By Akin Olagbende, General Counsel & Company Secretary, Forte Oil Plc
Forte Oil Plc is a leading indigenous, integrated energy company in Nigeria involved in petroleum marketing, power generation and upstream oilfield services. With more than 450 retail distribution outlets for petroleum products, the company holds approximately eight per cent market share in the downstream oil and gas sector in Nigeria.
Forte Oil was incorporated in 1964 as British Petroleum (BP) Nigeria Limited with the marketing of BP petroleum products as the main focus. It became a public company in 1978 under the Nigerian Enterprises Promotion Decree of 1977 and by 1979, the Federal Government of Nigeria (FGN) had acquired 60 per cent share capital of the equity held originally by BP. This transformed the company into an entirely Nigerian concern with a subsequent change of name to African Petroleum (AP).
By 2000, the FGN had fully divested its shareholding in AP, thus making the company privately owned and in 2010, the company was acquired by a majority stakeholder, Zenon Oil Plc, which saw the change of name and corporate identity of the organisation to Forte Oil Plc.
With a mission to build a long-term successful company and to be the investment of choice through positive actions that boost investor confidence at all times, the company has consistently maintained corporate policies and standards designed to encourage good and transparent corporate governance and avoid potential conflicts of interest while promoting ethical business practice.
Therefore, it was clear to the major shareholders of the company that no total transformation of the company could be done without the foundation of a solid corporate governance framework built on global best practice. The management of Forte Oil initiated the development of this framework and appointed external advisers to assist the company secretariat in developing a governance framework.
Some of the key deliverables of the framework is the creation of charters to guide the reconstituted board committees on their composition, functions, structure and to further ensure effective board accountability to the company’s stakeholders. Another key deliverable of the governance framework is to ensure compliance with the guiding principles of the 2011 Securities and Exchange Commission’s Governance Code for all public companies in Nigeria.
The board established four committees: the corporate governance and remuneration committee, the risk management committee, the board finance and strategy committee and the statutory audit committee. Each committee comprises of non-executive directors with a written charter through which the board accomplishes a substantial amount of its work. Each committee meets on a quarterly basis to discuss matters pertaining to its terms of reference in addition to regular reports provided through the company secretariat on any significant issues to be considered by the committee.
A major function of the committees has been the development and monitoring of the various policies at Forte Oil. These include business conduct and ethics, fraud policy, related party transaction policy – just to mention a few – all of which now govern behaviour across the company.
“Forte Oil has a mission to build a long-term successful company and to be the investment of choice through positive actions that boost investor confidence at all times”
Outside of these board committees, there are several management committees, namely the executive management committee, management committee, risk committee, credit risk committee, crystalised assets committee, branding committee and inventory management tenders and contracts committee, which are charged to ensure that the activities of the company are at all times conducted with high standards of professionalism, accountability and integrity.
A risk management structure is in place to assist the board in fulfilling its oversight responsibilities in the identification, assessment, management of risk and adherence to internal risk management policies and procedures.
This process ensures that the company is aware of changes in the economic and business environment and compliance with regulations that impact on the company. Recently, consultancy firm KPMG was engaged to review our enterprise risk management framework to align with best practice standards and recommend required improvements in our risk processes. This is a process of continuous development to ensure the management of risk is kept at the forefront of the minds of the board and executive management.
The membership of the board of Forte Oil is a dynamic mix of executive and non-executive and independent directors, chosen for their integrity, professionalism, career success, recognition and the ability to add value to the organisation. In reviewing board composition, the board governance committee ensures a mix with representatives and genders from different industry sectors to make sure the interplay of each candidate’s expertise, skills, knowledge and experience builds a board that is effective and responsive to the needs of the company.
The governance structure is reviewed yearly by an independent consultancy firm that is tasked to ensure that the board performs its functions as provided for in the charters and all legislative, regulatory developments and trends in governance. The report of this evaluation is published in the yearly financial report of the company. Furthermore, the board of directors and members of the audit committee attend bespoke board trainings sessions yearly, with the aim of ensuring that they are trained on international best governance practices.
This fusion of governance policies and sustainable business practices enabled the company to make an impressive return to profitability in 2012 and achieve an increase in its share price of 1,840 per cent since the beginning of 2012 with recorded earnings growth of more than 394 per cent between 2012 and 2013. In light of this performance, the company was included in the Morgan Stanley Capital International (MSCI) Frontier Market Index in May 2014, a recognition of our visibility to international investors.
These financial metrics and international recognition have further emphasised the effect corporate governance has had on the company. Currently, we have moved from the transformational stage of our development and into the sustainable stage, consolidating all the gains made and pushing into new frontiers of our industry. The governance foundations in place provide the insurance for the company to navigate this new uncharted era of our development.
For us… bring on the future.
About the Author:
Akin Olagbende is General Counsel & Company Secretary, Forte Oil Plc