INTRODUCTION
The corporate governance framework for financial institutions has significantly evolved over the past two decades, emphasising on well-governed, accountable, and independent boards. Central to the complexity of corporate governance is the transition from executive to non-executive roles within the governance structures of banks and their financial holding companies. Such transformations are critical to ensuring strong governance, driving innovation, and creating sustainable value for shareholders, stakeholders, and the business as a whole.
The role of an Executive Director is quite different from that of a Non-Executive Director, and transitioning from one to the other within the same institution or another institution within the same group structure is not always seamless. An Executive Director is typically responsible for overseeing the company’s day-to-day operations and strategy as needed. Conversely, a Non-Executive Director has the primary role of ensuring oversight and governance while not engaging in the institution’s day-to-day activities. This shift in role is driven by strategic, regulatory, and individual career considerations which must be managed proactively to ensure that the functioning board remains accountable, transparent, effective, and compliant with the laws and regulations in place.
The Central Bank of Nigeria (CBN) has, over time, reviewed its Corporate Governance Codes and has given particular attention to the evolving nature of the composition of boards of commercial banks, merchant banks, non-interest banks, and financial holding companies. These reviews encourage and protects institutional integrity and mitigate conflicts of interest.
This article explores the intricacies of transitioning from a non-executive role to an executive role on the board of the same bank or another institution within a group structure. It will examine the CBN’s Corporate Governance Guidelines, which provide the guide for these transitions. Furthermore, it will discuss best practices associated with such transitions, emphasising the significance of strategic alignment and governance excellence.
