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Regulation and Enforcement of Corporate Social Responsibility in Corporate Nigeria

Published online by Cambridge University Press:  24 January 2017

Nojeem Amodu
Nojeem Amodu*
Affiliation:
University of Lagos
*
namodu@unilag.edu.ng
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Abstract

It is usually assumed that there is sufficient legislation to regulate the Nigerian business community and combat corporate irresponsibility and that the challenge lies in lackadaisical enforcement by regulators. This article queries this assumption and analyses the corporate social responsibility (CSR) regulatory landscape in corporate Nigeria. It depicts a bleak picture of weak regulation, faulty legal transplantation of foreign principles, a lackadaisical attitude to enforcement, double operational standards from multinational enterprises, and incoherence and policy disparity between CSR regulatory provisions in primary legislation on the one hand and their subsidiary laws on the other. It argues that the challenge lies in faulty and disjointed legislation grossly undermined by fallacious legal transplantation. The article concludes by offering an agenda for the harmonization of the disjointed CSR framework in highlighted primary and subsidiary legislation, in line with best international standards.

Keywords

CorporateenforcementNigeriaregulationresponsibility
Type
Research Article
Information
Journal of African Law , Volume 61 , Issue 1 , February 2017 , pp. 105 - 130
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Copyright
Copyright © SOAS, University of London 2017 

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Footnotes

* Doctoral candidate, Department of Commercial and Industrial Law, Faculty of Law, University of Lagos, Lagos, Nigeria. The author would like to thank Prof Joseph EO Abugu and Dr Adewale A Olawoyin, SAN, both of the Faculty of Law, University of Lagos, Nigeria, for their insightful comments on the earlier draft of this article. All remaining errors are, of course, entirely the author's.

References

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22 J Zerk “Extraterritorial jurisdiction: Lessons for business and human rights sphere from six regulatory areas” (Corporate Social Responsibility Initiative working paper no 59, John F Kennedy School of Government, Harvard University, 2010) at 82.

23 This list is far from exhaustive because there are other methods. For instance, see Jennifer Zerk's categorization of direct extraterritorial jurisdictional regulations and domestic measures with extraterritorial implications: ibid.

24 Horrigan Corporate Social Responsibility, above at note 18 at 169.

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26 Horrigan Corporate Social Responsibility, above note 18 at 169.

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29 Villiers, C “Corporate law, corporate power and corporate social responsibility” in Boeger, N, Murray, R and Villiers, C (eds) Perspectives on Corporate Social Responsibility (2008, Edward Elgar) 101Google Scholar.

30 See the once proposed English Corporate Responsibility Act 2002. This was a bill “to make provision for certain companies to produce and publish reports on environmental, social and economic and financial matters; to require those companies to consult on certain proposed operations; to specify certain duties and liabilities of directors; to establish and provide for the functions of the Corporate Responsibility Board; to provide for remedies for aggrieved persons; and for related purposes”. It was presented by Linda Perham, supported by Barry Sheerman, Tony Colman, Frank Field, Martin O'Neill, Tony Banks, Sue Doughty, Simon Thomas, Glenda Jackson, Jackie Lawrence, Sir Teddy Taylor and John Horam and is available at: <http://www.publications.parliament.uk/pa/cm200203/cmbills/129/2003129.pdf> (last accessed 22 December 2016).

31 A Bill for an Act to provide for the Establishment of the Corporate Social Responsibility Commission, introduced by the late Senator Uche Chwukwumerije. It must be added that it is only convenient to cite the introduction of this bill here, as the content of the bill itself did not conform to the modern conception of CSR advocated in this paper. See note 1 above.

32 Cap C20 Laws of the Federation of Nigeria, 2004.

33 A few other principle-based provisions can also be found in the Nigerian Securities and Exchange Commission Code of Corporate Governance for Public Companies, 2011.

34 Lambooy Corporate Social Responsibility, above note 19 at 261.

35 Zerk “Extraterritorial jurisdiction”, above at note 22 at 66 and 67.

36 McBarnet “Corporate social responsibility”, above note 12 at 1 and 18.

37 EU “Promoting a European framework for corporate social responsibility” (green paper COM (2001) 366 final, 18 July 2001). See also European Commission communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: “A renewed EU strategy 2011–14 for corporate social responsibility” (COM (2011) 681 final, Brussels, 25 October 2011).

