SEC rolls out strict new rules to curb CEO power and boost board independence.
Three-year cooling-off period, role bans and tenure limits set to reshape governance.
In a sweeping overhaul aimed at tightening corporate governance standards, the Securities and Exchange Commission (SEC) of Nigeria has introduced new regulations to reinforce transparency and role independence within public companies. A major highlight of the directive is the introduction of a mandatory three-year cooling-off period for Chief Executive Officers (CEOs) before they can assume the role of Chairman in the same organization.
The SEC disclosed this policy in a circular released on Friday to capital market operators and listed companies. According to the Commission, the measure seeks to reduce the concentration of authority in a single individual and to enhance board oversight by creating clear boundaries between executive and non-executive roles.
By enforcing a three-year gap between serving as CEO and Chairman within the same entity, the SEC aims to safeguard the objectivity and independence of board leadership. This move is intended to ensure that the Chairman can effectively supervise the CEO activities without bias or influence rooted in prior executive ties.
In another significant reform, the Commission has outrightly barred Independent Non-Executive Directors (INEDs) from transitioning into executive roles within the same company or corporate group. This directive, according to the SEC, is aimed at preserving the core principles of board impartiality and unbiased supervision.
The regulator stressed that allowing INEDs to cross into executive roles undermines their independence and compromises their ability to provide non-partisan scrutiny. By ending this practice, the Commission hopes to bolster the integrity and functionality of boards, ensuring that INEDs serve their purpose without conflicts of interest.
Complementing these measures, the SEC also established strict tenure caps for CEOs and executive directors. Under the new rules, no CEO may serve more than 10 continuous years in the same company or beyond 12 years within a corporate group. Following this limit, individuals must observe a minimum three-year break before being eligible for any Chairman role in the same company.
Should a former CEO or executive eventually be appointed as Chairman, their tenure in that role must not exceed four years, further reinforcing the Commission’s aim to limit prolonged influence by any one individual.
The SEC emphasized that these new governance rules take immediate effect, and all public companies are expected to comply without delay. Companies must now revise their board appointment processes and succession planning to align with the updated regulations.
Additionally, the Commission clarified that any time already spent in a CEO or executive role will count towards the new tenure limits. This ensures consistency and prevents potential loopholes that could undermine the policy’s objectives.
These governance reforms are part of the SEC’s broader strategy to foster ethical, transparent, and internationally aligned corporate leadership across Nigeria’s capital market. The expectation is that these steps will promote accountability, limit undue influence in decision-making, and attract greater investor confidence.
However, these new measures are not without possible drawbacks. Critics argue that restricting the pool of leadership talent,, especially by barring experienced INEDs from becoming executives, could affect boardroom dynamism. The mandated cooling-off period may also disrupt leadership continuity and slow down the execution of long-term strategies, especially for companies reliant on visionary executives.
Despite potential operational challenges, the SEC maintains that its priority is to entrench robust governance structures that discourage power monopolies and encourage corporate renewal. By imposing defined limits and enforcing role separation, the Commission believes Nigerian public companies will move closer to global best practices, with stronger institutional checks, refreshed leadership, and improved protection for shareholders.
