Some market operators have said that the new guidelines issued by the Central Bank of Nigeria (CBN) on the tenure of Executive Management and Non-Executive Directors of banks and financial institutions were borne out of the abuse of power by the banks’ management and also aimed at strengthening the corporate governance of the institution.
The guidelines, contained in a circular dated February 24, specified the new tenures of Managing Directors (MDs), Deputy Managing Directors (DMDs), Executive Directors (EDs) and Non-Executive Directors (NEDs) of banks and financial institutions.
Abuse of power: Mr David Adonri, the Executive Vice Chairman of Hicap Securities Limited, said that the apex bank came up with the new guideline following the abuse of privileges on the part of the bank executives.
He noted that some ‘heavyweights’ in the banking industry saw their top executive positions as an inheritance and were abusing their offices. He said:
- “They personalised the bank assets that threatened the financial stability of those banks. Some of them carry the banks ‘money to buy personal assets in different parts of the world.
- “There were lots of sharp practices that whittle down the earnings of those banks. It is a welcome development, it will give upcoming professionals opportunities to the top jobs, not an inheritance.
- “After staying in such a position for ten years, it is better for a new person to come up with fresh ideas to drive the banks.”
The only disadvantage: Adonri noted that the only disadvantage is if a bank has an exceptionally gifted CEO that assumes the position at a young age and later gets restricted by the regulatory tenure even though he still has a lot to offer towards the development of the bank. Such, according to him, would be a great loss to the industry if such a CEO has to retire after 10 years even if he’s still young.
Strengthening corporate governance: The President of the New Dimension Shareholders Association, Mr Patrick Ajudua, said the CBN circular is quite in order as it has the power to review the tenure limit of bank executives in line with its regulatory oversight.
- “Therefore as shareholders of the banks, we welcome it since it is aimed at strengthening corporate governance. It is noteworthy that this measure will remove seat-tight bank executives who having serve a long period on the board, ought to have taken the exit door but will create a holding company structure where they will become either the GMD or chairman. Remember that if you stay too long in a place, there may be the tendency of compromise which is why corporate governance is experiencing a decline in the most financial sector,” he said.
Sustainability: The National Coordinator, Independent Shareholders Association of Nigeria (ISAN), Mr Moses Igbrude said the spirit of the law was to show that sustainability is very important adding that the new rule will help companies to put sustainability plans in place so that the companies can survive the founders.
- “Every management should at any point in time put a succession plan in place to bring about sustainability so that if one individual moves away, it will not affect the institution’s survival. I think that is the spirit behind the law.
- “I will advise the bank that going forward, they should have a strategic plan where they can have about two to three people as back-ups that can fit into the position to run the system correctly and efficiently in case of eventuality so that this kind of law will not catch them in the web.
- “However, the impact can also be negative. For instance, some banks that have no succession plan before the new law will be affected negatively. Going forward we should advise every bank to have a robust plan. We as shareholders will monitor the bank’s succession plans; we will constantly raise the matter at annual general meeting going forward to ensure that the bank’s management makes the issue of succession a point of duty,” he said.
The guidelines: The guidelines, among other conditions, stipulate that the tenure of Executive Directors (EDs), Deputy Managing Directors (DMDs) and Managing Directors (MDs) shall be in accordance with the terms of their engagement approved by the Board of Directors of the banks, subject to a maximum tenure of ten (10) years.
The guidelines further stated that where an Executive who is a DMD becomes the MD/CEO of a bank or any other DMB before the end of his/her maximum tenure, the cumulative tenure of such Executive shall not exceed twelve (12) years.
However, for an Executive (ED) who becomes a DMD of a bank or any other DMB, his/her cumulative tenure as ED and DMD shall not exceed 10 years according to the apex bank stated in the circular.
We love to chase shadows in Nigeria. What does length of tenure has to do with either the quality or substance of corporate governance? And how come there’s no such limit in nations with advanced financial systems and/or corporate governance standards? Not every thing should be reduced to turn-by-turn, chop-I-chop as we have with our political system. SMH
Hahaha this man is stupid telling shareholders how long there CEO should be in charge is stupid this man just want bribes from these banks