Last week the nation woke up to any
unscripted opera. The General Overseer of the Redeemed Christian Church
of God (RCCG), Pastor EA Adeboye, suddenly announced that he was
stepping down as the General Overseer of the church in Nigeria on
account of a little known Nigerian law. The law issued by the Financial
Reporting Council (FRC) required that founders of not-for-profit
organisations, including churches, should not stay at the helm beyond 20
years. The story unhinged the Internet, as all manner of bloggers and
commentators drew blood.
Two things came out of the tragicomedy.
First, Nigerians don’t trust the Pentecostal churches, even as they
flock there daily for miracles. Second, Nigerian regulators are severely
incapacitated in understanding their craft. Nigerian administrative law
is thoroughly underdeveloped. We are far off from understanding how the
administrative state works.
The truth is that as much as we rightly
deplore some of the actions of Pentecostal churches, and many of their
activities ought to be regulated, this regulatory intervention is
wrongly conceived and implemented. The corporate governance code as it
relates to leadership succession in not-for-profit organisations is a
regulatory misstep, period. It shows how much we need to learn about the
administrative state. The code erred in addressing the wrong issue and
addressing it wrong way.
The Administrative State and the Social Complexity
Before we dig into the legalities of the
code, it is important to emphasise the need for competence and
restraint in managing the complexities of the modern state. As Nigeria
embraces a private sector economy and the social sector expands, it
launches itself deeper into the administrative state. The administrative
state describes a situation where the regulatory function of the state
has transformed and expanded into far reaching and complex social
sectors. Traditionally, governments were producers of goods and services
and managed a rudimentary engagement with the private and non-profit
sectors. But with the triumph of market economics and the post-New Deal
involvement of governments in social security, the state took up itself,
a much more expansive managerial responsibility, even to the extent of
regulating the working of private markets. That is the administrative
state.
One of the critical attributes of an
administrative state is the almost infinite capacity to solve problems,
different kinds of problem, even polycentric problems. The
administrative state deals with complexities. Problems of the modern
state are polycentric and multidimensional. Therefore, public
administrators need to develop capability to evaluate these
complexities, and intervene in manners that secure public good without
causing severe unintended negative consequences.
Therefore, the regulatory craft, which
is the alchemy of the administrative state, is such that is not based on
hubris or on outrage; it is based on intelligent assessment of problems
and solutions. In Nigeria, we are often driven by outrage to solutions
that are both illicit and conceptually muddled. We are impatient and
incompetent to properly conceive the problem we want to solve, so we
know what kind of intervention is required. When problems overwhelm the
capacity to solve them, we easily slide into truculence and populism.
But the rule of law helps to constrain
this tendency. The rule of law framework, controls the regulatory
interventions of the administrative state such that it does not
undermine the interests, values and benefits of the modern statnñe. The
rule of law critique of the administrative state, therefore, works to
ensure that in solving complex social problems, we don’t destroy the
simple beneficences of a modern state.
Nature and Ambit of Governance Code for Not-for-Profit Sectors in Nigeria
The Not-For-Profit Organisations:
Governance Code 2016 is a regulatory directive issued by the Financial
Reporting Council, pursuant to its powers under Sections 7 and 8 of the
Financial Reporting Council Act of 2011 and the directives of the
Minister of Trade and Investment, to the Steering Committee on the
National Code of Corporate Governance. The ministerial directive
recognised the importance of extending corporate governance to the
social sector including churches and mosques. Therefore, the Minister
asked the Steering Committee to develop an appropriate corporate code
for the not-for-profit sector.
The main objective of the code is good
governance in the Not-For-Profit sector, which it defines as “ a
transparent decision-making process in which the leadership of a
non-profit organisation, in an effective and accountable way, directs
resources and exercises power on the basis of shared values”. The code
is full of verbiage on the features of NFPOs and all the right sounding
concepts on good corporate governance. There is some degree of
conceptual confusion with the code as a regulatory tool. It brings
everything in sight within its regulatory purview. It makes no
distinction between different categories of non- profits in the larger
context of the social sector. The social sector houses different and
divergent organisations. Social enterprises are a form of
not-for-profit. But they are definitely different from churches, mosques
and other religious organisation.
