A former Director-General, National Pension Commission (PenCom) Muhammed Ahmad, has advised Pension Fund Administrators (PFAs) on the need to effectively monitor their investments in blue chip companies listed on the Nigerian Stock Exchange (NSE).
The market’s equity investments value stood at N710 billion as at June, 2018.
Ahmad, who gave the advice at a forum in Lagos, canvassed the need for a structured process of ensuring that the pension industry could collectively protect its interest in some major companies in which it invests.
According to the investment expert, this could be achieved by securing adequate board representations and ensuring the board maintains excellent standards of corporate governance.
In addition, he stressed also the need for Pension Fund Custodians (PFC) to ensure the exercise of voting rights in a cohesive manner to enable the attainment of sustainable positive returns on investment.
Specifically, he pointed out that the efforts must be channelled towards establishing a more structured process of ensuring that the pension industry collectively protects its interest in some major companies in which it invests through securing adequate board representations and ensuring they maintain excellent standards of corporate governance.
He explained: “It is also worthy of consideration that Pension Fund Custodians ensure the exercise of voting rights in a cohesive manner to enable the attainment of sustainable positive returns on investment. The imperative of doing this is evident considering the value of N710 billion in equity investments of blue-chip companies quoted on the Nigerian Stock Exchange as at June, 2018.”
He noted that the pursuit of excellence in corporate governance by the pension industry underscored the imperative of seeking continuous improvement in all aspects of regulation and management.
The former PenCom boss urged pension operators to ensure that their boards comprise of adequate number of directors with diverse qualifications and experiences, adding that the inadequacy of directors often results in recycling of members on various Board Sub-Committees, thus, limiting the quality of deliberations.
He said further that the appointment of Independent Directors, had the potential of enriching the company’s policy decision making process, hence, pension fund operators should ensure their appointment as provided in the Code of Corporate Governance for Licensed Pension Fund Operators, stressing that this also contributes to the much-needed diversity of boards.
This is even as he pointed out that attaining a culture of excellent corporate governance entailed instituting a reliable process of board evaluation, which could be internal or external and that whatever option selected, it is important to highlight areas of deficiencies with a view to remedying same.
He advised that evaluation report should also be made available to the shareholders at the Annual General Meeting (AGM) as a feedback on the performance of the directors.
Also, the industry expert called for greater disclosure of both financial and non-financial item information to the shareholders, regulatory body and the fund’s members in order to engender greater confidence in the investment market.