In a decisive move to bolster corporate governance, the Securities and Exchange Commission (SEC) has issued a ban preventing Independent Non-Executive Directors (INEDs) from transitioning into Executive Director roles within the same company or its group entities.
This new directive, conveyed through a circular titled “Circular to All Public Companies and Capital Market Operators on the Transmutation of Independent Non-Executive Directors and Tenure of Directors,” targets a trend that the Commission deems harmful to the independence and integrity of board governance.
According to the SEC, allowing independent directors to become executive directors — or even Chief Executive Officers — compromises the fundamental principle of independence that such roles are meant to uphold. The Commission warned that such transitions diminish the objectivity and oversight function of the board, potentially leading to conflicts of interest and weakened shareholder trust.
The circular further reads: “The attention of the Securities and Exchange Commission has been drawn to the prevalence in recent times of the rotation of various directorship positions among individuals within the same entity or group of companies.”
The Commission described the conversion of Independent Directors into Executive roles, including CEO positions, as a “worrying trend” that could undermine transparent governance practices in public companies.
To reinforce the independence of leadership roles, the SEC has also instituted a mandatory three-year cooling-off period before a Chief Executive Officer can be appointed Chairman of the same company. This measure, the Commission stated, is designed to ensure a clearer separation of powers and oversight within company structures.
These directives are part of SEC’s continued commitment to fostering accountability, transparency, and best practices within Nigeria’s capital market.