38 S MacLeod “Towards normative transformation: Reconceptualising business and human rights” (PhD thesis submitted to the University of Glasgow, United Kingdom, 2012) at 257 and following. See also Smerdon A Practical Guide, above note 1 at 436.

39 MacLeod, id at 257 and 258.

40 There is no gainsaying that, in a rush for profits at all or any cost, many rogue businesses (regardless of where they are domiciled in the world) are willing and ready to do business regardless of whether elements of unlawfulness and irregularities are involved. See also R Broomhill “Corporate social responsibility: Key issues and debates” (Don Dunstan Foundation research paper no 1, University of Adelaide, 2007) at 24, available at: <https:// www.dunstan.org.au/docs/Dunstan_Papers_No_1_2007.pdf> (last accessed 22 December 2016).

41 McInerney, T “Putting regulation before responsibility: Towards binding norms of corporate social responsibility” 40 Cornell International Law Journal (2007) 171 Google Scholar at 185.

42 de Schutter, OC “Corporate social responsibility European style” (2008) 14 European Law Journal 203 CrossRefGoogle Scholar.

43 Horrigan Corporate Social Responsibility, above at note 18 at 57; see also Hadden, T Company Law and Capitalism (2nd ed, 1977, Weidenfeld and Nicolson) at 496–97Google Scholar.

44 Zerk “Extraterritorial jurisdiction”, above at note 22 at 34–36.

45 These include the aborted Corporate Social Responsibility Bill 2007 and the primary company law legislation in Nigeria: CAMA; the Investment and Securities Act 2007; the Nigerian Extractive Industry Transparency Initiative Act 2007; and the proposed 2012 Petroleum Industry Bill.

46 See generally, the Financial Reporting Council of Nigeria National Code of Corporate Governance (October 2016); the Central Bank of Nigeria Code of Corporate Governance (May 2014); the Nigerian Securities and Exchange Commission Code of Corporate Governance for Public Companies, 2011; the Nigerian Communication Commission Code of Corporate Governance for the Telecommunications Industry, 2014; National Pension Commission Code of Corporate Governance for Licensed Pension Operators, June 2008; the National Insurance Commission Code of Corporate Governance for Insurance Companies 2009; and the Financial Reporting Council of Nigeria's proposed National Code of Corporate Governance.

47 Explanatory notes to the Corporate Social Responsibility Bill. See Corporate Social Responsibility Commission (Establishment, etc.) Bill, 2007, C1239–44, available at: <http://www.nassnig.org/document/download/1> (last accessed 28 November 2016) (Nigerian CSR Bill).

48 The private member's bill was sponsored by the late senator Uche Chukwumerde (Abia North).

49 Nigerian CSR Bill, sec 5.

50 Amao, O “Mandating corporate social responsibility: Emerging trends in Nigeria” (2008) 6/1 Journal of Commonwealth Law and Legal Education 75 CrossRefGoogle Scholar at 83–85.

51 See sec 9 of the proposed English Corporate Responsibility Bill 2002.

52 See for instance, English Companies Act, secs 417 and 423(5).

53 Council Directive 2003/51/EC, 18 June 2003 amending Directives 78/660/EEC, 83/635/EEC and 91/674/EEC on the annual and consolidated accounts of certain types of companies, banks and other financial institutions and insurance undertakings, OJ L178/16, 2003.

54 Lambooy Corporate Social Responsibility, above at note 19 at 235.

55 EU Directive 2014/95/EU on Disclosure of Non-Financial and Diversity Information by Certain Large Undertakings and Groups, available at: <http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014L0095> (last accessed 28 November 2016).

56 Id, res 19 for example.

57 See Indian Companies Act, sec 135, available at: <http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf> (last accessed 28 November 2016).

