Is the Exit Door Open to a Bank CEO Being Investigated?

In the wake of Sanusi’s bank reforms that commenced on August 14, 2009 five banks got the hammer. But the heat is increasingly being felt by the other 14 banks now being investigated. Kenneth O Eze looks at the possibility of any of the existing CEOs opting out of the heat through resignation, especially with the rumoured resignation of Jim Ovia, Zenith Bank CEO, a while ago.

With the Central Bank of Nigeria’s (CBN’s) removal of the chief executive officers/executive management of five banks in Nigeria on August 14, 2009, and the machinery put in place to investigate the other 14 banks, the rumour mill came alive that Jim Ovia, the managing director of Zenith Bank threw in the towel.

But Victor Adoji, who spoke to M2 on behalf of Zenith Bank, said that there was no truth in that. He wondered where the rumour might have broken out from saying, “those who wished it were so would have started it.”

The rumour would not have hit the banking sector at a worse time, coming at a time when the sector was experiencing one of its worst image crises. It has now turned out that even the peddlers of the false information might have been a bunch of ignorant people, riding on the ignorance of the masses to fuel further crisis in the banking sector.

Adebayo Jones, a legal practitioner, told M2 that no director of a company can walk away from his post without serving the requisite notice contained in his/her contract of employment. Other options to ending the employment relationship between a director and his employers are by death, loss of sanity, bankruptcy, judicial intervention, or regulatory/supervisory pronouncement.

This view is corroborated by Hon Dr J Olakunle Orojo, while writing on Company Law and Practice in Nigeria (5th Edition) page 254: “A director of a company cannot vacate his position unless he/she “resigns his office by notice in writing to the company.”

Jones explained that for purpose of stability, most public quoted companies require long notices of disengagement, often a minimum of six months. He further stated that each company’s procedure for appointment or removal of directors is always as laid out in the memorandum and articles of association. This view is shared by Gbenga Badajo, a chartered accountant.

Badejo, told M2 on telephone that there are three process of disengaging from office as a director of a public quoted company, namely, willfully own volition, termination being relieved by employers, and by intervention of regulators as was the case in some Nigerian banks in the month of August, 2009.

A typical provision, according to Jones would be that formal notice of disengagement be served to give sufficient time for a replacement to be sought. He emphasized that the role of a chief executive is so important in company operation that it normally requires that the incumbent properly hand over to the incoming CEO in order to, as much as possible, make for seamless take-over and minimize disruption in the affairs of the company.

Badejo opines that there is no hard and fast rule about a person leaving a job; it does not matter what position the person occupies. The door of entrance, he told us, is always the door of exit. If a managing director, for instance, is appointed by the general meeting, he would have to address his resignation to that body for approval to free him of the responsibilities of that office, Badejo said. The body that appointed must be the one to relieve or approve resignation – either the board of directors or at the general meeting of the company.

Sola Salako, a brand activist, speaking to M2 on phone on the issue, inferred that legality should not be seen to come to the same plane with rhetoric. Her thought is that emotions should for once make way for realities, as “the banking system has experienced much rot and is in dire need of cleansing.” The rot, she pointed out, has seen banking bearing the brunt while the management of the banks smiled home.

Salako, who, like Jones, supports the ongoing reforms in the banking sector, observed that the banks are under focus for failure to follow due process and it does not make much sense playing up the issue of due process on them now. Jones, echoing this view, asserted that he who comes to equity must come with clean hands.

Badejo explained that anybody could make for the exit door but that “does not absolve the person of acts or commission carried out while in office.” In the light of CBNs investigation of the banks, a managing director may opt to act in concert with his/her board or the generality of shareholders to resign. But Badejo maintains that the person remains culpable for the acts or commissions carried out while he/she was in office.

Credence is lent to these views by reports in ThisDay Newspapers of September 19, 2009 that the States Security Service (SSS) quizzed directors of four of the banks now being audited, seizing their passports in the process to forestall their possible escape, like Erastus Akingbola of Intercontinental Bank.

From all indications, taking the back door appears to be the only exit point open to this set of bank executives. This is extralegal though, and they know it.

The newspaper named the banks, whose executive management were quizzed to include Spring Bank, Bank PHB, Equitorial Trust Bank and Wema Bank, stating that those whose travel documents had been taken over by the SSS would have no access to them, save with the consent of the CBN.

In particular, according to the newspaper, “the officials of Bank PHB, which had their passports seized by the SSS are its Managing Director, Francis Atuche; Executive Director, North Bank, West, Central and East Africa, Ahmed Kuru; Executive Director, Lagos Directorate, Julius Okotako; Executive Director, South Directorate, I. G. Ukpaka, and Executive Director, Service Bank, Eddy Ogboru.”

Another bank also in the murky waters is Equitorial Trust Bank (ETB). ThisDay writes that Ike Oraekwuotu, ETB’s managing director also had to answer question by the SSS.

Importantly, the law governing corporate practices in Nigeria, the Company and Allied Matters Act (CAMA) in section 262 provides for removal of directors.

Particularly, S262 (1) provides: “A company may by ordinary resolution remove a director before the expiration of his period of office notwithstanding anything in its articles or in any agreement between it and him.”

Subsection 2 dwells on the processes or requirements for the removal should the need arise. It states: “A special notice shall be required of any resolution to remove a director under this section or to appoint some other person instead of a director so removed, at the meeting at which he is removed, and on receipt of the notice of an intended resolution to remove a director under this section, the company shall forthwith send a copy of it to the director concerned and the director (whether or not he is a member of the company) shall be entitled to be heard on the resolution at the meeting.”

Orojo simplified the process of removal as involving the summoning of an annual general meeting, formally proposing an ordinary resolution to that effect to members, serving special notice on members of the company and the notice must be served on the director concerned offering him an opportunity to defend himself at the meeting at which the resolution is to be passed.

M2′s failure to obtain the articles of Zenith Bank made it impossible for us to know if the rumoured resignation had its roots in compliance with any of these requirements. Jones reacting to this said: “the man has a right to tender and withdraw a resignation. In which case, he remains in office.” Should the scenario in Jones’ mind play out, it can be safely stated that the “tendering” ignited the rumour, but Adoji maintains that no such thing took place.

The CBN has announced that the other 14 banks now being investigated would know their fate in October 2009. Words filtering from the apex bank indicate that there is nothing of the magnitude of the tide that swept aside the management and board of five banks in August 14, 2009 likely consequent upon the current investigations. So it can generally be expected that the worst is over for Nigerian banks and their teeming customers.

The door of resignation, according to observers who spoke to M2 is most likely shut against Ovia and the other managing directors. They all concur that resigning would not absolve anybody of acts or commissions perpetrated while holding forth as helmsman and is thus an effort in futility.

Perhaps what should be engaging the minds of the regulators and law enforcement agents is how to closely monitor suspected culprits to prevent their slipping outside the country beyond the reach of the laws of the Federal Republic of Nigeria. After all, the investigations have well advanced to the point of definite directions that can guide the regulatory authorities and law enforcement agencies.