Ethical Boardroom talks to Segun Agbaje, CEO of Guaranty Trust Bank (GTBank), on the company’s long-term commitment to strong corporate governance.
EB: Guaranty Trust Bank’s (GTBank) culture is defined by the ‘Orange Rules’ – what are they?
The Orange Rules are principles for progression, success, relationships and life. They guide our approach to banking and everything we do. Guaranty Trust Bank’s culture is centred on these eight rules, which have become synonymous with us over the years and continue to contribute to our success story. The eight rules are:
- Simplicity We are straightforward, direct and easy to deal with, making the complex uncomplicated
- Professionalism We are thorough and efficient, always inspiring confidence
- Service This is our major strength; we are constantly improving on our ability to delight our customers
- Friendliness We enjoy working together to fulfil customers’ needs, building mutually rewarding relationships
- Excellence We stand out from the crowd, always refreshing, always beyond the ordinary
- Trustworthiness We are reliable, what we say is what we do; trust us to always do what is right
- Social responsibility We care, we believe in building and sharing for the good of all
- Innovation We evoke inspiration and respect, our originality is second to none; we are bold, classy and always set the pace
EB: Long-term value creation and good corporate governance practices are inextricably linked. Is this is the case at GTBank?
Absolutely. There is a positive correlation between successful organisations and good corporate governance practices. The point of corporate governance is to enhance the economic value generation capabilities of an organisation.
One of the major reasons for our success is our commitment to good corporate governance practices, which we particularly had to improve on from 2007, in order to meet the listing requirement of the London Stock Exchange.
If you review our performance from 2007 to date, you will see an improvement in profitability following the establishment of better governance standards.
EB: In 2014, GTBank appointed KPMG to carry out annual board and director appraisals; has this evaluation process improved the Bank’s governance structure?
Guaranty Trust Bank was one of the first financial institutions in the country to commence the board appraisal more than seven years ago in line with its commitment to best in class corporate governance practices. We believe that a fundamental purpose of a great organisation is the creation of long-term sustainable value in a manner consistent with its principles and the Bank is committed to the highest standards of corporate governance, which is a vital facilitator in the creation of long-term sustainable value. “GTBank has very robust procedures in place for employees to report concerns, issues or potential violation of laws. Our overarching goal is to provide a productive and pleasant working environment driven by mutual respect”
“GTBank has very robust procedures in place for employees to report concerns, issues or potential violation of laws. Our overarching goal is to provide a productive and pleasant working environment driven by mutual respect”
The appointment of a consultant for the annual board appraisal of the Bank’s board of directors is a regulatory requirement by virtue of the Central Bank of Nigeria Code of Corporate governance for banks and discount houses. In appointing KPMG Professional Services in 2014 for this purpose, it was in recognition of the fact that there was a need for the progressive refreshing of the board appraisal and corporate governance process in view of the fact that the initial consultant had been with the Bank for about six years.
We considered KPMG to have internationally tested corporate governance methodology based on its global collective experience, therefore making it a suitable consultant for our corporate governance journey, which has always been based on a continuous improvement mind-set.
EB: In the past, Nigerian banks appointed directors through cronyism. How independent is GTBank’s director nomination process?
The Bank’s director nomination process is very independent. The board has a nominations committee, which is charged with the responsibility of leading the process for board appointments and identifying and nominating suitable candidates for the approval of the board. The balance and mix of appropriate skills and experience of directors is taken into consideration when considering a proposed appointment and the following core values of integrity, professionalism, career success, recognition and ability to add value to the board are considered critical in nominating a new director.
Shareholding in the bank is not considered a criterion in nominating a new director. The process continues to evolve and the Bank remains open to new ways of adding value to the process.
EB: What procedures does GTBank have in place on how employees can report concerns, issues or potential violation in laws?
GTBank has very robust procedures in place for employees to report concerns, issues or potential violation of laws. Our overarching goal is to provide a productive and pleasant working environment driven by mutual respect.
Apart from a well-established whistle blowing procedure that ensures anonymity – that includes two hotlines and a dedicated email address – the Bank has an open door policy to encourage staff to discuss issues at all levels with superior officers, including the managing director, without the fear of being repudiated. There is therefore a conducive environment for staff to freely express their views or concerns on any issue including a violation or potential violation of laws.
EB: GTBank has in place a best-in-class risk management structure that is overseen by the board risk management committee. Is having a coherent enterprise risk management strategy essential to the Bank’s growth?