58 J Dine The Governance of Corporate Groups (2000, Cambridge University Press) at 131 and 149.

59 See the Introduction above.

60 English Companies Act, sec 172. The provisions of Sarbanes Oxley have also confirmed the shareholder-oriented corporate culture of corporate America; see J Armour, H Hansmann and R Kraakman “The essential elements of corporate law: What is corporate law?” (Harvard John M Olin discussion paper no 643, 7/2009) at 10–11, available at: <http://www.law.harvard.edu/programs/olin_center/papers/pdf/Kraakman_643.pdf> (last accessed 28 November 2016). See also Australian Corporations Act, 2001, sec 181. See generally Hutton v West Cork Railway Co (1883) 23 ChD 654; Percival v Wright (1902) 2 Ch 421; Dodge v Ford Motor Co (1919) 204 Mich 459, 170 NW 668; Re Lee, Behrens & Co Ltd (1932) Ch 46; Rogers v Hill 289 US 582 (1933); McQuillen v National Cash Register Co 27 F supp 639 (D Md 1939); Greenhalgh v Arderne Cinemas Ltd (1951) Ch 286 at 291; Gottlieb v Heyden Chemical Corp 90 A 2d 660 (Del 1952); Park v Daily News Ltd (1962) 3 WLR 566; Amalgamated Society of Woodworkers of South Africa v Die 1963 AmbagsaaWereniging (1967) 1 SA 586 (T); and Michelson v Duncan 407 A 2d 211 (Del 1979). In the Nigerian corporate legal system, a similar shareholder-oriented approach is enshrined in CAMA, secs 279, 314 and 315, all to the effect that the interests of shareholders should be held paramount by directors and state regulators with little or no regard for societal or community concerns regarding companies' activities; compare with sec 279(4).

61 E Okon “Corporate social responsibility by companies: The liberal perspective” (1997) Nigerian Current Law Review 193 at 201 and 202.

62 Smerdon A Practical Guide, above at note 1 at 470. See also M Wolf “‘Sleep-walking with the enemy: Corporate social responsibility distorts the market by deflecting business from its primary role of profit generation” (16 May 2001) Financial Times; G Owen “Time to promote trust, inside the company and out” (30 August 2002) Financial Times; and Lambooy Corporate Social Responsibility, above at note 19 at 17.

63 CAMA, secs 279, 314 and 315.

64 (1943) 2 Hare 461, 69 ER 199 Ch. See also generally Edwards v Halliwell (1950) 2 All ER 1064; Alex Oladele Elufioye and Others v Ibrahim Halilu and Others (1990) LPELR-20126 (CA); Abubakari v Smith (1973) 6 SC 24. See similar criticisms of similar provisions in English companies legislation in Pennington, RR Company Law (6th ed, 1990, Butterworths) at 584–85Google Scholar.

65 CAMA, secs 331 and 332 and sched 2.

66 This principle of enlightened shareholder value is similar to the Australian Business Approach to Corporate Responsibility model, which also enjoins corporate managers to consider stakeholder interests so long as they are in the best interest of shareholders as a whole; see generally Mohd-Sulaiman, AN (2011) 7/13 Journal of Applied Sciences Research 2411 Google Scholar at 2418.

67 Armour et al “The essential elements”, above at note 60 at 7.

68 English Companies Act, sec 172. The provisions of Sarbanes Oxley have also confirmed the shareholder-oriented corporate culture of corporate America; see Armour et al, id at 10–11. See also Australian Corporations Act, 2001, sec 181.

69 Shareholders may remove directors who perform unsatisfactorily: English Companies Act, sec 168.

70 This includes voting rights at general meetings. The UK Corporate Governance Code (published by the Financial Reporting Council, September 2014), particularly the preface, paras 5 and 7, demonstrates that the code is shareholder-oriented. See: <https:// www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf> (last accessed 28 November 2016).

71 English Companies Act, sec 581.

72 There are provisions for derivative claims and petitions for unfairly prejudicial conduct. See id, secs 260 and 994.

73 Armour et al “The essential elements”, above at note 60 at 7–16.

74 See also the Directive on Disclosure of Non-Financial and Diversity Information, above at note 55.

75 See the corporate responsibility provisions in ISA, secs 60–65, available at: <http://sec.gov.ng/investment-and-securities-act/> (last accessed 28 November 2016).

