The Securities and Exchange Commission (SEC) has issued new directives barring Independent Directors of public companies from assuming Executive Director positions within the same company or group. The move aims to safeguard board independence and strengthen corporate governance.
In a circular released in Abuja, the SEC noted that the growing trend of converting Independent Non-Executive Directors (INEDs) into Executive Directors compromises board objectivity and undermines the principle of independent oversight.
“This practice erodes the neutrality of INEDs and compromises their ability to provide objective judgement,” the SEC stated. The directive aligns with the National Code of Corporate Governance (NCCG) and SEC Corporate Governance Guidelines (SCGG), both of which emphasise board independence.
Additionally, the SEC introduced a mandatory three-year cooling-off period before a Chief Executive Officer (CEO) or Executive Director of a public company can be appointed Chairman of the same company.
“Directors of Capital Market Operators considered significant public interest entities will have a tenure limit of 10 consecutive years within the same company and a total of 12 consecutive years within the same group structure,” the SEC added. Former CEOs or Executive Directors may only serve as Chairman after three years out of executive office, with a maximum chairmanship tenure of four years.
The directives take immediate effect and are binding on all public companies and Capital Market Operators (CMOs), who are expected to incorporate the rules into their board appointments and succession planning.
