CONTRIBUTED BY UDOKA JANET
INTRODUCTION
Corporate Social Responsibility (CSR) is premised on the idea that corporations should exercise a broader level of accountability (legal and social) towards stakeholder groups, other than shareholders.[1] This transcends mere corporate philanthropic gestures and encompasses economic, ethical, and legal expectations of corporations in terms of the impact of their activities on host communities and society at large.[2] A problem emanating from the regulatory framework of the CSR of oil companies in Nigeria is that the Companies and Allied Matters Act (CAMA) 2020, which is the primary companies’ legislation in Nigeria, lacks an enforceable duty mandating companies to discharge social responsibility in favour of their host communities. The implication of this is that the CAMA 2020 does not offer support for CSR and as such companies are not adequately encouraged to engage in social endeavours and community development. At most, only Oil Companies are bound to execute CSR initiatives under the Petroleum Industry Act 2021.
It is against this background that this article seeks to interrogate CSR under the Companies and Allied Matters Act and underscore its effectiveness and benefits to the host communities.
CSR and the Companies and Allied Matters Act 2020 (CAMA 2020)
The main corporate law statute in Nigeria is the Companies and Allied Matters Act (CAMA) 2020. The definition of CSR under CAMA may have had a significant impact on the type of CSR practices obtainable in the Nigeria corporate sector. While CSR may occasionally include elements of corporate philanthropy, charity, or making donations from business profits, it is clearly not all about altruism.[3] It may be essential to emphasize that the issue of corporate giving and charitable giving has subsequently been resolved under the CAMA, 2020.[4] A business is typically only allowed to engage in philanthropy and charity if doing so will ultimately benefit the company and advance the success of all of its shareholders.[5] Otherwise, corporate law prohibits corporate gifting since it is interpreted as an unauthorized use of funds that would otherwise be accessible as profits for shareholders.
Also, all corporations are said to have all the rights and powers of a natural person with full capacity, including the right to make donations, under section 43 of the CAMA 2020. So, it follows logically that any business that has been established will be permitted to participate in corporate gifting provided that its memorandum and articles of association do not contain any prohibitions to the contrary. Moreover, Section 43(2) of CAMA 2020 solely forbids corporate donations to political parties, associations, or for any other political reasons. Again, this can only imply that such corporate contributions will be intra vires, lawful, and legitimate if they are not directed toward any political objectives or purposes and if they are not otherwise banned by the company’s constitution (memorandum and articles of association).[6]
Although it will be legal for business managers to provide gifts from company cash, doing so at random and solely for charitable purposes will amount to an unnecessary depletion of capital that would have otherwise been accessible to shareholders as profits.[7]
Once more, CAMA 2020 does not seem to offer enough ideological backing that is favourable to good CSR efforts in Nigeria. Being a classic shareholder-first style of corporate governance, CAMA gives relatively little consideration to company responsibilities towards stakeholder groups like employees, creditors, local communities, and suppliers.[8] The combined implications of section 305(3) and (5) of the provisions of CAMA 2020 further support the claim that CSR has supported very little in Nigeria, particularly in terms of employee rights. Corporate decision-makers appear to be obligated under sub-section 4 to take into account, and balance employee-related issues and interests. While these employees may feel that their interests are being considered in the promotion of the company’s success, sub-section 9 makes it abundantly clear that they should not attempt to enforce this right because they will fail since only the company (that is, the shareholders as a whole) can sue if this right is violated or perceived to have been violated by corporate managers. This codifies section 341 of the CAMA 2020 and the well-known common law rule established in the case of Foss v. Harbottle.[9]
