Leadership_Issues_in_Post_Consolidation_Banking_Era

Banking & Finance : Leadership Issues in Post Consolidation Banking Era in Nigeria In the last two years, the banking sub-sector of the Nigerian economy has soaked in huge investment from private, local and foreign institutional investors, as well as from the marginal investing public. The shareholders fund of the 25 banks in the economy has thus grown to over N700 billion, thereby increasing stake holding in that sub-sector. For the banks to deliver good returns to the shareholders and enable economic growth which financial intermediation engenders in liberal economies, there is the need for improved regulation and monitoring to ensure that the board and management of the banks comply with codes of good corporate governance. But codified corporate governance practices are strange to most companies in Nigeria. A 2003 study conducted by the Securities and Exchange Commission (SEC) stated that 60% of quoted companies in Nigeria including the banks had no officially adopted code of good corporate governance. The above statistic points out a gap in corporate leadership and weak regulation of businesses in Nigeria. With the recent release by the CBN of the revised code of corporate governance for the banks, the boards and 23 men and 2 women CEOs of the 25 banks in Nigeria are required to lead their institutions along the line of probity in order to sustain public confidence in the banks. For history and in recognition of the enormous responsibilities of leading the newly recapitalized banks into the watershed post consolidation era, we provide here the names of CEOs of the banks. Aigboje Aig-Imoukhede (Access Bank Plc); Patrick Akinkuotu (Afribank Plc); Emeka Onwuka (Diamond Bank); Funke Osibodu (Ecobank Plc); Ike Oraekwuotu (Equitorial Trust Bank); Ladi Balogun (First City Monument Bank Plc); Reginald Ihejiahi (Fidelity Bank Plc); Jacob Ajekigbe (First Bank Nigeria Plc) Okey Nwosu (First Inland Bank Plc) Olutayo Aderinokun (Guaranty Trust Bank Plc); Atedo Peterside (IBTC Chartered Bank); Erastus Akingbola (Intercontinental Bank Plc); Michel Accad (NIB/Citibank); Cecilia Ibru (Oceanic Bank Nigeria Plc); Francis Atuche (Bank PHB); Akinsola Akinfemiwa (Skye Bank Plc); Mike Chukwu (Spring Bank Plc); Greg Brackenridge (Stanbic Bank); Simmon Millet (Standard Chartered Bank Nigeria); Tunde Dabiri (Sterling Bank Plc); Tony Elumelu (UBA Group Plc); Godwin Oboh (Union Bank of Nigeria Plc); Falalu Bello (Unity Bank Plc); Bisi Omoyeni (Wema Bank Plc); Jim Ovia (Zenith Bank Plc)   Most of the post consolidation banks in Nigeria, by their configurations, are high risk businesses. This assertion is validated by a global statistics showing that up to 66% of mergers fail. Only seven banks organically grew their shareholders fund to achieve the mandatory N25 billion capital base requirement of the CBN. Eighteen other banks are hybrid brands that emerged through mergers and acquisitions. This portends that except the right mix of effective regulation, competent leadership and adherence to good corporate governance codes are emplaced, corporate catastrophes may present as the outcome of the banking consolidation programme. The CBN codes of corporate governance which come into effect from April 3, 2006, identified practices and lapses that are threats to the long-term growth of the banking industry. Most of the threats to corporate survival of the banks can be counteracted by effective and transparent leadership functioning at executive and non-executive board level and top management. Bold and definitive, some of the codes pointedly addressed some banks whose board and management compositions are at variance with global outlook which the CBN wants the banks to have in order for them to be able to attract required skills and continuous investment. In the Central Bank of Nigeria Code of Corporate Governance for Banks in Nigeria Post Consolidation, the apex banking regulator stipulates that:  Government equity holding in any bank shall be limited to 10% by end of 2007, as government is enabling a private sector-led economy.  Equity holding of over 10% by any single investor shall require CBNs approval  No individual will combine the positions of Chairman and CEO, and in the new era, such title as Executive Vice Chairman is not recognized.  No two extended family members can hold simultaneously the positions of Chairman and Chief Executive Officer. The new code recognized the role of entrepreneurship in steering the bank and encourages equity owners as CEOs of banks. However, a clear programme of succession for the top executive is a requirement. Only recently, the position of the CEO of one of the top five banks became a subject of media speculation as the extended tenure of the incumbent nearly ended without a successor named. As a matter of fact, among the surviving new generation banks that were licensed in the late 1980s, Guaranty Trust Bank Plc stands out as the bank that has implemented non-intra family CEO succession. Diamond Bank has joined the list with the appointment of Emeka Onwuka as the banks CEO with Pascal Dozie occupying the position of Chairman of Board. Other banks which have been referred to as family banks have implemented only intra-family CEO transitions, while there are individuals who have been at the top of management of some banks for over 15 years. The CBN code discourages sit-tight board predilection as fresh ideas are constantly required in steering the banks. At a recent lecture, the CEO of Standard Chartered Bank Nigeria, one of the foreign bank franchises in the country, advocated introduction of international accounting standards in the country.  