Corporate Governance and Corruption in Ghana

Thu, 12 Jan 2012 Source: Sakyi, Kwesi Atta

By Kwesi Atta Sakyi

31st December 2011


Following a series of major corporate failures and scandals in the 90s, it became apparent that something had to be done to rein in the way limited companies are directed, controlled and governed. The problem was more pronounced with the public limited companies which have directors, some of whom are external. The principal-agent problem came to a head as shareholders expectations often diverged widely from those of directors, who irrespective of poor performance, awarded themselves hefty perks such as golden handshakes, annual bonuses (which in some circumstances were unsustainable and undeserved), golden parachutes, executive mansions and vehicles, paid-for holidays, among many other mouth-watering fringe benefits. These fat cats and captains of industry constituted themselves into sacred cows, untouchables and a clique. Many engaged in insider-trading, off-balance sheet accounts, creative or window dressing accounts and questionable business decisions which were often suicidal. Cases which readily come to mind are the Enron, WorldCom and Anderson and Anderson companies.

Tenets of Corporate Governance

In Britain, there were many commissions which were set up to come up with proposals and recommendations on the way forward for listed companies. Some of he Commissions were the Cadbury, Greenbury, Hampel, Higgs, and Turnbull Commissions. In South Africa, we had the King’s Report. Apart from the resultant Stock Exchange Rules and Guidelines, there have been other corporate governance models around the world such as the Singapore Model, South African Model, Australian Model, OECD Model, EU Charters and the Sarbanes-Oxley Act of the USA, 2001. While the British-based models are principles-based, those of the USA are rules-based. It is said that there is flexibility with the guidelines in the English Model as the spirit of the law rather than the letter of the law is of essence, while the regulatory environment in the USA is one of rigidity, absolute compliance and no room for flexible interpretation of the law. Directors of companies fall into two categories, namely Executive Directors (EDs) and Non Executive Directors (NEDs). EDs are the ones who deal with the day to day running of the company while the NEDs only attend Board Meetings once or twice in a month. The various Commissions of Enquiry in their reports, recommended that there should be equal balance of the number of NEDS and EDs as well as a mixture of talent so that different perspectives can be brought to bear on issues. Furthermore, directors have to be rotated every 3 years through democratic elections in order to bring in fresh blood and new ideas. Directors are to be fully inducted and orientated on appointment and they should be appraised and rewarded on the basis of performance, competence and zeal for work. There should be segregation of duties and on no account should the Board Chairman be the same as the CEO or MD. This is to avoid the over-concentration of power in the hands of a single person. Directors are required to behave in a morally upright and ethical manner so as not to dent the image of the company. They are to ensure that the rules are obeyed, taxes paid, stakeholders are treated fairly, the environment is protected and they perform their duties with the highest levels of due care, probity, transparency, integrity, competence and diligence. They are to promote best practice and perform their fiduciary duties to ensure the company is big, strong, reliable, viable and a going concern. Directors should ensure that the due process of the law is followed in all transactions such as tendering for suppliers, outsourcing contracts, and appointment of top executives. They should avoid conflict of interest and take steps to appraise corporate risks, so as to classify them into low, medium and high risks, with mitigating and contingency plans put in place. The NEDs should be the controlling authorities in establishing internal and external audits. The Board’s Audit, Risk, Nominations and Remuneration Committees should be chaired and driven by the NEDs to provide checks and balances, and to safeguard minority interests. In the past, the principal-agent problem has been a thorny issue in corporate governance. Here, we can cite the Dodge vs Ford classic case in 1911, which ruling established the dictum that the agent (Ford) erred in principle in not consulting his benefactor/principal/financier, Dodge, when distributing rewards to esteemed customers during one Christmas time. Also there is the classic Carlill vs Carbolic Smokeball case of (1835) which also ruled that Mrs. Carlill was misled by Carbolic Smokeball advert, which claimed that their product would cure influenza after bathing with their soap for two weeks. Directors should be thorough and scrupulous in their dealings with the public, who are increasingly becoming sophisticated, knowledgeable and more demanding this day and age.

Implications of Corporate Governance and Corruption

The principles of Corporate Governance apply to both listed and non-listed Companies and institutions in the private and public sectors in Ghana, such as parastatals, NGOs, Charities, churches and government boards, trusts and agencies. To avoid corruption or to minimize the incidence of corruption in Ghana, the Ghana government should legislate that all institutions should establish strict governance structures which take into consideration the various corporate governance models. Also many workers in the NGOs, charities and public institutions should be made to belong to professional bodies so that the strict oversight, gatekeeping and sunshine rules can be applied to them. Many public institutions and not-for-profit organizations are these days being required to publish their social charters, social audits and mission statements in a bid to ensure efficiency, transparency, probity, accountability and effectiveness in public service delivery, and also to satisfy the varied expectations of all valued stakeholders. Professionals always ensure that they act responsibly, according to their norms, in order not to tarnish their individual image, that of their professional bodies and the organizations they work for, plus safeguarding the interests of patrons, donors, cooperating partners and sponsors, and probably not to incur the wrath of the penalty of having their licences suspended or cancelled or their activities prohibited.. All our teachers, immigration officers, customs and accounting personnel, should be made to belong to professional bodies in order to bond them. Some of the professional bodies are Institute of Bankers, Chartered Institute of Marketing, ACCA, CIPS, CILT, CIMA, CFA, IoD, AAT, ABE, CPA, among others.


I think that in theory, we can be upbeat about the tenets of Corporate Governance but in practice, we may falter where self interest, greed, avarice and cut-throat competition threatens our very existence. Besides, powers that be may twist our arms to do their bidding. What is important in such circumstances is to have high personal value clarification to guide one in such moral dilemmas. Above all, we need to be having the public interest uppermost in our minds all the time. We also have a personal locus of control not to pass the buck when matters come to the head. We can whistleblow, report to relevant authorities or form ethical committees to enforce ethical standards. We should take pride in our professional training and practice what we have been trained to do. Our motto should be ‘to whom much is given, much is desired’.


ACCA Paper 1 – Governance, Risk and Ethics

London: BPP Learning Media Ltd

By Kwesi Atta Sakyi

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Columnist: Sakyi, Kwesi Atta