Banks are dithering on the new tenure policy for top executives by the apex bank following the allegation that it is a reproduction of some provisions of the 2016 National Code of Corporate Governance of the Financial Reporting Council of Nigeria (FRC) that was suspended by the federal government in January 2017.
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The policy, which some bankers said is not popular, they also argued, will fade off quietly as it came.
Former minister of industry, trade, and investment, Okechukwu Enelamah suspended the 2016 FRC Code in January 2017 claiming the suspension was to allow for a detailed review and extensive consultation with stakeholders as well as reconstitution of the board of the FRC. The FRC has since issued a new code.
However, CBN in February 2023 issued a new policy on the tenure of Bank MDs, DMDs, EDs, and non-Executive Directors, which it states would strengthen the governance practices in the banking industry. The new policy which specifies the tenure of top bank executives was contained in a circular referenced FPR/DIR/PUB/CIR/001/070 and signed by the Director, Financial Policy and Regulation Department, Chibuzo Efobi.
Efobi, in the circular states, that the tenure of Executive Directors (ED), Deputy Managing Directors (DMD), and Managing Directors (MDs) shall be by the terms of their engagement approved by the Board of Directors of banks, subject to a maximum tenure of ten (10) years.
It also states 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.
“Non-Executive Directors (NEDs), except Independent Non-Executive Directors (INED), shall serve for a maximum period of twelve (12) years in a bank, broken into three terms of four years each.
“EDs, DMDs, and MDs who exit from the Board of a bank either upon or before the expiration of his/her maximum tenure shall serve out a cooling-off period of 1 year before being eligible for appointment as a NED to the Board of Directors.
“NEDs who exit from the Board of a bank either upon or before the expiration of his/her maximum tenure of 12 years (3 terms of 4 years each), shall serve out a cooling-off period of 1 year before being eligible for appointment to the Board of Directors of any other DMB.
“The cumulative tenure limit of EDs/DMDs, MDs, and NEDs across the banking industry is 20 years.”
However, the new policy has generated debates in the sector, and findings by InsideBusinessNG show that the policy which Efobi’s circular says is effective from 24th February, is unpopular among bankers, and many may not comply with it.
Further findings about the policy in the industry show the apex bank is not empowered to issue the policy which bankers said, usurps the function of the Corporate Affairs Commission (CAC) under the Companies and Allied Matters Act (CAMA).
Cross section of banking industry operators especially the top echelon told InsideBusinessNG that no section of the CBN Act or the Banks and Other Financial Institution Act (BOFIA) gives the apex bank such power to dictate the tenure of top management staff.
“Check the circular announcing the policy, it did not cite any section of the CBN Act or the BOFIA which gives it legal teeth” noted an Executive Director in one of the Second- Tier banks.
While some MDs who volunteered comments noted that the 2016 National Code of Corporate Governance of the FRC from which the CBN allegedly copied remains suspended, they also argued that if the policy is properly implemented, the CBN Governor, Godwin Emefiele ought to be the first casualty owing to the length of time that he has spent at the top cadre of the banking industry.
A check, and comparison of the new CBN policy on tenure, and, that of the provisions of the suspended FRC code shows they are identical, thereby confirming some of the views expressed by the managing directors of banks that the Tenured Policy of the former, may have been copied from the latter.
According to the “Tenure and Re-Election of Directors” in section 14 of the Private Sector Code, a part of the suspended 2016 National Code of Corporate Governance of the FRC, section 14 (1) clearly shows that the provisions of the Companies and Allied Matters Act, Cap. C20, Laws of the Federation of Nigeria 2004, deals with the tenure of directors of companies in Nigeria while section 14 (2) says “Non-executive directors shall serve for a defined period on the board”, noting that it is necessary to reinforce the board by continually injecting new energy, fresh ideas, and perspectives and therefore, empowers the board on periodic appointment of new directors to replace existing non-executive directors.
Section 14(3) of the FRC Code which is identical to the new CBN Policy, says “The tenure of the Managing Director/Chief Executive Officer shall not exceed two terms of five years each”, while section 14(4) of the suspended FRC Codes provide that “The tenure of executive directors other than the Managing Director/Chief Executive Officer shall not exceed three terms of four years each”.
Section 14(6) of the Suspended FRC Code says “The tenure of non-executive directors shall not exceed three terms of four years each”, just as spelled out in the fourth requirement of the new CBN policy on the tenure of top bank executives.
The managing directors argued further that the seventh requirement of the apex bank’s new policy affects the current CBN Governor, Godwin Emefiele who they said, had spent over 20 years at the top of the banking industry including his years at the apex bank.
“If the CBN is to be fair with the new tenure policy, the Governor should have been the first to resign because counting from his years as an Executive Director at the Zenith Bank and up to this year, he has spent about 22 years cumulatively”, some managing directors argued.
Emefiele, the current CBN Governor became the Executive Director, Corporate Banking/ Treasury, and Strategic in 2001 at Zenith Bank and was later promoted to the position of Deputy Managing Director (DMD) of the bank in the same year. He became the managing director of the bank in August 2010, a position he occupied until he was appointed the CBN governor in June 2014.
Between 2001 and 2023, Emefiele they said, has been in top positions for 22 years, according to the bankers who said he has spent above the 20 years prescribed by the new CBN policy.
