The Bank of Ghana (BoG) has issued a directive to cap the tenure of the office of all managing directors or chief executive officers (MD/CEO) of regulated financial institutions at four years.
However, this is renewable only for two additional terms of four years each.
The new directive, which takes immediate effect, also restricts the tenure of office of non-executive directors and board chairpersons of financial institutions to a limited term, unlike the past when such positions could be occupied till retirement.
A revised transitional provision, issued on September 3, 2018, seeks to operationalise the directive that will limit the tenure of office of the topmost positions in banks and other deposit-taking institutions to only two terms.
The corporate governance directive was issued in March this year to, among other things, improve governance practices, internal controls and risk management systems of financial institutions.
Rationale for directive
The directive has become necessary following the collapse of seven local banks since August last year and the roles played by directors of these banks leading to their collapse.
Among the reasons for the collapse of the banks are poor supervision and non-adherence to corporate governance practices.
The collapse of the banks is estimated to cost the taxpayer more than GH¢8 billion.
Presently, the Bank of Ghana is taking steps to ensure that all those who may have played a role in the collapse of the banks are brought to book in accordance with the laws of the country.
For the term of office of a board chairperson, the directive provides that such positions shall not be occupied for more than three years (one term) and may be renewed for only an additional term.
According to the directive, a board chairperson of a regulated financial institution who had been in office for more than six years prior to the coming into force of the directive “shall not be eligible for another term upon the expiration of the current term of his appointment.”
It also provides that where the existing appointment of the board chairperson of a regulated financial institution as of the date of the coming into force of the directive does not stipulate a fixed term, “the regulated financial institution shall by December 31, 2018 submitted to the Bank of Ghana for consideration, a succession plan for the appointment of a new board chairperson within a reasonable period to be specified by the regulated financial institution.”
With the tenure of office of a non-executive director, the directive provided that occupants of such offices shall not serve more than three years and their contracts might not be renewed for more than two additional terms.
According to the directive, “a non-executive director of a regulated financial institution who prior to the coming into force of this directive had served in that capacity for nine years or more shall not be eligible for another term upon the expiration of the current term.
“Where the existing appointment of the non-executive director of a regulated financial institution as of the date of coming into force of this directive does not stipulate a fixed term, the regulated financial institution shall by December 31, 2018, submit to the Bank of Ghana for consideration, a succession plan for the appointment of a new non-executive director within a reasonable period to be specified by the regulated financial institution.”
Source: Graphic Business