Rethink CEO term limits in parastatals – Business Daily
Nairobi Stock Exchange (NSE) Chief Executive Geoffrey Odundo. PHOTO | FRANCIS NDERITU | NMG
The proposals to have the Capital Markets Authority amend regulations that impose term limits for the Nairobi Securities Exchange (NSE) chief executive are timely.
Management of companies is changing globally and perhaps it is time that Kenya reconsidered CEO term limits in key parastatals and companies.
Great CEOs are the glue that provides continuity between the vision and strategy of an organisation. They also offer a steady hand at the wheel.
A few companies have an official policy of changing their CEOs after a few years and they are typically subsidiaries of multinational firms. Frequent executive turnover in some NSE-listed firms is often the result of crises and shareholder changes.
Though well-intentioned, sometimes term limits severely derail the growth of an organisation and continuity in business. It also encourages cronyism and pilferage of funds, because officials are keen to embezzle money within the few years they are in office. The term limit law is particularly restrictive to proven well-performing CEOs, especially considering the talent pool may not be as big.
Term caps are common in State-owned companies, but CEOs of most private firms listed at the NSE serve on unlimited contracts. The number of CEOs serving more than 15 years is on the increase. The NSE is undergoing restructuring, therefore there is a need for continuity.
Like their counterparts in private firms, parastatal CEOs may also need time to attain their performance goals, including completing public projects.
