NGX Group and Commitment to Corporate Governance

Capital market

After a successful process of demutualisation, the Nigerian Exchange Group held its 60th annual general meeting last week, where shareholders, management, and board of the new entity met to ratify the 2020 performance report and renew commitment to adhere to the principle of corporate governance, reports Festus Akanbi

In a corporate environment, where the issue of corporate governance has been a knotty issue for a considerable length of time, it is always inspiring when a regulator leads by example.

This was the sentiment at the Abuja venue of The Nigerian Exchange Group’s (NGX) 60th annual general meeting last week.

As a form of endorsement of the leadership direction of the board and management of the Exchange, shareholders voted overwhelmingly in support of the resolutions presented by the Group at the annual meeting.

The meeting, which was the first AGM of the Group as a demutualised, shareholder-owned, for-profit entity, further to previous shareholder and regulatory approvals, marked a historic moment.

Capital market watchers said the meeting, which provided the board of the NGX Group a great opportunity to give their stewardship, especially in the first year after the completion of its demutualisation processes, should be seen as a lesson in corporate governance. They explained that the statutory action also provided the opportunity for stakeholders including shareholders, management, and staff to assess the new structure put in place after the Exchange became a public quoted company.

One of the highlights of the meeting was the approval of the shareholders for the Group’s proposals to introduce equity-based incentives to employees’ remuneration, including an Employee Share Ownership Plan and a Long-Term Incentive Plan, aligning the interests of internal stakeholders with those of shareholders in long term value creation.

Equity-based incentive compensation plans are an increasingly popular component of overall compensation packages. Analysts explained that at its core, an equity-based incentive plan is used to attract, retain, and incentivise employees. It is a common practice for companies to reward employees, partners, directors, contractors, or others by granting them shares or in an equity plan, thus the massive support given by the shareholders for the incentive plan.

Basking in the overwhelming support of the company’s shareholders, the Group Chairman, NGX Group Plc, Otunba Abimbola Ogunbanjo, described the meeting as historic as the first of such meetings after going through the demutualisation processes.

“This meeting is also historic in that it marks the first time in the history of the NGX Group that its AGM will hold outside the hallowed confines of the Exchange House in Lagos and we have chosen the Federal Capital Territory – Abuja – in recognition of the integral role the Federal Government of Nigeria played in actualising the demutualisation of NSE and its support in establishing NGX Group. I am both thankful for the invaluable support of our stakeholders and proud of the resilience NGX Group continues to demonstrate after over six decades. Despite the global pandemic and other economic shocks, it is indeed noteworthy that we have already begun to actualise the benefits of demutualisation including the alignment of stakeholders’ interests in the value created by the new Group under a revised Corporate Governance framework.”

He explained that special case made for employees at the meeting was in line with global best practices, saying, “We received approval of new equity-based incentive schemes for employees which are in line with the authority granted to directors by then members of NSE at an Extraordinary General Meeting conducted in March 2020 and adhere to global best practices allowing us to attract and retain the best talent. Today, I am more confident than ever that the Group is well-positioned to deliver value to shareholders as we move into a new growth phase.”

The Scorecard

Meanwhile, the Group Managing Director/Chief Executive Officer, NGX Group Plc, Oscar N. Onyema, described the group’s performance as a reflection of the global economic realities.

He said, “Our 2020 results reflect the challenging macroeconomic and market conditions, as well as operational resilience of the Group with income and resulting surplus after tax valued at N6.02bn and N1.84bn respectively.

“In the context of COVID-19 pandemic, we maintained tight cost controls, which reduced expenses by 13 per cent despite investments in technology that allowed us to operate remotely with zero downtime. The Group ended the Year 2020 in a sound financial position with net asset growth of over 10 per cent to N31.28bn.”

Restating the commitment of the NGX Group to realise its vision, Onyema noted that the group and its wholly-owned subsidiaries – Nigerian Exchange Limited, NGX Regulation, and NGX Real Estate – have continued to advance the realisation of the group’s vision to be Africa’s leading integrated capital market infrastructure provider. “As the Group progresses its plans to list on Nigerian Exchange, we look forward to welcoming a broader group of investors to share in our journey,” he said.