LACK OF CSR PROVISIONS IN CAMA 2020 AS A BARRIER TO COMMUNITY SUSTAINABILITY
The CAMA 2020, which is “the current primary corporate law legislation in Nigeria,” adopts the traditional primacy model of corporate governance which is based on a shareholder-centric model with very little corporate responsibility for stakeholder groups like local communities and suppliers.[10] So, only Nigerian-based businesses willingly engage in CSR programs.[11] However, the combined consequences of CAMA 2020 sections 305(3) and (5) reveal little support for CSR, particularly community participation, in Nigeria. According to Section 305 of CAMA 2020, corporate directors only owe responsibilities to the company; they are not legally obligated to do any other tasks or have the capacity to do so. What obtains in practice however is that directors have construed “interests of the firm” to refer exclusively to shareholder interests.[12] This idea of shareholder supremacy in Nigeria could hinder CSR efforts, especially since the community is not specifically listed as an interest that directors should take into account. Thus, directors may continue to prioritize the interests of shareholders with little or no concern for the community that is impacted by their operations. It may be possible to require corporate social responsibility for the community and ensure that the company law expressly recognizes the community’s interest, especially in vulnerable areas where the pollution of agriculture by oil exploration activities has resulted in a high percentage of poverty. Mandatory CSR establishes a level playing field for measuring and accessing compliance, ensuring that every company engages in sustainable business practices.[13] Flowing from the absence of clear-cut CSR provisions under CAMA 2020, Community Sustainability is threatened and this does not only relate to Companies that make up the oil and gas sector in Nigeria but extends to non-oil and gas sector companies.
CONCLUSION
This article aimed at underscoring CSR provisions under the Companies and Allied Matters Act 2020 and to uncover whether CSR practices are prescribed under the Act. Based on the relevant sections cited in the course of this article and the shareholder-centred approach adopted by CAMA 2020, it is submitted that what is obtainable under CAMA, 2020 does not entail altruistic CSR practice but interest-based CSR. CAMA 2020 does not permit a company to freely utilize its resources to undertake CSR. Against this background, it is submitted that CSR under CAMA 2020 is more of a myth than reality and consequently, it is recommended that CAMA 2020 should be amended to allow companies to undertake CSR activities without restraints. This would fall in line with practice from other jurisdictions like England.[14]
- Nojeem Amodu, ‘Regulation and Enforcement of Corporate Social Responsibility in Corporate Nigeria’ [2017] Journal of African Law 105. ↑
- Ibid. ↑
- C Okafọ and O Obioma. “Towards An Effective Legal Regime for Developing Nigeria through Philanthropy.” (2020) Chukwuemeka Odumegwu Ojukwu University Journal of Private and Public Law 2.1 ↑
- Section 43(2) Companies and Allied Matters Act 2020 ↑
- The English Companies Act, 2006, section 172. ↑
- E Okon, ‘Corporate Social Responsibility by Companies: The Liberal Perspective’ (1997) Nigerian Current Law Review 193 to 209 at 201 and 202. ↑
- Martin Wolf, ‘Sleep-walking with the Enemy: Corporate Social Responsibility distorts the Market by Deflecting Business from its Primary Role of Profit Generation’, Financial Times, (May 16th 2001) ↑
- CAMA 2020, sections 305, 357 and 358; all to the effect that the interests of shareholders should be held paramount by directors and state regulators with little or no regard for societal or community concerns from companies’ activities; section 305 (4) CAMA 2020. ↑
- (1943) 2 Hare 461, 69 E. R. 199 Ch ↑
- N Amodu, (n 1) 16 ↑
- Ibid ↑
- I Iyiola-Omisore, Assessing the Relationship between the Nigerian Companies Act and Corporate Social Responsibility in Nigeria (2020) Available at https://www.afronomicslaw.org/2020/03/30/assessing-the-relationship-between-the-nigerian-companies-act-and-corporate-social-responsibility-in-nigeria Accessed 13th July 2023 ↑
- O Amao, “Corporate Social Responsibility, Multinational Corporations and the Law in Nigeria: Controlling Multinationals in Host States” (2008) 52 J Afr Law 83 at 96. ↑
- See English Companies Act 2006 ↑
