The role of non-executive directors in Nigerian listed companies

The literature on corporate governance reveals an emphasis on board characteristics and firm performance. The role of the NED is examined under board roles. The concept NED effectiveness is considered as part of board effectiveness revealing a lack of clarity of what distinguishes NED roles from board roles. The literature suggests that a consideration of board roles and effectiveness ultimately covers the purpose of NEDs. The research examined the roles of NEDs in listed companies in Nigeria. The research method utilised in this study was the semi structured interview method. Forty directors and company secretaries were interviewed for the research. The findings of the research revolves around five constructs namely board effectiveness, convergence or divergence with corporate governance principles, NED effectiveness, NED roles and power. The NED requires power to perform their roles, as a result their effectiveness as individuals and a group is restricted to, the weight of influence they carry and exhibit in board room deliberations. The NED is thus hindered by challenges such as information asymmetry. The findings also reveal that, collaboration and team work is crucial for NED and board effectiveness. The different director functions may create hierarchy in the board room. However, a board climate which encourages organisational, rather than performance hierarchy may increase cohesiveness in the board room. The findings reveal that understanding and team work are crucial for successful completion of board tasks. This is because NED roles are not independent of board functions.
The findings reveal that Nigerian NEDs in listed companies apply corporate governance best practices. The Nigerian listed companies have separated the roles of the CEO from that of the chairman. This suggests that listed company boards are most likely independent. However, Nigerian NED’s are faced with the challenge of not having adequate company information, through which they can perform their roles. Interestingly, majority of the participants in this research seemed to agree that information asymmetry was the greatest challenge faced by Nigerian NEDs. However, the EXEC participants did not agree with the idea that, Nigerian NED’s do not receive adequate information to perform their roles. As a result, the research indicates that NED’s play more of a supervisory and supportive role in the board room. Furthermore, it reveals that Nigerian listed companies may comply with local and international best practices. However, the notion of board room independence is not enshrined in listed companies in Nigeria. The research findings also indicate that, the Nigerian institutional environment restricts the practice of good corporate governance. Furthermore, the control and monitoring role of Nigerian NEDs has been restated by the EXECs and the corporate environment. The findings indicate that Nigerian listed boards use private and public company meetings to create a front and influence shareholders and stakeholders’ perceptions of directors and the company. Furthermore Nigerian directors use impression management strategies to influence the different actors in the company. There are rare occasions where, stakeholders control the impression management process and this leads a break in the frame and director accountability. The overall key finding of this research is that the findings five constructs are intertwined and are necessary ingredients for NED and board effectiveness.