Simmon Millet maintained that the positive perception of the Nigerian business environment and the strong advocacy for transparency in business were the instigators of the investment of over $150 million in his bank last year. Due process, data integrity and disclosure requirements are serious leadership responsibilities for banks board and management in the new era.  The CBN requires that the CEOs and Chief Finance Officers of the banks assume responsibility for all reporting to it by their banks. In this regard any bank that makes false rendition of their reports to the CBN could have its CEO dismissed and blacklisted as a non-first time offender. The codes also stipulate prudential and procedural measures to curb insider loans abuses while prescribing role performance for auditors including approving their appointment. Although some of these regulations are not so new, the regime led by Prof. Soludo at the Central Bank has been very active in its regulatory responsibilities to the banks, matching its words with actions. However, it is our opinion that process integration, risk management and ICT will pose the biggest challenges to the banks, especially the mergers. All hands must be on deck to ensure that the mergers achieve full integration. This is one area the CBN can get more kudos for the consolidation programme. We advocate that the banks should deepen consumer and retail banking in the country through development of value-added financial and investment products as a strategy for mobilizing deposits and loanable fund. Financialnigeria.com specializes in online marketing of financial and investment solutions for the financial services sector. “You have to make difficult choices in your life, and you just have to be happy with them.” – Lori Laughlin quotes.CBN's directive yesterday, issued on the Proshare newsletter at 8pm, contains the following statement: "Chief Executive Officers, CEO of banks shall serve a maximum tenure of ten years; All CEOs who would have served for ten years by July 31, 2010 shall cease to function in that capacity and shall hand over to their successors; Where a bank is a product of merger, acquisition, take-over or any other form of combination, the ten–year period shall include the pre and post combination service years of a CEO provided that the bank in which he previously served as CEO was part of the new bank that emerged after the combination; Any person who has served as CEO for the maximum tenure in a bank shall not qualify for appointment in his former bank or subsidiaries in any capacity until after a period of three years after the expiration of his tenure as CEO."    The directive from CBN - not only fixed a 10-year tenure for bank chief executive officers in the country, it laid out an exit date for those who would be affected, a disqualifying period for the CEO’s, CBN, and NDIC officials, and made changes to both engagement contracts and provisions of the Memart. What this means is that UBA’s Tony Elumelu (CEO since 1995 – adding Standard Trust Bank), Zenith Bank’s founder Jim Ovia (CEO since 1990) and Skye Bank’s Sola Akinfemiwa (CEO since 2000 – adding Prudent Bank) are expected to vacate the banks they founded in July 2010.   So tenure guarantee, as defined in their contracts, is up in the air, and there is nothing the board of the bank can do about it – Memart and CAMA notwithstanding. Is it any wonder therefore that stakeholders are left wondering whether the CEO’s would surrendered their independence under such a ruling by CBN under a democracy and not a military government' As one respected market analyst said to me: "Which was a more profound announcement – the 14/08 sack of rescued bank CEO’s or the 20/01 exit notification of cleared bank CEO’s'” The nature of the CBN’s directive not only surprised a few but its rhetoric as declared in the seven-point announcement raised the usual concerns that have often plagued the CBN in its good intentions. I have had to place my intuition in check as I digested the breaking news and knew that this was not going to be another one of those announcements that simply goes away. Proshare had to respond and provide a view point that was impartial and dealt with the facts as it were. The role and place of sit-tights founders/CEO’s has always been with us for as long as the history of the country can be recalled and if anything, any discussion on the failing of the country will not be complete without addressing this issue in our public and private firms; not just the banks.    The banks however have been more prominent in the national discourse simply because of the critical role and perhaps overbearing role they play in determining our economic well being. If therefore the case is made about corruption, we cannot engage in this discussion without recognising the role played by these institutions.     