Francis Owusu-Achampong’s thoughts ..Culture And Conduct Risk (3) .…Missing pillars in the corporate governance architecture.


Nurturing what might be considered as” acceptable behaviours” in an organization is not a mean task. To be able to infuse a growth orientation among employees “business as usual practices” cannot be entertained. This is particularly so in commercial firms that face stiff competition, increasing overhead costs and work culture compounded by COVID 19.

A growth or sustainability-oriented leader must boldly admit that one cannot make omelette without breaking eggs. Change requires that some people must be forced to unlearn negative attitudes and other organizational practices they are used to.

Resistance to change must be expected as I am sure Dr. Paa Kwasi Nduom was confronted with in his attempt to bring reforms into the civil and public services during President Kufuor’s era.

Difficult as it may appear, one must be prepared to take the bull by the horns, especially if we are to break the cycle of bank collapse that we have all endured in the past few years with attendant deleterious effects on public confidence and valuable jobs.

This is particularly important if one considers that recapitalization without changes in business conduct will not yield the desired results. The Banking Regulator has expectedly come up with directives designed to inculcate proper behaviour in the corporate space.

It is not enough to have an elaborate Code of Conduct that spells out what is acceptable or otherwise in the banking space.  The real missing link is not the communication of such acceptable behaviours down the corporate echelon but significantly deliberate enforcement of sanctions against those who breach corporate governance measures. This would serve as a deterrent against misconduct.

Conduct risk for our purpose here is broadly defined as any action of an institution or individual staff that leads to customer detriment or has an adverse effect on market stability or effective competition and profitability.

This risk, like many others, therefore, involves the identification and management of any value system or practice that can potentially be detrimental to the firm’s growth and reputational aspirations.

Jurisdictions differ in the extent to which corporate governance infractions are met with stiff sanctions against individual culprits and institutions. Perhaps it would not be too far fetched to surmise that some of our African neighbours  do well comparatively when it comes to levying penalties, including jail terms and forfeiture of ill-gotten wealth, especially in the financial sector against those who breach corporate governance rules with criminal intent. This writer is yet to be reminded of similar robust responses in the Ghanaian financial space. We can and must start strict enforcement of corporate rules.

One cannot be tired of listening to endless tales of frustrations from banking practitioners who sincerely desire to do the right things. It is a bad reflection to consider how other miscreants have been left off the hook with financial malpractices in the past, in both the commercial banks and even in the Central Bank. For reputational reasons, some banks choose to quietly deal with financial miscreants. Whether this inures to their benefit or the   society’s interest is another subject for debate later.

Much as white collar crimes are relatively more difficult to prosecute than other crimes, if we are to live under this impression and choose inaction, we shall simply embolden criminals to perpetuate their practices while making other virtuous operatives wonder if there is any worth in sticking to rules.

Collectively, we must open a new chapter in our financial history where malfeasance will be met with stiff sanctions towards deepening confidence in the financial sector. We must consciously entrench the perception that personal liability will rise for individual and collective infractions of corporate rules, no matter whose ox is gored.

A strong and deliberate posturing that signals the possibility of jail terms for those who commit financial crimes must be cultivated.  If one cannot apply one’s conscience positively towards societal good, then legal sanctions must whip one into line.

It is gratifying though to admit that we are gradually seeing a push in that direction. Evidently, this is forcing some people who vehemently defended their innocence in the media in some earlier court cases to avail themselves of hitherto less known legal window (to us non lawyers) in the judicial framework to resort to restitution.

Some may welcome this development, in the effort to inculcate acceptable behaviours. But others question the ethical basis or propriety of this legal opportunity that suggests that impunity can be bought; just show remorse, return the loot and avoid a jail term…we shall excuse the initial illicit gain!

The failure to punish individuals involved in infractions breed ethically and legally questionable behaviours and perpetuate a culture of impunity.  This is even more exacerbated when the board of directors is composed of family, friends or political cronies which then compromises a sanctions regime.

Rexford (fictional name) confides that as leader of team of banking supervisors on an off-site assignment, there was an attempt to cower him into submission to edit factual infractions that had come up during an examination. He bemoaned that a call had been made to his superiors to rein in “that young man with audacity to challenge his elders who were in banking when he was in pre-school learning nursery rhymes”

It takes a bold effort to remain steadfast in the face of such blatant intimidation, rooted in the African cultural concept of respect for elders or authority. Where lies the disrespect in this case where factually (mathematically) the bank’s capital adequacy ratio had grossly fallen below mandatory levels?

