New rule restricts MDs from succeeding board chairmen
It may soon become illegal for the managing director and chief executive officer of a publicly quoted company to succeed the chairman of the board of directors, except after a period not less than three years of exiting the first position.
Also, under a proposed draft code, it may become unlawful for a person to hold concurrent appointments as chairman or executive director in more than one company, or for a managing director or an executive director to head committee in companies in which he is serving.
The above proposals are part of an exposure draft of a code for corporate governance packaged by the Financial Reporting Council (FRC) to boost confidence by investors and attract local and foreign investment.It was learnt that public hearing had been conducted on the draft in major cities across the country.
“The managing director/CEO should not go on to be the chairman of the same company. If in very exceptional circumstances, the board decides that a former MD/CEO or an ED should become chairman, a cool off period of three years should be adopted,” the draft rule reads.
At the public hearing in Abuja, Executive Secretary and Chief Executive Officer of FRC, Daniel Asapokhai stated: “So far, we have recorded huge success in the public hearings. On Wednesday June 27, 2018, we were in Owerri, and on Friday June 29, 2018, we took the public hearing to Port Harcourt. Lately, on Tuesday July 10, we were in Gombe for the sensitization in the North East geopolitical zone.
“It is our belief that this code will promote ease of doing business, attract local and foreign investments and enhance the integrity of the Nigerian capital market by entrenching a culture of disclosure, transparency and accountability. This code will raise public awareness of good corporate governance practices.”
Asapokhai revealed that the Nigerian Code of Corporate Governance has adopted the ‘Apply and Explain’ principle, which requires companies to apply the requirements of the code and to explain how they did it.
“The decision to adopt the ‘Apply and Explain’ approach was made after careful considerations of several factors including the Nigerian legal system, Nigerian culture and history, government policies, state of the economy, global economic and political climate, and levels of capital inflow of investment coming into the country.”According to the FRC chief executive officer, the Nigerian Code of Corporate Governance 2018 shall apply to all public companies, whether listed or not.