The Code is a mishmash of the necessary
and the frivolous. For example, there is no need to require annual
general meetings for all NFPOs irrespective of the nature and mandate.
The provisions of the Company and Allied Matters Act (CAMA) suffice in
this respect. The Code in paragraph 6 in Pact C provides that all NFPOs
must hold annual general meetings at which the directors and trustees of
the NFPOs shall be appointed. The language of the code is not legal
enough. It sounds like a commentary on the social crises of the social
sector in Nigeria, and a sentimental approach to solve an ill-conceived
problem. From its language and provisions one can argue that the code is
not a proper subsidiary legislation and may not be accorded the usual
degree of compliance.
The Administrative Law Compliance of the Code
Let us presume that the code is a
subsidiary legislation made pursuant to the Financial Reporting Council
Act No.6 of 2011. A regulation issued by an agency of government passes
the first test of validity, if it is made clearly within the powers that
a legislature has denoted to that agency. This is so because of the
doctrine of separation of powers enshrined in Sections 4, 5 and 6 of the
Constitution. An executive agency’s lawmaking power through delegated
legislation, is only possible because it, the legislature, has
authorised it to make such rules. Therefore, where the exercise of such
delegated legislative authority is not strictly in the terms such powers
were granted, such rule making would be unlawful.
The code is an example of administrative
regulation. It sources its legality from the powers the National
Assembly grants the Financial Reporting Council to regulate the
financial transactions of organisations in Nigeria. But from reading of
Sections 7 and 8 of the Act, dealing with the mandate and function of
the Council, it would appear that some of the provisions of the code are
not valid exercise of agency rule making powers by the Council.
The mandate and the object of the
council, show clearly that the purpose of creating the Council, is to
institutionalise good financial governance in the various private and
public organisations. All of the functions that the Act permits it to do
relate to ensuring integrity in the financial systems of organisations
in Nigeria. But the focus of the code is more on governance system or
structure of not-for-profit organisations. When the executive or
agencies in the executive branch of government take actions to execute
the law through subsidiary legislation or other forms of legislative
interventions, they must ensure that they do not violate any part of the
constitution or enabling legislation, or impose duties that are not
within the ambit of the authorising law (A.G.Ogun & Ors. v A.G.
Federation (1982)1 NCLR 166); Attorney-General of Bendel v
Attorney-General of the Federation 7 ors. (1982) ANLR 85).
The power of regulatory agencies to
interprete their laws is fully acknowledged by the courts. The
regulatory agency has the power to interprete its law, as long as such
interpretation does not violate the clear provisions of the enabling
law. In the famous chevron Case (Chevron USA, Inc. v Natural Resources
Defence Council 467 U.S 837 (1984), while conceding that the “the power
of an administrative agency to administer a congressionally created
….program requires the formulation of policy and the making of rules to
fill any gap left impliedly or explicitly by the statutes” held that
where such policy or rule making or interpretation are manifestly
contrary to the express and unambiguous provisions of the enabling law,
the court will not offer to the agency the usual deference.
Another issue is that administrative
rule making ought to be focused on solving a legitimate problem that has
public interest impact. The code rambled so much about the mission and
vision of Not-for-Profit Organisations, and at times, talked about
strategies to cajole founders and leaders of churches to accept their
replacement. The question for administrative rule making is whether
intervention will address any manifest public interest. In this case,
what is the public interest in enforcing tenure for voluntary
associations? What legitimate public interest is served by stimulating
how non-profits elect their leadership? Focusing on these issues is an
illegitimate exercise of executive powers
Constitutional Validity of the Code
Every exercise of legislative power,
whether by a legislature or an administrative agency must comply with
the constitution to be valid. The primary test of validity is compliance
with the fundamental rights. These rights are guaranteed against the
state, because the idea of democratic governance is to secure for
citizens a zone of non-interference where the citizen disposes his
affairs, as he likes. The constitutional principle, established in many
cases by Nigerian courts and courts in other democracies, is that before
the state can interfere with these rights, it must establish an
overriding public interest. This is an interest that would be severely
undermined, but for such interference.
