It’s no news that the average Nigerian
enjoys title more than anything else. Some see it as a form of identity
and failure to stroke their ego proves very fatal in the circumstances. It’s
not uncommon to see titles like Chairman/CEO or MD/CEO being the title
addressed to someone and while some people use it indiscriminately, it
may be proper in the circumstances depending on the company. By the
Companies and Allied Matters Act 1990, companies in Nigeria can either
be public or private whether limited by shares or by guarantee. A
private company is a company with members(owners) are not more than 20
while a public company typically has an unlimited number of members.
These members are also known as the owners of the company.
For
every company, a set of people are employed by the company owners to be
the directing mind of the company who are in charge of the day to day
running of the company. They are known as directors. There is a clear
distinction between the owners or members and the directors. The owners
are the people who pull their resources together to form a company while
the directors are employees of the owners of the company employed to
manage the day to day affairs of the company. Typically, a company must
by law have more than one director: a minimum of two. These directors
form a board known as the board of directors or management board as the
case may be. They as directors carry out the executive functions of the
company by making policy decisions, conducting other staff and ensuring
the profitability of the company. The head of the board is usually the
most senior director and the position is usually addressed as a managing
director. He is for all intents and purposes the Chief Executive
Officer(CEO).
For private companies, especially companies with
small and medium capital base, it is not uncommon to find the owners
also being the directing minds if the company. So if Mr David owns a
company that fabricates metal scaffolds with a relatively small base of
N2,000,000.00, Mr David will most likely be a director and being the
owner of the company, he will typically be the most senior director who
manages the affairs of the company thereby making him the Managing
Director and being the most senior executive, the Chief Executive
Officer. So, Mr David who owns the company and takes on the role of
personally managing the affairs of his company is the Managing Director
and Chief Executive Officer. It is not entirely strange to see a private
company owned privately by a few people and ran by another set of
people. A typical example would be Uber. Uber was founded by Travis
Kalanick and Gareth Camp who are the owners while the day to day running
is done by Dara Khosrowshahi who is the CEO.
It’s a
different thing entirely for public companies. Due to the participation
of ownership by members of the general public, there are strict rules of
indoor management so as to ensure accountability to all members who are
not directly involved in the running of the company. Typically, the
management board of a public company consists of both executive and
non-executive directors. While the executive directors carry out
executive functions of the day to day running of the company, the
non-executive directors are independent people appointed by the owners
to assist the executive directors in policy formulation. The
non-executive directors are in no way connected in the day to day
running of the company as that is reserved for the executive directors.
Remember that the most senior executive director is known as the Chief
Executive Officer. Now in the case of a public company where there are
both executive and non-executive directors, will there be a change in
the nomenclature of the most senior director? It doesn’t change at all.
There will only be an addition of Chairman for a member of the
non-executive directors.
So in essence, for a public company, the
directors are divided into executive and non-executive. Both the
executive and non-executive form a board of directors headed by a
Chairman who by law must be one of the non-executive directors within
the board. The Chairman is not in any way connected with the day to day
running of the company. The day to day running will be the function of
the Managing Director/Chief Executive Officer who is also a member of
the board. Drawing an analogy in Nigeria, Zenith Bank is a public
company whose chairman is Jim Ovia but the MD/CEO of Zenith Bank is
Peter Amangbo. While Jim Ovia presides over the board and assists in
policy formulation, PeterAmangbo is directly responsible for the day to
day running of Zenith Bank.
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