76 See the NEITI website: <http://neiti.org.ng/index.php?q=pages/about-neiti> (last accessed 28 November 2016).

77 Ibid.

78 See the EITI Standard, revised version 1 January 2015, available at: <https://eiti.org/document/standard> (last accessed 28 November 2016) (EITI Standard).

79 See NEITI Act at: <http://www.neiti.org.ng/sites/default/files/documents/uploads/neitiact.pdf> (last accessed 28 November 2016). The EITI Board designated Nigeria as EITI complaint on 1 March 2011. See also Ekhator, EO “Corporate social responsibility and Chinese oil multinationals in the oil and gas industry of Nigeria: An appraisal” (2014) Cadernos de Estudos Africanos 28 Google Scholar at 129.

80 Explanatory memo to the 2007 NEITI Act.

81 Id, sec 2.

82 See the NEITI website, above at note 76.

83 NEITI Act, sec 5.

84 Id, sec 6.

85 Ihugba, BU “Compulsory regulation of CSR: A case study of Nigeria” (2012) 5/2 Journal of Politics and Law 68 CrossRefGoogle Scholar at 74.

86 Id at 75.

87 Ibid.

88 Ekhator “Corporate social responsibility”, above at note 79 at 130.

89 Amao “Mandating corporate social responsibility”, above at note 50 at 99.

90 Dine, J “Jurisdictional arbitrage by multinational companies: A national law solution?” (2012) 3/1 Journal of Human Rights and the Environment 44 CrossRefGoogle Scholar at 60.

91 The Foreign Corrupt Practices Act of 1977, as amended, 15 USC, paras 78dd-1 and following, available at: <http://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act> (last accessed 28 November 2016).

92 Ibid. It was “enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the act prohibit the wilful use of the mail or any means of interstate commerce corruptly in furtherance of any offer, payment, promise to pay or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person”.

93 Above at note 55.

94 See EITI Standard, principle 12.

95 PRT is an independent civil society initiative that complements EITI and other efforts to achieve transparency in oil, gas and mining revenues. There are differences and similarities between PRT and EITI that make them distinct but complementary; see more at: <http://archive.transparency.org/policy_research/surveys_indices/promoting_revenue_transparency/in_english/eiti#sthash.swRkLNdn.dpuf> (last accessed 28 November 2016).

96 See UNGC website: <https:// www.unglobalcompact.org/about/governance> (last accessed 28 November 2016).

97 J Ruggie Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises: Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy Framework’ (21 March 2011, A/HRC/17/31), available at: <http://www.ohchr.org/documents/issues/business/A.HRC.17.31.pdf> (last accessed 28 November 2016).

98 For instance, see different versions available at: <http://legaloil.com/download%20file/NEW-PIB.pdf> and <http://www.eisourcebook.org/cms/pib_160712v1.pdf> (both last accessed 30 December 2016).

99 Ibid.

100 Nigerian National Petroleum Corporation “An overview of the Petroleum Industry Bill” (July 2009), available at: <http://www.nnpcgroup.com/portals/0/pdf/pibconsultativeforum.pdf> (last accessed 28 November 2016).

101 See PIB, secs 116–18. Interestingly, under the similar sec 116 of the Nigerian Minerals and Mining Act 2007, the introduction of the execution of a community development agreement with host communities has similar connotations; CSR regulation and enforcement are simply reduced to contributions to community development projects.

102 This is however subject to sub-sec 2, to the effect that, at the end of the fiscal year, each upstream petroleum company shall reconcile its 10% remittance with the tax return it has filed to the Nigerian authorities and settle any differences.

103 Emeseh, E, Ako, R, Okonmah, P and Ogechukwu, L “Corporations, CSR and self-regulation: What lessons from the global financial crisis?” (2010) II German Law Journal 230 Google Scholar at 243 and 244.