Section 40 of the Constitution
guarantees to every person in Nigeria the right to associate freely with
others in pursuit of lawful personal interests. In the language of the
constitution, “Every person shall be entitled to assemble freely and
associate with other persons, and in particular he may form or belong to
any political party, trade union or any other association for the
protection of his interests”. By the language of the constitution, apart
from political parties that require the recognition of the electoral
management body, there is no constitutional restriction to the right of
association.
As Calvin Massy puts it in his American
Constitutional Law: Powers and Liberties, “Whenever government action
significantly impinges upon a ‘fundamental right or interest’ that
action is presumptively void. The government action is only valid only
if it can prove that the infringement is necessary to accomplish an
overriding government interest”. This is the essence of all the
decisions of the Nigerian and US Supreme Court decisions, ranging from
Ransome Kuti v A-G Federation (1985) 2NWLR Pt. 6, page 211, to Director,
SSS v Agbakoba (1999) 3 NWLR pt. 596, page 314. Section 45 of the
Constitution captures this important constitutional law principle, by
requiring that before government can interfere with these rights, it
must show that the enjoyment of the guaranteed rights undermined
national defence, national security and public health.
Any regulatory intervention that would
encroach on the right of free association, must be justified on the
basis of an overriding public interest. This is the canon of
constitutional law in a written constitution, with a guarantee of
fundamental rights. It is the protection of substantive due process. The
guarantee of the right to freedom of association means that the
government is restrained from interfering with this right, except it
shows that there is a threat to security, defence or public health or
other. This restriction applies to both the exercise of legislative,
executive or judicial power. Neither the legislature, the executive or
judiciary can make rules or orders to abridge the exercise of these
rights without making out a clear case of overriding threat and danger
to public interests. This is the essence of the heroics of the Supreme
Court in many cases stating that any exercise of executive or
legislative action against these guaranteed rights, is unconstitutional.
Beyond Sentiments: Protecting Public Good
Responses on the code have been mostly
sentimental. People have pointed out the need to regulate the churches
because of alleged excesses. The argument is that many church founders
and leaders have constituted these churches into private estates, and
therefore the state needs to intervene to protect the hapless members of
the churches. Another variant of this argument is that the churches are
very rich, that they need to be regulated. The churches ought not to be
beyond the reach of the law, they argue.
The problem with this line of thought is
that it assumes that it is the responsibility of government to correct
every ill of life. Many things are wrong with life and those things are
not the business of government and not the subject of public regulation.
There is room for private regulation. The family and the society play a
role in regulating ills in the private domain. Governments do step in
through regulatory activities, to shape outcomes in the private domain
through clever use of incentives. Even at that, such use of incentives
must be indirect, and through manifestly public action.
So, the question that the FRC should ask
is what overriding public interest is being achieved by regulating the
tenure of leaders of private associations that do not depend on
government funding? What wrong does the public suffer when such founders
and leaders stay a lifetime as General Overseers in their churches? Do
such wrongs conceivably amount to a significant threat to public order,
security or public health such that government has to intervene?
Public sector leadership in a
constitutional democracy calls for sensitivity to the complexities and
intersections of the different domains. If a church is using animal or
human beings for sacrifice, then the government may intervene with a
rule that prohibits the use of animal or humans for sacrifice. There is a
manifest and overriding public interest to protect endangered species
or human beings. This is what happened in the case of the Church of the
Lukumi Babalu Aye, Inc. v City of Hialeah, 508 US 520 (1993) where the
city regulated religious sacrifice of a Yoruba sect in the US. The US
Supreme Court still struck it down because the rule targeted religion.
The rule was not properly targeted to address any specific public
interest. It rather burdened religion unfairly. As Justice Blackmum put
it, the rule was not ‘precisely tailored to a compelling governmental
interest”.
Conclusion
The Governance Code for Not-For-Profit
issued by the Financial Reporting Council may be well intentioned. But
it is a bad and dangerous regulation. It is bad because it violates the
principles of administrative rule making, by exceeding the powers
granted to the Council by the legislature, by being so imprecise and
vague that it could not be a valid exercise of delegated legislation.
The code is dangerous because it attempts to abridge the right to free
association, without any compelling government interests or threat to
national security, defence, public safety and public order. Therefore,
it is an unlawful regulatory intervention.