Presentation by Keith Richards
MD Promasidor Nigeria Ltd.
29 July 2009
Protocols
The gist of my presentation today is to demonstrate why it makes good commercial sense and why all companies have a responsibility to engender a strong sense of community while adding that the custodians of the community should equally work to build a co-operative and mutually sustainable relationship.
Let me start with what is so often just called “CSR” or good Corporate Social responsibility. CSR should form a fundamental and integral part of any organization’s Corporate Governance Strategy. In the UK this subject is defined in the Report of the Cadbury Committee on corporate Governance in which Sir Adrian Cadbury described corporate governance as “concerned with holding the balance between economic and social goals and between individual and communal goals….the aim is to align as nearly as possible the interests of individuals, corporations and society.”
The Organisation of Economic Co-Operation and Development or OECD also extols the virtues of good corporate governance as a “key element in improving economic efficiency and growth as well as enhancing investor confidence” making the link between the development of a country’s economic policy and the health of it’s private enterprise. In its report the OECD says that companies and governments should set rules and regulations “that reflects their own economic, social, legal and cultural circumstances”.
It is possible to argue that corporations, particularly multi-nationals have a greater responsibility to the wider ‘economic, social, legal and cultural circumstances’ of the stakeholders of a developing nation rather than to the equivalent stakeholders of their home ecomies where social facilities are more likely to exist. Put even more simply; shouldn’t foreign companies with profitable subsidiaries in Africa take their social and moral responsibilities even more seriously than they might at home? Indeed, should this just stop at foreign companies? I have always taken my personal responsibilities as a CEO in Nigeria to include the importance of being a good Corporate Citizen and building strong relationships with my host Communities. I just believe it makes good business sense. Fortunately, my shareholders in Promasidor are strong in the same belief.
One of the problems, of course, is that as the CEO of a corporation you are paid to enhance the interests of the owners of that corporation, not society or the community at large. This means there is a fundamental or at least a potential conflict between the interests of the two. There will always be tension in achieving the balance between investing the company’s resources in a ‘profit only’ mode against a wider context. Let’s make it clear. Making the numbers is still the name of the game but in the longer term the numbers will not be made without understanding and being sensitive to local stakeholders and communities.
It is increasingly the case that investors are attracted to companies with strong codes of conduct who act in ways consistent with good corporate practice. Indeed, according to recent research undertaken by the US management consultants, Mckinsey, over 80% of US investors stated they would pay a premium for stock in ‘well governed companies’. The same research showed that the average return on ‘most admired companies’ in the Fortune 500 was 125% compared to 80% for the ‘least admired’.
However, increasingly CSR has become an industry with consultants all helping to produce glossy brochures and fancy mission statements. CEO’s cut ribbons opening bore holes or new classrooms and then go home believing that their company is a model Corporate Citizen. But this is NOT what constitutes good Community centred behaviour. In fact we see this very clearly in the behaviour of many Nigerian based companies who spend money on a glitzy CSR message but turn a blind eye to what is be done in their own neighbourhood.
Just take the scramble for real estate in Lagos. It is easy to blame the banks as the most visible culprits but the owner/builders of hotels and shopping plazas, of fast food joints and glitzy head offices are equally culpable. Each of the executives involved in these projects will complain bitterly about the traffic while at the same time their companies develop buildings that block existing drainage, have insufficient parking and are far too close to the road. Almost every new bank branch has parking for about six cars when it needs parking for twenty. They hire badly trained security guards to wave sticks at the traffic and direct customers to back into impossible traffic or allow double parking that causes congestion. There is obviously no consideration of the suitability of the premises in terms of the impact on their environment and neighbours. The same goes for hotels, fast food joints and nightclubs whose establishments are a magnet for badly parked vehicles to block other resident’s access and create accidents, not to mention attracting area boys and touts.