Recall our blog post on 100 Days After: Paying a heavy price for banks to be virtuous - http://proshareng.com/blog/'p=79 and Corporate Governance – Financial Crisis and the Nigerian Leadership Meltdown http://proshareng.com/blog/'p=54 where we made the case that “Now that we understand that we have a shared problem, can we change the engagement rules' The CBN must rethink its engagement approach if the ultimate goal is to establish a game changer' To have a market, we must have participants. In or desire to get the banks to become virtuous and disengage from being ‘facilitators of criminal enterprises’ as they have been branded, we have all be made to pay for the changes needed”   We surmised that “the cost of getting our banks to become ‘virtuous’ overnight without admitting the intrinsic cost of the democratic deficit that is being charged” would aggravate matters and perhaps bring the regulator to disrepute.”   The Burning Question   Was this required at this time, just as the market was coming to terms with the series and sequence of pronouncements from the apex regulator on issues that affect shareholding, administration of authority and the symbols attached to it thereto and the redefinition of the rules of engagement'  Which was a more profound announcement – the 14/08 sack of rescued bank CEO’s or the 20/01 exit notification of cleared bank CEO’s' Separately, they can probably all be justifiable in intent but perhaps not in approach and timing. If that holds true, the question of whether the principle behind the directive of yesterday was healthy for our markets should not be in doubt. We all know we needed to act on this and trust the CBN to take a decision that promotes the recovery of the market, not a decision that casts doubts on the process in the name of moral obligation.    Make no mistake about it, Proshare fully supports the need to set new engagement rules and term limits for banks based on our cultural imperatives and environmental dynamics – with a measure of buy-in from the stakeholders.  These men are in their own right, icons in the industry locally and internationally for whom the significant rise in profile and growth of the industry has been attributed to; along with the pioneers of customer-focussed banking Messrs Fola Adeola and Tayo Aderinokun.     Indeed, it was the model of succession management put in place by the latter that encouraged the belief that the banking sector is headed for a great future. The challenges involved in the management of the transition at GT Bank perhaps reflected more the resilience of the system they built which has produced other CEO’s and top-of-the class executive directors of which the Managing Director/CE  of Access Bank Plc,  Mr. Aigboje Aig-Imokhuede and his colleagues represent a good reference point. The banks whose CEO’s are affected by this law have provided competent hands managing financial institutions including some who are serving in government as is the case with Remi Babalola (ex-Zenith Bank General Manager). Indeed the CBN picked at least five of its people to serve as executive directors and CEO in the rescued banks from UBA Plc who is still able to ‘field a formidable first eleven’ to show up in the market.     Thus the industry cannot be said to have an immediate capacity problem and  stakeholders should therefore not be in a panic mood. Activities in the market in the next few days and weeks would however indicate how much of this reality is factored in. Needless to add; and this is for the benefit of the capital market, some of these CEO’s have in place a credible team of top managers who are able to run the institutions they have laboured to build.  Arguments bothering on the inevitable ‘what happens now question’ can and should be equated to such questions that may arise, God forbid, if they had passed on. It is a direct testament to their legacy that they see to it that these institutions survive and grow with or without them. Let no one be in doubt, the directive from CBN is huge and laden with many twists and turns in the days and months ahead. The truth however is that taking no action was not an option in this case.    The CBN Motive - Justification    According to the CBN, the new guidelines announced at the end of the Bankers Committee's meeting in Abuja on Tuesday, are in line with the ongoing banking reform initiated by Sanusi Lamido Sanusi, the Central Bank governor, to enthrone good governance in the nation's financial system. Samuel Oni, the bank's director of banking supervision department, who announced the guidelines, said they are designed to help define the tenure of banks' managing directors and chief executives and institutionalise the appointment of banks' chief executives. "Those CEOs of banks that are affected by new guidelines have been given up to July 31 to prepare a successor as approved by their boards and have a credible succession programme that would be monitored by their boards and subjected to the monitoring to the CBN," Mr. Oni explained. He disclosed that the directive, which has already been communicated to the managements of all the 24 Nigerian banks, is also to ensure that banks have a good succession plan as well as avoid the temptation of personalising their institutions.     "In terms of the appointment of the CEOs of banks, the conditions and terms under which they were appointed and approved by the board must also be ratified and approved at the annual general meetings and such terms of appointment in the first instance shall not exceed five years, though it is renewable for another term, provided that the period of service cumulatively does not exceed 10 years," he added. In the words of Thisday Newspapers, “The Governor of CBN, Mallam Sanusi Lamido Sanusi …. made good his threat to wrest banks from proprietors”. The reasoning behind this is not far fetched. Insider details on the outcome of the audits carried out by the apex regulator had indicated the following:     The CEO’s equated the institution in terms of policy, processes and procedure and indeed a verbal instruction from them was as good as an approved order;The CEO’s of some of the rescued banks had employed most people in the organisation for over a decade and their loyalties were to the CEO’s rather than the institution;  There were infractions observed from the audit exercise which suggested that the culture of being there ‘forever’ created a huge overhang on the administration of proper corporate governance in the institutions.     The CBN Governor is on record as saying that the institution has nothing against the CEO’s of the banks affected and that there should be no attempt to cast aspersions on their integrity or personal character. This directive therefore must be seen within the context of the cold realities of our local environment and cultural imperatives that allow the CEO to operate a hierarchical based administration that is sustained by the very notion that this organisation is owned by the individual at the top. This culture of servitude leads to a culture of patronage and circumvention of best-intentioned corporate governance rules. No one can and should fault these conclusions from the CBN. Indeed, this line of action is not only necessary and couldn’t have come at a better time.   The CBN approved banking licence is a privilege, it is argued - the exercise of which means that it takes precedence over all other laws in its contextual application. Whenever the BOFIA (and not even the omnibus CBN Act) and CAMA is in conflict, BOFIA is supreme.   In consideration thereof of the recent abuses by some CEOs' of banks in Nigeria, the CBN perhaps felt that they needed to institute rules/regulation to protect investors, and to stop CEOs' from believing that they own these banks, or they are appointed for life – a major hindrance to enthroning a culture and value system that would support the professional discharge of obligations and responsibilities. CBN has only given a directive, and it is supported in doing so by all the relevant laws - the CBN Act 1997, CAMA and BOFIA.  The relevant decision needed will be taken by the Board/shareholders, in compliance with the regulator's directive.   The Counter Argument The reactions have been varied but intense. Significant supporters of Sanusi Lamido Sanusi, CBN Governor have had to take a second look at the directive and with exceptions so rare have not given their usual 110% support. So what went wrong here' Was it a question of the personalities involved or the motive behind such an action' As regards the motive, this appears clear as articulated above. If it were the personalities, the notion that no one was indispensable was clear to these individuals. It must therefore be the application of the rule and guidelines of the execution. While one may never know the inner workings of men of money and power in Nigeria , this much remains clear - echoes of the words attributable to Pastor Martin Niemöller (1892–1984) came to the fore. Majority of the people appear spooked by the severity of the CBN Governors actions or they simply have genuine fears about the larger implications of the retroactive directive. Recall the 1955 poem published by Milton Mayer - They Thought They Were Free - based on interviews he'd conducted in Germany several years earlier which went thus: “First they came for the communists, and I did not speak out—because I was not a communist; Then they came for the trade unionists, and I did not speak out—because I was not a trade unionist; Then they came for the Jews, and I did not speak out—because I was not a Jew; Then they came for me—and there was no one left to speak out.” This quotation, thought to have been contained in a January 6, 1946 speech before representatives of the Confessing Church in Frankfurt by Pastor Martin Niemöller (1892–1984) about the inactivity of German intellectuals following the Nazi rise to power and the purging of their chosen targets, group after group seem to aggregate the views of these group of people..  