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Performance is higher in companies with women board members — Oteh

By BusinessNews Staff on July 7, 2014

The Director-General, Securities and Exchange Commission, Ms. Arunma Oteh, in this interview with IFEANYI ONUBA speaks on issues affecting the capital market

You recently said SEC would work with Corporate Affairs Commission on some regulations as it concerns having more women directors of companies. What format will it take?

It is important to have more women on board. We have about 190 listed companies today, 73 of them have no woman on their boards, 10 per cent have 20 per cent women on their boards and I think there are only 15 female chief executives of the 190 listed companies.

What we have found recently is that there is now some link between the performance of companies and the number of women they have on their board. And that linkage is very positive that the more women we have on the board, the more likely their performance would rise.

There is a catalyst organisational study that companies which had more women on their board, at least 19 per cent of their board members being women, did better in terms of Return on Investment and in terms of other profitability indicators.

My suspicion is that the reason for that is that first if you have got women on the board, it opens up the market to the broader range so when you are crafting your policies, when you are reviewing how you are doing as a board, the questions will point you to something that may not have come out if you had just one gender, if you had a board that is solely men.

The other thing is that diversity inspires innovation. There is a linkage between diversity and innovation because people come from different directions. So we think that something should be done. The Companies and Allied Matters Act was last reviewed in 1990. There was a recent amendment which was very specific. We think that one of the things which should be looked into is certainly having a clause that encourages greater participation of women.

We are the custodian of the SEC code of corporate governance. So through that we can also influence that issue. But I think that the best way is that the companies too should look at that issue as something that is most beneficial to them because it opens up the space and market for them.

How can people effectively leverage the benefits of the capital market?

What I tell everyone is that investing is very critical. If you are going to invest, you must have some level of familiarity with what you are going to invest in. Even if you have an expert that is helping you, you must be able to ask the right questions. So first and foremost, my advice to people is to focus on building their knowledge because it is a skill that you will need through your life because saving and investing help you to raise your standard of living, to save for your retirement, to save for any health challenge you may face or to save for the education of your children.

So it is a skill that people should learn about. In fact, at the SEC; we have broadened our financial education to include all kinds of tools to help investors in this regard.

We are recommending mutual funds which allows one to invest a small amount, and at the same time, to have the opportunity of investing that amount in several companies or several types of products.

A company recently launched online trading. What is the regulatory background to this?

One of the first things that we started in 2010 was to see how we can leverage technology to do much more. That point of encouraging technology is something that the Nigerian Stock Exchange has also taken on board and implemented a new trading platform in September of 2013. And that trading platform basically allows you to trade using your smartphone to trade online. So it broadens access because previously we had to rely solely on the broker from the beginning to the end.

While you still need a broker to close the transaction, you can still you can leverage on your smartphones and computers to post what you think you like and I think it is a very important development for our markets.

The regulation is still the same and that is any trade that is done on any of the vehicles that we regulate whether the NSE, the Over the Counter platforms, NESD or FMDQ still comes within our regulatory oversight.

Few years ago people lost a lot of money in the market. How has SEC been able to stabilise the market?

I have been at this job for four years. First and foremost is the point I made; please don’t go into something you are not familiar with. The financial literacy agenda is big.

Second and more importantly is that as the apex regulator, we will not permit wrong doing in our markets; we will take the necessary steps to ensure that people who do the wrong things are brought to book. There were a lot of things that were done wrong in the past. Those who are in this market today know that you cannot do the wrong thing.

Third is going back to the financial literacy agenda. It is to make sure that people understand that investing particularly in the stock market is not something you do with money that you need to feed tomorrow.

The fourth is to make it easy for you to come in and exit the market, liquidity issues and our infrastructure. We have taken a holistic reform agenda in that respect and I hope that what we are seeing today is sustained. At the beginning of 2010, stock market recapitalisation was at N4.99tn. Today, it is give or take N12.5tn, and rising; in fact it hit a peak of N13tn.

Why are there issues regarding the new minimum capital requirement?

The SEC is very comprehensive when it does anything. Many of you may know that in 2007, I had not joined but I read some of what journalists had written. The SEC had asked for capital requirement to be raised and that was foiled.

When I joined in 2010, as a fallout of the global financial crisis, the SEC felt that we needed to raise the capital requirement primarily because there were accusations of people selling customers’ shares without authorisation; people holding on to the proceeds of sale and all kinds of accusations. So, my colleagues felt we needed an immediate response. But because I was new, I wanted to study the issues; I also wanted the circumstance to be much easier for all of the market participants, whether brokers, fund managers or in whatever sector.

So I took some time myself to study the issue. After doing that, I then set up a committee that was chaired by our then Commissioner for Operations and had representations from the Chartered Institute of Stock Brokers, the Owners of Association of Stock broking Houses of Nigeria, the NSE and others. And they came up with a proposal.

They completed their work at the end of 2012. We studied the work that they did, and we also had an international expert who was Deputy Chief Executive Officer of the Toronto Stock Exchange comment on the work. We reviewed it internally, and then made proposals on the basis of that work. Essentially, the issues are first we want our institutions in Nigeria to be as strong as institutions everywhere.

[Punch]

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