The oil marketing companies too seem to be able to close their eyes as to the impact their business has on every day life. The whole issue of their tankers is obviously just too difficult a subject for them to handle so they stick their heads in the sand and pretend it has nothing to do with them. New service stations are built in positions that appear as if they were deliberately chosen to cause maximum hold up. As soon as there is any fuel scarcity the queue is certain to clog up the nearest roundabout. There is no organisation of the queues as a free for all of motorists and okada riders jostle for position. The worst culprits are the largest four wheel drives sent by big boys with an instruction to the driver to push in and drop money to the attendant.
Then there are the telecommunications companies. These are the biggest spenders of money on ‘spin’ to convince us they are model Corporate Citizens with their foundations and high profile sponsorships. However, their current craze for digging up the roads to bury cabling is another unrestricted contributor to smashing up the drainage system and ruining our roads. If you complain they will blame their contractors but is it not they that should be managing them? Many of our Expressways are bordered by huge ridges of mud & rubble. After the contractors lay the cable they half fill the ditches, leaving mounds of soil that can be clearly seen to restrict entrance to many of the businesses and which wash into the drains. Get off the main road and it is even worse. Around Isolo we can see examples of that phenomena. It is the responsibility of any company to manage its contractors properly. I presume the contractor imagines no senior executive from a telecoms company will ever drive up Bode Thomas St from Surelere into Mushin where hundreds of shops now have to cope with rubble and half filled ditches blocking their premises.
Good Corporate Citizens should look close at home and ensure that they conduct their core businesses in a community and environmentally responsible manner before they start paying consultants to print glossy statements. I would also say Kudos to Lagos State who are making some attempts to tackle these issues but I will say more on this subject later.
However, having made the point that good Corporate Community relations begins at home and that a glossy CSR brochure does not excuse poor behaviour in your own backyard I will turn my gaze towards host Communities, especially Local and State Governments. If, as I say above, Corporates have been causing problems with badly positioned buildings and poorly managed contractors, how are they let to get away with it? Revenue is the lifeblood of any government if they are to provide the services that should be available to their constituents. All responsible companies and individuals should pay their dues fully and on time but we all know that as none of us likes to pay taxes this does not happen without robust collection. I do not have a problem with this. However, at Federal, State and LGA level there are too many repeated and hidden taxes. Many of us in business in Lagos State have written to complain about the multiplicity of taxes and levies. Apart from LASSA, on which subject I have written to the Governor, we pay various fees to Isolo, LASEPA, NESREA, NAFDAC, SON, this task force, that task force and so on. There is a bill in the House of reps to levy 3.5% of pre Tax profits as a CSR charge, there is an unrealistic minimum wage bill being mooted and there is a potential levy of 2% for using generators. If Governments and Communities want responsible Corporates, in turn Corporates want responsible Government and Communities.
In particular, those of us that are socially responsible Corporates feel we are penalised when we see that others who resort to underhand payments to avoid their responsibilities seem to get away with things. The State and Local Governments, representing our host communities, need to consider very well their approach to enforcement. They should not look at focussing on easy targets but ensure an even and clearly neutral and unbiased implementation. Let the correct rule of law be applied rather than physical harassment. Please make sure your enforcement officers are managed and supervised so that they do not take inducements to turn a blind eye here and penalise the Corporate who will not offer bribes. A level playing field and robust and professional enforcement will encourage the responsible Corporate Citizen.
So, as I round up let me declare publically that while I may criticise Government at any level, as is my corporate and democratic right and duty let me also commend what is going on Lagos and Isolo. As a businessman I do have some issues as I have mentioned but I do see genuine progress in Lagos and I commend his Excellency for it. I also see in Mrs Oseghale a Chairperson who is committed to improving her Locality. We in Promasidor are dialoguing with the Local Government to see what more we can do as Corporate citizens to help develop Isolo. We also support the Osolo of Isolo as a benevolent and supportive traditional ruler. A combination of strong traditional and modern leadership will help development for all stakeholders in Isolo. In particular, congratulations to the organisers because this kind of event, symbolising progressive dialogue, will encourage the responsible Corporate citizen to partner with the local Community and, hopefully, bring more companies and employment onto our area. We in promasidor will continue to do all we can to support our local community and out Local Government in this area.
Thank you for the opportunity and I hope we have a successful and predictive Summit.
Keith Richards