This is important to us because we understand that the business of banking is about managing risk and the sustenance of any business depends largely on its ability to identify and mitigate business risk. We also understand that our risk exposure goes beyond credit and market risk. Our enterprise risk management strategy enables us to properly dimension risk from a holistic view point, taking into consideration all forms of risk, ranging from operational, market, credit risk, etc. This enables us to provide an integrated robust platform to effectively mitigate identifiable risk.
The board risk committee (BRC), which oversees all non-credit related risk in the bank, has fully complied with BASEL II standards by successfully implementing regulations in the bank. This has helped us to effectively manage our capital adequacy, which is presently at 35 per cent as against regulatory requirements of 30 per cent.
The issue of risk management in business development and sustenance cannot be overemphasised, hence the need to properly dimension all business undertakings of the bank by determining an acceptable tolerance level reflective of our risk acceptance criteria and in line with our strategic global objective.
EB: Stakeholder engagement is relatively new in Nigeria. What steps have GTBank taken in this sphere?
We have an impressive history of stakeholder engagement and have always appreciated the importance of stakeholder engagement in the business. The Bank has an investor relations unit, which deals directly with enquiries from shareholders and ensures that shareholders’ views are escalated to management and the board. In addition, quarterly, half-yearly and annual financial results are published in widely read national newspapers and on our website.
GTBank ensures that institutional investors, international holders of the Global Depositary Receipts and other stakeholders get frequent updates on the Bank’s progress via interactive conference calls, local and international investor presentations and meetings. These conference calls and investor meetings provide our investors with direct access to senior and executive management.
EB: Could you tell us why it’s important to have corporate social responsibility (CSR) at the heart of your operations?
At GTBank, we believe we can only grow and sustain the value of our business by what we give to our host communities. We also passionately believe that CSR embodies our ardent commitment and social pact with all our stakeholders. Our footprints in CSR are guided strategically by our decision to operate on the four major pillars of education, community development, arts and the environment, which we believe are essential building blocks for the development of communities and prerequisites for economic growth.
Through our education programmes, the Bank ensures that children don’t stop learning by creating conducive learning environments and teachers are better equipped to engage their students through effective teaching practices. Our community development initiatives create societal awareness and acceptance of developmental disabilities and stimulate community investment activities in child healthcare.
Art is integral to promoting cultural exchanges that break down barriers to building global relationships. The Bank has global cultural partnerships with art institutions, such as The Tate, to increase understanding and interaction among cultures around the world through the exploration of art in all its varied forms, including painting, film, poetry, play, drama, music, fashion and exhibitions. We ensure our art projects and investments provide tangible benefits for African art nationally and globally.
GTBank consciously takes steps to safeguard its environment by ensuring the sustainable use of its resources. We invest in renewable energy and implement energy efficient ways of doing business. The Bank is a signatory to the United Nations Environmental Programme Finance Initiative; a global partnership between the United Nations Environment Programme and the global financial sector.
EB: What compliance challenges has GTBank faced in this ever-evolving regulatory landscape?
Regulatory compliance has always been a moving target as new technology and trends in the business world continue to introduce new risks. As new rules are introduced and existing ones tightened, financial institutions are faced with a host of challenges in keeping abreast with these changes, as well as putting in place an effective and dynamic risk-based compliance framework that is responsive to the market and regulatory developments. Perhaps the biggest challenge banks now face is regulatory risk, which can be described as the risk to earnings, capital and reputation associated with a failure to comply with regulatory requirements or, simply put, the risk of non-compliance.
Over the years, our overarching aim has been to conduct ourselves in a manner required of an institution with high corporate governance standards. We strive to achieve this by adopting global best practices in all our business processes.
Our commitment to global best practices has become the fulcrum that enables us to ensure compliance with regulatory policies, even as the regulatory landscape continues to undergo changes in response to political and regulatory pressures and demands designed to restore economic and financial stability. In spite of the associated cost and the attendant operational risks involved, we very recently had to comply with a regulatory policy – The Foreign Account Tax Compliance Act (FATCA). According to the Act, all foreign financial institutions, such as Guaranty Trust Bank, are expected to identify all customers in their records who are either US citizens or US affiliated businesses to the United States government.
In complying with this policy, banks were faced with the challenge of identifying existing customers who are US persons, revising and reprinting new client on-boarding stationery to include questions pertaining to FATCA.
EB: What does it mean for GTBank to be recognised as a regional leader in corporate governance in Ethical Boardroom’s 2015 Awards?
This award means more to us than annual returns or profits. Our vision has always been to create an oasis and an African institution that can operate anywhere in the world and we have always known that the key to achieving this is getting the right corporate governance structure. It is an attestation of our long-standing commitment to doing things right, always.