SEC bans independent directors from taking executive roles

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SEC bans independent directors from taking executive roles

In a major regulatory move, the Securities and Exchange Commission (SEC) has banned public companies and key capital market operators from converting Independent Non-Executive Directors (INEDs) into Executive Directors or Chief Executive Officers (CEOs) within the same company or group.

The directive, announced in a circular today, comes amid growing concerns over boardroom manipulations and the erosion of corporate governance standards in Nigeria’s capital market.

The SEC observed an increasing trend where companies rotate directors into different roles, particularly moving independent directors into executive positions. The Commission warned that such practices compromise the neutrality of INEDs, whose primary role is to provide unbiased oversight on company management.

“This practice undermines the principles of good corporate governance as stated in the National Code of Corporate Governance (NCCG) and the **SEC Corporate Governance Guidelines (SCGG),” the circular stated.

In addition to the ban, the SEC introduced **strict tenure limits for directors of significant public interest entities in the capital market:
Maximum 10 years in the same company. Maximum 12 years within the same group.

Further, SEC ordered that former CEOs and Executive Directors who step down after reaching these limits cannot become Chairman until after a three-year cooling-off period. Even then, their chairmanship tenure is capped at four years.

According to SEC, the new rules take immediate effect, meaning companies must adjust their board appointments and succession plans accordingly. The SEC clarified that years already served by current directors will count toward the new limits.

Financial analysts and governance experts have welcomed the move, saying it will strengthen board independence and prevent **excessive director entrenchment.

“This is a positive step toward ensuring transparency and accountability in corporate leadership,” said Adesola Adeleke, a corporate governance consultant.

Public companies and capital market operators are expected to review their board structures to ensure compliance. The SEC has warned that failure to adhere to the new rules may attract sanctions.