PenCom updates Guidelines on Corporate Governance for PFAs & PFCs

The National Pension Commission (PenCom) has released Revised Guidelines on Corporate Governance for Licensed Pension Fund Operators (LPFOS).  The revised Guidelines outlines the minimum standards and best practices to promote transparency, accountability, and ethical conduct in the Nigerian Pension Industry.

Key Highlights of the Revised Guidelines:

Board of Directors

• The Board of LPFOs must act with integrity and fairness, ensuring diversity in gender, age, skills, and experience.
• The board shall ensure that at least 3 members or 30% of the Board are independent, whichever is higher.

Tenure limits: 

• Managing Director/Chief Executive Officer (MD/CEO) and Executive Directors (EDs) – max 10 years; Non-Executive Directors (NEDs) max 15 years; Independent Non-Executive Directors (INEDS) max 9 years.
• The tenure for an ED who proceeds to be MD/CEO shall not exceed a maximum of 15 years cumulatively, inclusive of the years spent as ED.
• Where an individual has served as an ED and subsequently as an MD/CEO in the same LPFO for a combined tenure of up to fifteen (15) years, such an individual shall be eligible to serve as MD/CEO or ED in another LPFO, subject to a maximum tenure of five years after a cooling off period of 3 years.
• NEDs shall serve for a maximum period of fifteen (15) years on the Board. However, it is necessary to reinforce the Board by continually injecting new energy, fresh ideas, and perspectives. The Board should ensure the periodic appointment of new Directors to replace existing NEDs.
• INEDs shall not serve on the Board for more than a maximum of 9 (nine) years, comprising three terms of three years each.
• No NED may serve as the MD/CEO of the same LPFO after his/her tenure ends. However, the NED may serve as MD/CEO or ED of another LPFO subject to a maximum tenure of five years, after a cooling-off period of three years.
• No INED can become the MD/CEO or ED of the same LPFO upon expiration of his/her tenure, however the INED may serve as MD/CEO or ED of another LPFO after a cooling-off period of three years.
• To ensure continued innovation and prevent entrenchment, the tenure of an MD/CEO or ED who has completed his/her tenure in a LPFO may subsequently serve as a NED in another LPFO subject to a maximum tenure of five years after a cooling off period of 3 years.
• Mandatory Board Committees: Audit, Risk Management, Nomination & Governance, and Investment Strategy. However, Investment Strategy Committee shall not be applicable to Pension Fund Custodians.
• The Chairman of the Investment Strategy Committee shall be an INED. This strengthens investment decisions with greater objectivity.
• The Chairman of the Nomination and Governance Committee shall also be an INED and members should be NEDs. This strengthens oversight with more checks and balances in board affairs.
• The Board shall appoint an independent external consultant to conduct an annual evaluation of its own performance, that of its Committees, the Chairman and individual Directors, at least once in two (2) years.

Principal Owners of Pension Operators are

• Individuals holding 50% + 1 share or more in a LPFO.
• May serve as NEDs beyond tenure limits under strict conditions.
• Cannot hold Executive roles, or classified as INED.
• Cannot also serve as chair of Audit, Risk Management, Remuneration and Nomination & Governance Committees.
• No LPFO shall have more than one principal owner serving concurrently as NED
• Subject to re-election every 3 years, annual performance reviews, and external evaluations approved by PenCom.
• PenCom reserves the right to restrict or terminate the tenure exemption of any principal owner should governance concerns/regulatory non compliance, performance deficiencies or ethical breaches arise.

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