104 There are exceptions to the voluntary application of the codes. See principle 8 of the Central Bank of Nigeria Code of Corporate Governance for Banks and Discount Houses in Nigeria, 2014 (Central Bank Code) and the mandatory enforcement regime in the recently released Financial Reporting Council of Nigeria National Code of Corporate Governance, 2016. See the Financial Reporting Council of Nigeria Code, available at: <http://www.financialreportingcouncil.gov.ng/> (last accessed 28 November 2016).

105 See above at note 46.

106 See for instance the vague CSR regulatory provisions of principle 4.1.3 of the Central Bank Code, especially in comparison to principle 3 of the same code on the protection of shareholder rights.

107 See principle 1 of the SEC Code and of the NCC Code.

108 See section above on “Regulating and enforcing CSR in corporate Nigeria”.

109 The following cases constitute authorities that subsidiary regulations must align with the primary enabling legislation: Adene and Others v Dantubu (1994) 2 NWLR (pt 382) 509; NNPC v Famfa Oil Ltd (2012) 17 NWLR (pt 1328) 148; Olanrewaju v Oyeyemi and Others (2001) 2 NWLR (pt 697) 229; Din v AG Federation (1998) 4 NWLR (pt 87) 147 at 154; and Governor Oyo State v Folayan (1995) 8 NWLR (pt 413) 292 at 327. See also the judgment delivered by Salihu Modibbo Alfa Belgore, CJN (as he then was) on 22 September 2006 in Attorney General of Lagos State v Eko Hotels Limited and Oha Limited (SC147/2002), available at: <http://judgment.supremecourt.gov.ng/pdf.php?case_id=81> (last accessed 28 November 2016); and Noble Drilling Nigeria Limited v Nigerian Maritime Administration and Safety Agency (2013) LPELR-22029 (CA).

110 Financial Reporting Council of Nigeria, available at: <http://www.financialreportingcouncil.gov.ng/> (last accessed 23 December 2016).

111 See: <http://www.financialreportingcouncil.gov.ng/news-center/frc-releases-draft-national-code-of-corporate-governance/> (last accessed 22 December 2016).

112 The author has recently published an article showing the FRC to be constituting itself as an outsider regulator whose regulatory technique has been demonstrated to be not very effective in the business community. See generally Abugu, J and Amodu, N “Regulating corporate reporting in Nigeria: The uncharitable perception of an outsider (external) regulator” (2016) 2 The Commercial and Industrial Law Review 64 Google Scholar.

113 Dine “Jurisdictional arbitrage”, above at note 90 at 49; see also Hadden Company Law, above at note 43 at 486–87 and 506.

114 Ibid.

115 English Companies Act, sec 172.

116 Above at note 97.

117 Amodu, N “Theoretical underpinnings of corporate social responsibility: Victim of ideological clashes” (2014) 6/3 Journal of Corporate Governance 1160 at 1255–60Google Scholar.

118 This has been the restricted definition of the interest or success of the company, taken to be the interests or success of the shareholders. See generally Hutton v West Cork Railway Co; Percival v Wright; Dodge v Ford Motor Co; Re Lee, Behrens & Co Ltd; Rogers v Hill; McQuillen v National Cash Register Co; Greenhalgh v Arderne Cinemas Ltd; Gottlieb v Heyden Chemical Corp; Park v Daily News Ltd; Amalgamated Society of Woodworkers of South Africa v Die; Michelson v Duncan (all above at note 60); and Evans v Brunner, Mond & Co (1921) 1 Ch 359. This restricted and narrow definition of a company's success being the success of the shareholders as a whole enjoys statutory codification under sec 172 of the English Companies Act.

119 See Pennington, RR “Terminal compensation for employees of companies in liquidation” (1962) 25 Modern Law Review 715 Google Scholar at 719.

120 See: <https:// www.globalreporting.org/Pages/default.aspx> (last accessed 28 November 2016).

121 McBarnet “Corporate social responsibility”, above at note 12 at 48.

122 Many corporate responsibility and accountability frameworks assume, even if on a voluntary basis, that accountability and CSR principles generally should be applicable to all companies and businesses regardless of size. See generally, Ruggie Report of the Special Representative, above at note 97, general principles at 6 and principle 14.

123 Emeseh et al “Corporations, CSR”, above at note 103 at 243 and 244.

124 Ibid.