Corporate governance expert Dr. Richmond Atuahene has said the Bank of Ghana’s introduction of Corporate Governance Directives – under which it has asked MDs and CEOs of all financial institutions who have served for twelve years and above to step down by end of December this year is a good move and a step in the right direction.
The central bank on Monday released a new corporate governance Directive, dubbed ‘transitional provisions’, aimed at guiding banks ahead of the GH₵400million recapitalisation deadline in December.
The directive has capped the tenure of MDs/CEOs of regulated financial institutions at a four- year maximum, subject to a renewal for an additional two terms only.
It indicates, however, that “the term of office for an MD/CEO of a regulated financial institution indicated in the contract of employment executed with the regulated financial institution before coming into force of the directive may run in full, and shall not be renewed where that MD/CEO has cumulatively served for more than twelve years prior to the directive coming into force; and, in which case, such MD/CEO may be given up to 31st December 2018 to wind-down”.
According to Dr. Atuahene, the directive will restore some sanity into the banking industry as the fate of banks will no longer be in the hands of one person or a few people forever.
“It is a very good policy and the best thing that has happened to the financial sector. The new directive will ensure that no one person runs a bank the way he likes for so many years. So, I think it is a step in the right direction. The question is: why did it take such a long time to introduce this Directive?” he said.
The Directive further states that the term of office of any MD or CEO will not be renewed if doing so will make the person serve more than twelve years.
“A renewal or extension of a contract shall be subject to the renewal guidelines, and shall not be for any additional term that brings the cumulated years of service of the person in that institution and in that capacity to more than twelve years (12),” the Directive stated.
According to Dr. Atuahene, the central bank should ensure that the Directive is enforced and bring people who flout it to book in order to clean the system.
“Our ability to enforce it now is the main issue. The regulator must make sure it enforces this directive strictly, and where people are found culpable they must be made to face the law,” he said.
The Corporate Governance Directive further states that the tenure of regulated financial institutions Chairpersons will not exceed three years and may be renewed for one additional term only – meaning Board Chairs will not serve more than six years in any bank.
“Board Chairpersons of regulated financial institutions who had been in office for more than six (6) years prior to the Directive coming into force will have up to 31st December 2018 to continue service in that role,” the Directive states.
The tenure of office of a non-executive director of a regulated financial institution, according to the Directive, shall not be more than three (3) years and may be renewed for not more than two additional terms.
The Directive’s implementation will take effect from January 1, 2019.