Commitment to Highest Governance Standards

As part of its statement to the public, the NGX Group said it is committed to the highest governance standards, recognising that it operates critical capital markets infrastructure.

“As a recently demutualised group, our board of directors is responsible for the alignment of our strategy with the interests of our stakeholders. In addition, our operating subsidiaries have independent boards,” the statement said.

Demutalised for Better Performance

Earlier this year, the entity formally known as the Nigerian Stock Exchange was demutualised into the Nigerian Exchange Group. The Exchange has now completed its demutualisation process, having received all the requisite approvals from the Securities and Exchange Commission (SEC) and Corporate Affairs Commission (CAC).

A new non-operating holding company, the Nigerian Exchange Group Plc (‘NGX Group was therefore created with three operating subsidiaries, namely: Nigerian Exchange Limited (‘NGX’), the operating exchange; NGX Regulation Limited (‘NGX REGCO’), the independent securities regulator; and NGX Real Estate Limited (‘NGX RELCO’), the real estate company.

The group explained that the development marks a critical and historic milestone for the Exchange as it enables it to execute its strategic vision to be Africa’s premier exchange hub. The group promised that stakeholders, including its new valued shareholders, will benefit from its enhanced corporate governance, access to capital to fund strategic developments, and a more globally competitive Exchange.

Demutualisation is a process by which a private, member-owned company, such as a co-operative, or a mutual life insurance company, legally changes its structure, to become a public-traded company owned by shareholders.

In demutualisation, the members give up their rights and receive shares in the company in return, which the (now former) members may then sell. Demutualisation happens most often when a stock exchange owned by its members goes public. As an aside, a mutual company should not be confused with a mutual fund.

The Nigerian Exchange Group (NGX) is such an example of a demutualised company that announced the development in an update published on its website on Wednesday, March 10, 2021.

Meanwhile, members of the Association of Securities Dealing Houses of Nigeria (ASHON) have renewed confidence in the Exchange group.

ASHON also described the NGX Group’s 60th AGM as a symbol of current diversified ownership and sustained national outlook.

Commending the leadership of the Exchange, ASHON said despite the prevailing economic challenges the NGX Group has been able to maintain investors’ confidence.

The Chairman of the association, Chief Onyewenchukwu Ezeagu, explained that the association’s members had always partnered with the exchange as they played pivotal roles during all stages of the demutualisation process, promising continued support.

In July, NGX Group engaged investor relations consultants, Vaerdi, and financial advisers from Rand Merchant Bank to provide key insights into the setup of the new structure, current operations, and plans.

The analysts were said to have engaged the CEOs on issues around the activities of NGX by way of listings and the introduction of exchange-traded derivatives to the market.

In what was an engaging session, analysts further engaged the CEOs on issues around the activities of NGX by way of listings and the introduction of Exchange Traded Derivatives (ETDs) to the market. Of particular interest was also NGX RegCo and the stringent policies it has put in place to maintain independence in its regulation of NGX Group, NGX, and the capital market as a whole; as well as the new business lines that NGX RelCo will open up for the Group.

The Nigerian Exchange Group (NGX Group) officially commenced operations on 25 August 1961, as the Lagos Stock Exchange, after it was founded on 15 September 1960.

In commemorating the Diamond jubilee milestone, the Group Chairman, NGX Group Plc, Abimbola Ogunbanjo in a statement, paid glowing tribute to the original subscribers of the articles of association.

According to him: “In consonance with the innovative spirit of our founding fathers which has continued to drive our operations, demutualisation has allowed us to transition into a profit-driven, shareholder-held, and globally competitive organisation.

Onyema said the Exchange is already using its experience to deepen its competitiveness. “Building on six decades of growth and partnership, NGX Group of companies is now positioned to be a key player in strengthening our competitiveness on a larger scale. Our recently launched campaign “The Stock Africa Is Made Of” further encapsulates our commitment to fulfilling the dreams of our founding fathers not only in Nigeria but also in Africa, he said.”

Analysts said the Exchange has demonstrated its readiness to provide leadership in the capital market and to reward its shareholders with sterling performances.