Implementing Board Rotation: A Potential Remedy for Nigeria’s “Boardroom Bubble”? Examining Benefits and Limitations

Abstract

This article examines the potential and limitations of director rotation as a response to the "boardroom bubble" phenomenon in Nigerian companies. Gaining traction as a key corporate governance practice, director rotation seeks to mitigate stagnant decision-making within boards. The research explores how this approach can enhance corporate governance, accountability, and oversight. Our study suggests that while director rotation holds significant promise in reducing board entrenchment and strengthening corporate governance, it is not without drawbacks. These drawbacks include: Lack of independence among directors, reduced knowledge continuity on matters such as ESG (Environmental Social and Governance) factors or long-term strategies, difficulty finding suitable successors who share their predecessors’ characteristics (e.g., gender) as well as turmoil created when introducing inexperienced members onto Boards at times of crisis. Additionally, it does not address other important aspects of board diversity i.e., racial or ethnic background or educational achievements, which remain overlooked through this process alone. While acknowledging the benefits of rotation as a potential remedy for the “boardroom bubble,” this paper advocates for a nuanced approach to board rotation in Nigeria. Our research undertakes a comprehensive examination of Nigeria’s legal and regulatory landscape for implementing rotational boards, employing a rigorous doctrinal approach. The analysis delves into primary sources of data, such as the relevant Acts of the National Assembly and pertinent case law, while the secondary data are mainly books, journals, periodicals and web-based materials. In addition, the work proposes further research to explore specific regulatory frameworks and best practices tailored to the Nigerian context.