseen outside of the system. Hence the so-called “core concepts” as is preached about Corporate Governance for now, stressing “the codes of corporate governance” often brought together by players themselves in tacit approval of public departments, will only serve as per what is concealed in the structure and system but not what is hidden in the heart of the managers. This returns the unraveling of motives beyond the commitment of crimes of corporate governance to much higher ways of ethics, the philosophical teaching of morality in the academia.
However pecuniary benefit may be the commonest motive for malfeasance in the marketplace for in the expanded horizon where transaction now takes place in the 21st Century there could be sundry other motives leading to capital not directly cash-money. Power, relationships and many other kinds of kicks have come in, and so are the varying means of meeting them some of which are now the subject of neurotic analytics. Meeting these avenues has expanded the ambit of information seeking, gathering and re-use, and ultimately how man plans to react to maximise their benefits.
All above is the latest preoccupation of curriculum developers in seeking to integrate vistas of knowledge in other to prepare a programme of education that will be fit for would-be professional/practitioner of corporate governance.
- Ogunsakin can be reached on: 08037250343 greenhavenfoundation@gmail.com
