The Securities and Exchange Commission (SEC) has rolled out new governance measures aimed at strengthening corporate oversight and ensuring a clear separation of roles within Nigerian public companies.
A significant aspect of these new regulations is the introduction of a three-year cooling-off period for Chief Executive Officers (CEOs) who wish to become Chairmen of the same company.
In a press release issued on Friday, the SEC stated that this directive, communicated through a circular to public companies and capital market operators, is intended to mitigate concerns regarding the concentration of power in a single individual.
By mandating a break between these two roles, the SEC aims to preserve the independence of the Chairman and ensure effective oversight of the CEO’s actions
In addition to the cooling-off period for CEOs, the SEC has also banned Independent Non-Executive Directors (INEDs) from transitioning to Executive Director positions within the same company or corporate group.
The Commission highlighted that such transitions compromise the fundamental principle of board independence, which is essential for providing impartial oversight of the company’s management.
This directive is designed to maintain the objectivity of INEDs and prevent scenarios where a director’s neutrality could be jeopardized by moving into an executive role. By eliminating this practice, the SEC aims to strengthen the role of independent directors in ensuring effective governance of public companies.
Alongside these changes, the SEC has established new tenure limits for CEOs and Executive Directors. CEOs are now limited to a maximum of 10 consecutive years in the same company or 12 years within the same corporate group. After this period, they must wait at least three years before being eligible for the Chairman position. Additionally, if a former CEO or Executive Director becomes Chairman, their tenure will be restricted to four years.
These new regulations are designed to prevent the long-term entrenchment of individuals in key positions, thereby fostering fresh perspectives and effective decision-making within boards. The SEC has emphasized that these directives are effective immediately and must be followed by public companies and capital market operators.