Should Rexford succumb to blackmail and intimidation and doctor his findings to suit the whims and caprices of “stronger men in the system”? To what extent can we collectively embrace an ethos where “none is mightier than the system will prevail?”. We must create an environment that protects right doers but not orchestrated to shield big fishes who fall foul of governance rules.

Should we for instance, be silent as Odikro dissipates all the remaining ancestral lands when we know that God has finished with the business of creating more lands, all in the name of respect for old age or authority? Should Odikro not also consider our aspirations and the concept of accountability…that he holds the lands in trust for all of us?

This throws into sharp focus the unwritten traditional African concept that challenging the boss or Nana is a taboo. Should this hold even where the boss or Nana is palpably wrong or criminally inclined?

Admittedly, there are bosses at the helm who will ask everybody in the boardroom about their views before they make the ultimate decision. In that case, not necessarily heeding to a subordinate’s suggestion or the majority view has little significance since the buck really stops at the boss’s desk. The majority view may not always be congruent to the boss’s strategic intent.

Respect for authority is a core virtue to be promoted as we find exemplified in Japanese and Chinese socio- cultural practices which also permeate their corporate space.

The problem is where unrestrained coercion to silence others reign. This has a tendency to breed timidity among young executives. This could be a recipe for disaster in the effort towards building succession planning and engendering acceptable behaviours in the corporate space.

Laura Delizonna  reinforces this view  in the  Harvard Business Review by stating  that “ studies have shown that psychological safety allows for moderate risk-taking, speaking your mind, creativity, and sticking your neck out without fear of having it cut off – just the kind of behavior that lead to market breakthroughs”… ( performing teams need psychological safety- here is how to create it . August 24, 2017)

Conduct risk can be challenging but not impossible to evaluate. A number of practical tools and processes are available for boards and managements to use in assessing whether the firm is on course with the right culture. This include, but is not limited to diagnostics and focus group surveys, 360 degree appraisal mechanisms, and use of social media to track public perceptions of staff and the organisation. Most importantly, continual board due diligence of executive management’s acts and omissions is a sine qua non.

This must involve penetrating questions around financial trends and other soft issues. Indeed, nothing precludes a board from seeking independent external opinion when necessary to arrive at decisions. The expense is tax allowable and certainly obviates the excuse of saving they were misled by executive management intent of covering misdeeds or padding performance indices. Intense and continuous scrutiny must permeate the board’s oversight responsibility.

Getting everyone in the firm to behave responsibly can be attained with the “tone at the top philosophy”, This will prevail where the tenets of honesty, integrity, transparency and accountability are visibly seen to be practiced from the top.

It becomes easier to entrench these values in the corporate space than merely enshrining same in the Code of Ethics or Code of Conduct, beautifully crafted in a document but blatantly abused by executives and employees.

The soft (qualitative) aspects of corporate governance are as crucial as the ability to interpret a set of financial documents prepared for the consumption of stakeholders. The financials are true and fair and represent the financial health of the firm only in so far as we can vouch for the integrity of those who prepared and authorised them.

Sadly, we have seen otherwise strong financials of firms which went bust a few months after we have been conned to believe them. Other  supposedly independent practitioners  endorse their accuracy and fairness! And they get away with paltry fines, at least in Ghana’s recent financial history.

Recruitment, remuneration and promotion, professional development and dismissal decisions that over value short term revenue generation and other important aspects of performance can engender or incentivise misconduct.

Conduct also suffers where emphasis is placed on recruiting only those with high academic scores without regard to their ethical dispositions, skills and experiences.

The qualitative issues which conduct risk seeks to identify and manage and which give rise to real growth or decline of a banking firm must therefore elicit the scrutiny of any board. Acceptable behaviours must be considered as intangible assets that can propel the firm to even greater heights, just as software is under consideration as part of a firm’s capital.

The writer is a Fellow of the Chartered Institute of Bankers and an adjunct lecturer at the National Banking College, and the Chartered Institute of Bankers, a farmer and the author of “Risk Management in Banking” textbook.

Email; [email protected]  Tel. 0244 324181 / /0576436414



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