21 Jun Hobbes In Corporate Governance

The Hobbesian Theory is largely about man helping himself. In the Leviathan, Thomas Hobbes postulates that to leave man in his natural state would be to exist in a state of anarchy in which everyone would do whatever he wanted, even where detrimental to his neighbor. The reason being that man cannot be trusted to do the right thing. He therefore postulates that to escape a state of chaos and war, man willingly gives up certain natural rights to a central authority (government) by way of a social contract – which in turn assures the citizenry of protection – in addition to other benefits.
Not everyone agrees with the entirety Hobbes’ proposition, but few question the need for some form of extraneous control. I recall a discussion a few months ago on whether man was fundamentally good or evil? All, but the most jaded, agreed that most men were fundamentally good. They however conceded that man was nevertheless also weak and vulnerable; and therefore could not always be trusted to act in line with what would generally be considered higher principles or mores.

This is what Corporate Governance aims to do. In between laws, ethics and practices, there is an expanse of territory not necessarily legislated on, which the modern corporation has attempted to develop a set of rules or norms for control and guidance. Not to do this, would be to subject our corporations and business interests to the whims and caprices of leaders, some of who are limited, others sometimes incompetent and many of which can be cast as megalomaniacs of sorts.

The story of Chainsaw Al reads like a Hollywood script. It is both scary and humorous in the lessons it provides on how so destructively short of self-awareness a lot of intelligent people are in allowing a huge ego ultimately do them great disservice. Al Dunlap took over as CEO of Sunbeam in 1996. His celebrity – which was significant at the time – was borne from his reputation as a corporate turnaround expert (hence the nickname Chainsaw) and he was not about to relinquish this claim to fame. However, after a litany of financial and ethical abuses – not to talk of verbal and mental haranguing which came with his style, Al Dunlap was sacked by his board three years later – his name forever etched in infamy. Not many people can match the bluster and bombast associated with Al Dunlap’s personality – but there are nevertheless serious issues that need to be considered.

I think of Tim Iseghoghi as I write this. Though not a personal acquaintance, I first saw him at a WIMBIZ seminar, years ago, when he spoke of what it took to succeed in the corporate world. Over the years, further references to him cast him in my mind as a corporate beacon in the Diaspora for Nigeria, as a whole. When he was appointed the Managing Director of Transcorp, I seriously toyed with the idea of picking up Transcorp’s shares, which I had studiously avoided earlier – but was eventually saved from so doing by the bearish slide that the Nigerian stock market took soon afterwards. As news of possible financial indiscretions by him hit the newsstands a few months ago, my response went from total disbelief to the numbing neutrality fueled by the pragmatic conviction that no man can be considered infallible. As he defends himself against the charges made, hopefully in the next few months, the questions that nevertheless should come to mind are, “How clear was the governance or institutional infrastructure in the organisation?”; and secondly, “How far can license be exercised, if there are no clear controls or boundaries?” It will be interesting to see how the court grapples with the latter dilemma, if the first question is answered in the negative.