| Yet Another Drumbeat |
 By HELEN ENI Following the announcement, January 20, of a new tenure policy on chief executives of banks, by the Central Bank of Nigeria, CBN, some banks have commenced moves to ensure effective compliance. The apex bank has set the maximum tenure of banks’ chief executives at 10 years. According to CBN, “Chief executive officers, CEOs, of banks shall henceforth serve a maximum of 10 years. All CEOs that would have served for 10 years by July 2010, shall cease to function in that capacity and shall hand over to their successors – where a bank is a product of a merger, acquisition or takeover or any other form of combination, the 10 years shall include the pre and post combination service years of a CEO provided the banks, which he served as a CEO was part of the new banks that emerged after the combination.” The appointment for the post of chief executive, however, would be for a period of five years, renewable for another term of five years. By this pronouncement, three prominent bank chiefs would be expected to relinquish their positions by the end of July. To be ousted are Jim Ovia, managing director, MD, of Zenith Bank, Tony Elumelu, MD, United Bank for Africa, UBA, and Akinsola Akinfenwa, MD, Skye Bank. They have served as chief executives of their respective banks for a period of 11 to 20 years. In a swift response to the directive, UBA, last week, announced the appointment of Phillips Oduoza to take over from Elumelu at the expiration of his term in July. Oduoza, who has about 23 years experience in the banking and financial services sector, was the bank’s deputy managing director, South. Zenith Bank followed by appointing Godwin Emefiele, its deputy managing director in charge of corporate banking, treasury, financial control and strategic planning to succeed Ovia. Emefiele has over 20 years experience. Skye Bank is said to have also commenced the process of appointing its new helmsman. If the appointment of these chief executives are eventually confirmed by the CBN, they would be expected to assume duties in August this year. They would serve for a period of five years and then seek re-appointment for another five years. Other banks that are not immediately affected by the new policy will still have to comply. Some banks have their own tenure system, which they will now have to set aside. Chief executives like Tayo Aderinokun of GTB and Aigboje Aig-Imoukhuede of Access Bank would be completing their tenure in 2013. Quite a number of them would be completing their first term later this year and may seek re-election by their board of directors. Their re-appointment would thus depend largely on their level of performance. To those who are familiar with the ‘tsunami’ approach of the CBN in implementing banking reforms, the new tenure policy did not come as a bombshell. But it has continued to generate reactions from virtually all stakeholders. Lamido Sanusi, governor, CBN, stoutly defended the tenure policy, which he said is aimed at improving corporate governance and avoiding the sit-tight syndrome, which often leads to abuses in the banking system. Indeed, corporate governance is of paramount interest to virtually every stakeholder in the banking industry, mainly because of the nature of banks as keepers of people’s money. Depositors, investors, government and the general public all share the vision of ensuring good corporate governance in banks. So to some analysts, putting a cap on bank executives’ tenure would help enhance good corporate governance. Tosin Shaba, a legal practitioner, based in Lagos contends that having unlimited tenure could breed corruption and lead to infractions of corporate governance practices. Expressing his support for the policy, which he says is long overdue, Shaba notes that some chief executives of banks are more powerful than their boards of directors and could take wrong decisions unchallenged. Given the sensitive nature of banking institutions as custodians of public funds, he argues that the apex bank has the legal right to put in place policies to guide their operations. To Bamidele Lawson, a teacher, the policy is not unconnected with the several abuses of some banks by those in charge of running them in the past. He says that instilling a culture of succession planning in the banking sector would help to curb abuses by bank executives. Tom Nwoke, a training manager expresses similar views. He says that having unlimited tenure could give chief executives the opportunity to engage in various acts of illegalities to amass wealth. But those who share contrary views argue that many of the banks operating in the country already have enduring tenure system based on defined parameters and should be allowed to determine the tenure of their executives. This argument is strengthened by the fact that the apex bank has not been able to establish a correlation between tenure and corporate governance or corruption. “Why would CBN think it is when you peg a tenure that you can checkmate corruption? Someone can assume a position and wreck the whole institution in one day, while another can be there for several years and remain steadfast,” submits Godwin Owoh, an economist. Faulting the new policy, Owoh describes it as a violation of the Companies and Allied Matters Act, CAMA, which confers the power to elect and fix the tenure of CEOs on the board of directors. As it is now, the board of directors can only elect chief executives but can no longer determine tenure. Banke Akande, a management consultant, posits that to peg the tenure of bank chiefs at 10 years presupposes that they would be corrupt if they stayed longer. Like Owoh, Akande believes it is not the number of years spent on a position that determines one's performance, stressing that if a chief executive’s performance is excellent, it would not be in the interest of the bank if he is removed just on the basis of having spent 10 years on the saddle, even when the bank has not established any wrongdoing against him or her. Some others have pointed to the fact that there are adequate legal provisions to address the issues of corporate governance and corruption in financial institutions in the country, such as CAMA, the Banks and Other Financial Institutions Act, BOFIA (1991), the CBN Act 1991, Nigerian Deposit Insurance Corporation, NDIC Act of 1988 and the Investment and Securities Act (1999), among others. These legal instruments provide guidelines for appointing and removing executives. Rather than peg tenure by fiat, Owoh contends that the apex bank could specify the qualifications required for such executives as well as determine the size of the board. He argues that “since it is the board of directors, during the annual general meeting that appoints CEOs, not CBN, it is inappropriate to peg the tenure of such appointed executives all in the name of performing your regulatory functions.” He also suggests that CBN should checkmate multiple directorship and establish a code of conduct where CEOs are asked to declare their assets upon appointment, so that when they are leaving, their accounts and assets can be probed. By August, three of the existing 24 banks will present new CEOs. Can these new helmsmen make any significant changes in the operations of the banks? Some analysts say it is unlikely because the forced exit of the CEOs would not change the ownership structure. Since they still have controlling shares in their banks, it is feared that their exit would create room for intense boardroom politicking, which may derail the growth plans of the banks.
The BOFIA, which confers on the CBN governor, the power to approve licences and appointments into the board and senior management of banks, does not grant it the power to set tenure as this responsibility is rested in the board of directors. So rather than usurp such powers without any cause, the CBN governor has been urged to focus on other critical aspects of the banking sector reforms which would truly promote corporate governance and trigger a boost in the national economy.
Additional report by STELLA SAWYERR
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