It is against this background that I contextualise the fears, uncertainty, shock and the classic distrust of government and its agencies for those who are strongly opposed to the directive. For others with less conspiratorial leaning, the matter simply bothers on rights, principles of fairness and the need to avoid precedents that might harm rather than build. Specifically these varied concerns from stakeholders can be categorised under three distinct schools of thought, viz:    THE LEGAL SCHOOL OF THOUGHT Here, the concern lies solely with the following issues:This development is about the sanctity of the law and the protection of basic rights as allowed by the Constitution of the Federal Republic of NigeriaPurely as a matter of law, and with the exception of the military era when the constitution and basic civil rights were suspended, the CBN Governor cannot pass retroactive laws;.Whereas BOFIA confers on the CBN Governor the power to approve licences and appointments into the board and senior management of banks; it does not grant it the power to remove them without any cause; There is no law superior to the Federal Constitution which guarantees the right to own property without let. The only law added to the constitution, to make it sacrosanct, was the Lands Use Act. Based on this every other law is inferior to the constitution and where there is a clear encroachment on the rights of individuals, the constitution and not BOFIA is supreme.   The rights of individuals to own shares in a bank and to exercise control over the affairs of the company based on the consent of other owners is as provided for. The fact that the CBN gives licences and can remove same cannot be used as a threat to force compliance as there are grounds under which such removal can take place.What manner of precedence are we therefore setting for the corporate governance framework within the country – the banking sector obviously has a governance code now that allows it to run against a fundamental aspect of CAMA'Should NAICOM and SEC also pass rules that run contrary to the CAMA, what does that do to our rules and regulations – the rules of engagement commonly known to all players – local and international'   THE POLITICAL SCHOOL OF THOUGHT The era of state controlled financial reforms is here with us – how this provides good corporate governance is open to debate. This has been a very delicate issue even in developed countries and though cultural imperatives make it important to provide a wedge, this action is without merit. The decisions by the CBN Governor have all but eliminated and alienated the South-South from the leadership cadre of the banking sector; With the exits of Cecilia Ibru, Francis Atuche, Jim Ovia and Tony Elumelu; not a few south-south leaders who supported the CBN governor have raised eyebrows on this development;The conspiracy theorists have indicated that under a new administration or dispensation, this move has provided the basis for a reversal of some of the decisions taken by the CBN Governor.    THE PROFESSIONAL SCHOOL OF THOUGHT This cannot be in the interest of a private sector led reform market. There are living examples of CEOs' of fortune 500 companies and banks in the US that have spent more than 10 years in their position as CEO. The argument about Nigeria ’s peculiar cultural issues does not hold water as businesses do not exist outside their local realities.Since the CEO’s did not have any character, criminal or competence issues, what therefore informs such an approach to getting rid of them'If they have some issues not considered material enough to have encouraged the CBN to remove them during its two major pronouncements, they ought to have been privately briefed on the policy direction of the CBN and allowed to make a more honourable exit rather than being shown the way out of an institution they founded and built up to such an international standard in an environment where there are few examples of such landmark achievements.   Ordinarily, the board and shareholders are responsible for appointing and voting out CEOs. Does this not further indicate the growing disregard for the role of shareholders in the determination of the affairs of the companies concerned and hence a further erosion of one of the fundamental principles of corporate governance'This new ruling is open to abuse and impacts the enthusiasm/commitment of the CEO who then realizes that no matter how good he is or might have been; he would not be able to enjoy the backing of his board – so much for trust.   Does this not leave the CEO vulnerable to an overbearing board and a non-activist CBN Governor at some point in the future' What happens to their shareholding in the banks'The re-election of directors has already been fixed by the CBN in respect of CEO’s which coud possibly require a change in CAMA to make it proper. This infuses a new dimension to financial services sector Memarts.What signal does this send to those nearing the end of their tenures in banks in which the same characteristics they observed is prevalent'  The Retroactive Law and its Limitations under this Case' An Ex Post Facto Law (from the Latin for "from after the action") or retroactive law, is a law that retroactively changes the legal consequences (or status) of actions committed or relationships that existed prior to the enactment of the law.  It is important to explain that this rule only applies to criminal issues, where it may criminalize actions that were legal when committed; or it may aggravate a crime by bringing it into a more severe category than it was in at the time it was committed; or it may change or increase the punishment prescribed for a crime, such as by adding new penalties or extending terms; or it may alter the rules of evidence in order to make conviction for a crime more likely than it would have been at the time of the action for which a defendant is prosecuted. In understanding this rule we must realise the nature of administrative pronouncements from the CBN and its non-application under this rule.  