Introduction:
Companies provide goods and services for society and keep economies running. To meet the needs of society on sustainable basis, companies must be well managed to generate value for their shareholders and stakeholders. This article takes a look at how Ghana has fared in managing companies, state enterprises and civil society organisations, a practice that is also known as corporate governance.
In the narrow sense, corporate governance is about how a company’s Governing Board or Advisory Council work as its controlling mind, on behalf of its shareholders and stakeholders to achieve its stated mandate. It begins with the law or constitution from which the board derives its mandate; how it is executed and ends at whether the mandate has been realised or not. Where breaches occur in the process, action may be taken to halt it and sanctions applied to culpable individuals and or the entity collective.
In Ghana, the Company’s Act 2019 (Act 992) prescribes how the mandate of a company may be structured, although companies are at liberty to register and operate with their own constitutions so far as they do not offend provisions in Act 992. In the case of State Owned Enterprises (SOE’s), their mandates are contained in specific legislation that shall not violate the constitution 1992, the supreme law of Ghana.
The Good:
The evolution of corporate governance in Ghana, has been influenced by that of the United Kingdom (UK), the colonial master. After protesting what appeared to be an imposition of the retrogressive British Companies Code in 1948, the Companies Ordinance of 1907 remained the operative statute. By 1958, the imperative for a statute fit for purpose, for the newly independent nation state of Ghana, had become very loud. In response, the Governor General appointed a Sole Commissioner, Professor L.C.B Gower to review the 1907 Ordinance and recommend a suitable regime.
Following the review, the Gower Commission’s report (1961) birthed Ghana’s first Companies Code 1963, which turned out to be miles ahead of the UK’s Code of 1948. Former Professor of Law and retired Justice of the Supreme Court of Ghana, Prof. Samuel Kofi Date-Bah credits the longevity of the 1963 Code to the diligent and forward looking qualities of Prof. Gower’s work. It served Ghana for about five decades with few amendments until Act 992 which has also benefitted immensely from the Gower report, was promulgated in 2019.
The Bad:
Between 2017 and 2019, Ghana suffered the “Banking and Financial Sector Crisis”. Government of the day and the Bank of Ghana (BoG), revoked the licenses of more than 300 regulated financial institutions including Banks for allegedly turning insolvent as a result of “poor corporate governance and weak supervision.”
The BoG followed up with “The Corporate Governance Directive 2018”, to pre-empt and prevent the recurrence of crisis of that nature. With the benefit of hindsight, a good number of corporate governance practitioners have come to the conclusion that the “crisis” could have been managed differently to avoid the needless loss of jobs, livelihoods, lives, pensions, investments, tax payers’ monies and confidence in the financial sector.
The dearth of literature on the impact of Act 992 on corporate governance, some five years after its promulgation, calls for massive investigations. The core duties of boards as providers of leadership and strategic direction for effective and efficient delivery of their mandates with fidelity, remain a myth to the average Ghanaian.
While engagements and communication with stakeholders to build trust and understanding has become overly fashionable, the Finance, Audit and Risk sub-committees of boards that should work to guarantee compliance to safeguard investments, seem to exist just in name and where they are engaged, have rather become dysfunctional, as a result of conflict of interest and little or no regard for values and ethics. Overall, even boards with capable men and women exhibit huge Knowledge Attitude and Practice (KAP) gaps; a phenomenon that requires investigation.
The Ugly:
By operation of Ghana’s constitution 1992, the President appoints an estimated six thousand persons to various corporate leadership roles. They include CEOs, board chairs and members who must honour their fiduciary obligations during and after their tenure. At a recent meeting with CEOs of SOEs, the President warned that “loss-making SOEs will no longer be tolerated… Corruption, fraud, and financial mismanagement will be prosecuted strictly and boards that rubber-stamp poor decisions will be replaced”.
The President, who holds the SOEs in trust for the people of Ghana was speaking as a key stakeholder and in many cases sole-shareholder. Section 190 (1-6) of Act 992 prescribes the fiduciary relationship that must exist between a director and his or her company. It also enjoins a company to maintain an Interests Register where board members’ interests must be recorded during their tenure. Can SOEs use this provision to check the endemic conflict of interest that has rendered most of them perpetual loss makers?
With the death of the typical public corporation and the transition of SOEs to companies proper, SOEs should not be exempted from any of accountability procedures that make private sector companies more efficient and effective. The Speaker of Parliament has recently reiterated the absurdities in the corporate governance space when Members of Parliament and their Speakers who supervise SOEs and analogous institutions, gleefully accept corporate leadership roles in the same companies.
Mr. Speaker’s protest is in accordance with good corporate governance and extends to the unnecessary breach of the principle of separation of powers. How can Mr. Speaker accept the role of board chair of an agency under a ministry, supervised by a minister, who is appointed by the head of the executive and not compromise his position as head of the legislature; and the legislature in its entirety, which is enjoined by the constitution 1992, to be a check on the executive?
How can the Electricity Company of Ghana (ECG), be said to be operating within the framework of good corporate governance, if the ECG board chair is majority leader, minister for parliamentary affairs and leader of government business in the legislature? Is that not absurd? Is the current state of the ECG not a true reflection that absurdity?
Conclusion:
Overall, there are adequate laws, rules and regulations in the corporate governance space for accountability, public and private sector enterprise growth and development in support of the Ghanaian economy. Old hands must take a cue from the reset agenda and adjust early. The new hands need to proactively access continuous orientation in modern corporate governance culture and ethics.
The number of relatively new corporate leaders in the previous administration, who are facing criminal charges for stealing public funds may well be a true reflection of how ugly the corporate governance space has become and therefore ripe for reforms. To that end, taking a few days off to build capacity at niche business practice institutions like the Ghana International Business School (GiBS), should help make a big difference.
China, Singapore, Malaysia and South Korea among others have all proven that SOEs can lead a nation’s economic transformation if good corporate governance practices are strictly adhered to. Ghana’s GDP without doubt, can begin to show in Trillions of Dollars if good corporate governance becomes the norm rather than the exception. A culture of high ethical standards is required to give lasting impact to the ongoing Operation Recover All Loot (ORAL). Those who know better do better. Ghana can do better in corporate governance, if corporate leaders know better.
The writer is a Management Consultant at GiBS-Accra.
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