During the Soludo-era the separation of the executive vice-chairman and CEO was promulgated which led to the exit of Subomi Balogun from CBN. Also, it was under this era that the definition of who can be the MD/CEO of a bank where age and years sent on the job was defined. The notion that this is a retroactive law therefore does not and would not be a sufficient ground for a court judgement. This is a purely administrative directive within the powers of the CBN.  A Game of Musical Chairs   Clearly, and without mincing words - The Challenge of Politics and Policy – will deliver one obvious answer - Politics shall overcome. Looking at the arguments above and the dynamics on ground, it is obvious that the political climate does to provide the CBN enough cover to successfully execute the move it has made this time around; this move will raise the political heat on the apex institution. Let’s humour ourselves with the little matter of the July 2010 deadline - How was this arrived at' Take Jim Ovia, for example, he has been in the saddle for the past 19 years in the same bank; so at which point do we determine his 10years – 9 years ago or immediately' Why therefore wait till July 2010 to get a successor when this was not a subject of the ‘CBN special audit’'   As laughable as this faux-paux was, it is my judgement that the intention of the CBN was not to disrupt the banks or usurp the powers of the Boards/shareholders. Time will be required for the departing CEOs to put their houses in order, for a board meeting/AGM to be called and in that respect for due process to be observed. The question might then be that why should the CBN get themselves into this unnecessary situation in the first place' Lets take for example the absurd point in the directive that said “Any person who has served as CEO for the maximum tenure in a bank shall not qualify for appointment in his former bank or subsidiaries in any capacity until after a period of three years after the expiration of his tenure as CEO.”   This provision opens up the possibility for a scenario where Jim Ovia moves to UBA Plc either as CEO or Chairman or Tony Elumelu goes to Zenith Bank Plc with the same options. Sola Akinfenwa can easily re-appear as the CEO of new bank, or an existing bank. In this case, they would not have flouted the CBN rules and only succeed in confusing the market place and ridiculing the CBN. For what abiding purpose was this directive therefore meant to serve if it would open such a big loophole' The phrase here should have been "any bank" even as I realise that the intendment of the law/rule maker is clear. Besides, considering the practical difficulties that may arise in making Ovia Chairman of UBA, or Elumelu going to Zenith; the author of the directive must have come to the conclusion that this was not a feasible option – thinking, what can such an individual still possibly be looking for'  That however is beside the point.  Conclusion   Frankly speaking, the best case scenario is that this policy directive is allowed to stand. The most likely scenario is that the law will be subjected to the rigours of interpretation by the law courts as a contribution to our democratic development as a sovereign nation. The worst case scenario would be that the law is withdrawn or modified to eliminate the points raised above. In the main, I fully agree with the reasoning adduced by the CBN setting term limits for the CEO’s of banks who have, through their conducts given the public and regulators sufficient reasons to doubt their ability to stay above board in decisions either as a matter of cultural influence or personal ego. My natural inclination is to support the directive. The Oceanic Bank and Intercontinental Bank Plc case (a product of the trial by the media which I do not subscribe to) has provided a background to why allowing ‘sit-tightism’ in a bank can create serious corporate governance problems. No one can imagine anyone even a director of the bank challenging Cecilia Ibru at Oceanic, Elumelu at UBA, Akinfenwa at Skye or Ovia at Zenith, and yet these are publicly quoted companies' The same equally goes for Balogun at FCMB, Adenuga at ETB, and many other banks and companies. If at all there is any deduction to make from this directive (as good intentioned as it is), it would be that it is an ineffectual policy as the case of Otunba Subomi Balogun and Mike Adenuga has demonstrated. Jim Ovia, Tony Elumelu and Sola Akinfenwa can set up a Zenith Group limited, UBA Group Limited and Skye Group Limited and control the activities of the institutions from such an entity outside the powers of the CBN. The rule can be easily side stepped without much drama. On a final note, the point ought to be made that the more CEO’s of banks stay in their institutions, the more susceptible to abuses are the corporate governance imperatives. This has been a matter for which those involved in the industry have spent considerable time deliberating on with many options and approaches put forward – the end game being that CEO’s should and must not have an indeterminate tenure as the CBN seeks to introduce. The CBN Governor, Sanusi Lamido has bitten the bullet and taken the hard and difficult choice – it is left to the market to respond.  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.