By Constance GBEDZO and Dr. Bernard TETTEH-DUMANYA
The Institute of Directors-Ghana (IoD-Gh) was initially founded in 1999 as an independent organization, registered under the Companies Act as a company limited by guarantee.
In May 2019, it was re-registered under the Professional Bodies Registration Decree 1973, NRCD 143, to more effectively promote director professionalism and corporate governance in Ghana and beyond. Its name, Institute of Directors (IoD) is a global organization dedicated to training directors in best practices for corporate governance. Membership is open to directors and corporate governance practitioners, providing opportunities for capacity building and networking.
IoD branches exist worldwide, including the Institute of Directors Bermuda, the Institute of Corporate Directors Canada, the Institute of Directors UK, the Institute of Directors India, the German Institute of Directors, the Institute of Directors Ireland, Institute of Directors Jersey (i.e. USA), Institute of Directors Kenya, Institute of Directors Nigeria, Institute of Directors Scotland, Institute of Directors South Africa, The Moroccan Institute of Directors, Singapore Institute of Directors, The Institute of Directors New Zealand, etc.
Today, poor governance practices in Ghana’s public and private institutions have led to pervasive corruption and nepotism, resulting in financial instability. For instance, the Ghana Cocoa Board has faced significant governance issues, including mismanagement and corruption, necessitating borrowing to finance cocoa purchases.
Additionally, the collapse of several banks and asset management firms has been attributed to poor governance and oversight, which was the direct responsibility of the Bank of Ghana. These institutions were alleged to have engaged in risky lending practices and poor financial management without significant penalties until their failures became inevitable. Broader governance failures have also plagued other Ghanaian institutions.
The Produce Buying Company (PBC) and Cocoa Processing Company (CPC) have incurred substantial losses over the years due to a lack of adherence to good corporate governance practices. Nonetheless, the consistent losses being incurred by state-owned enterprises support the public’s view that these institutions have not followed sound governance practices.
Just recently, the Central Bank of Ghana reported unprecedented heavy losses for the 2023 financial year, leading to significant capital erosion. There is now an urgent need to recapitalize the Central Bank. This situation raises serious questions about the bank’s corporate governance practices.
Moreover, Ghana’s public sector institutions have largely failed to meet their mandates. Ministries, Municipalities, and District Assemblies (MMDAs) have not adequately discharged their duties, leading to widespread disappointment among Ghanaians. As a result, the national economy has suffered severe economic setbacks, culminating in the country being declared bankrupt with negative ratings from international rating agencies.
Cost of living, driven by escalating food prices, remains a significant issue for the average Ghanaian, with rising poverty, underscoring the need for strong leadership and governance. These governance failures highlight broader societal challenges stemming from poor corporate governance practices. From the executive branch of government to the legislature and judiciary, breaches in corporate governance are evident.
The public has high expectations for the Institute of Directors-Ghana (IoD-Gh) to address these gaps and improve corporate governance practices across the country. The importance of sound corporate governance and efficient, professional company administration cannot be overstated. This is reflected in both past and present legislation and jurisprudence on company administration in Ghana.
The Institute of Directors-Ghana (IoD-Gh) has set a critical mission for itself: to promote high levels of skill, knowledge, professional competence, and integrity among directors; represent the interests of members and the business community to the government and in public forums; encourage and foster a climate favorable to entrepreneurial activity and wealth creation; and promote the study, research, and development of corporate governance. However, the public is keen to understand how effectively IoD-Gh has upheld its mission and ensured that Ghanaians adhere to good corporate governance practices.
There is a need to measure IoD-Gh’s success thus far. IoD-Gh has consistently highlighted its achievements, claiming that since its establishment, it has played a leading role in promoting sound corporate governance in Ghana through training, consultancy, advisory, advocacy, research, and publications. Despite these claims, many Ghanaians do not feel the impact of these efforts in their daily lives.
Many public-spirited individuals believe that the state’s failure to guarantee social protection, prosperity, and economic inclusion for Ghanaians reflects the IoD-Gh’s performance on its mandates.
This perceived failure can be attributed to several factors that have impeded its effectiveness in promoting good corporate governance and fostering leadership excellence in Ghana. While these criticisms and challenges reflect common concerns, it’s important to note that assessments of IoD-Gh’s performance can be subjective and may vary depending on different perspectives.
The perceived failure of the Institute of Directors-Ghana (IoD-Gh) can be attributed to a combination of internal and external factors, including ineffective enforcement, insufficient training programs, poor advocacy, weak governance practices, institutional weaknesses, financial constraints, conflicts of interest, societal challenges, public perception issues, and inconsistent application of standards.
Broader societal issues such as corruption and nepotism may also have undermined IoD-Gh’s efforts by creating an environment where merit and good governance are not prioritized. These challenges highlight the need for a cultural shift towards valuing ethical leadership and governance, even within IoD-Gh.
One major criticism of IoD-Gh is its lack of robust enforcement mechanisms. Effective corporate governance requires stringent oversight to ensure that directors and boards adhere to best practices. However, IoD-Gh has been criticized for not having sufficient mechanisms to educate citizens on these standards. This deficiency fosters an environment where companies may not feel compelled to comply with governance principles, knowing that violations will likely go unpunished.
The lack of significant penalties for breaches in governance further exacerbates this issue, allowing organizations to operate without making necessary improvements. Questions arise about IoD-Gh’s advice, visibility, and competence in pursuing their mandates. The effectiveness of IoD-Gh is also hampered by its lack of strong advocacy for policy changes that support good governance.
An effective IoD-Gh should actively engage with policymakers to create a regulatory environment conducive to best governance practices. Unfortunately, IoD-Gh has been seen as having limited influence over both the private and public sectors, reducing its capacity to effect meaningful change.
Without strong advocacy, the necessary regulatory and policy frameworks that promote and enforce good governance remain weak or underdeveloped. The recent controversy involving the Social Security and National Insurance Trust (SSNIT) and the purported sale of its hotels to Rock City underscores the importance of robust policies and regulatory frameworks to prevent such conflicts of interest.
Additionally, IoD-Gh itself may suffer from internal governance issues, including weak organizational structures, poor leadership, and a lack of strategic direction. These institutional weaknesses undermine IoD-Gh’s effectiveness in promoting good governance. A lack of coordination between IoD-Gh and other key stakeholders, such as government agencies, industry associations, and educational institutions, leads to fragmented efforts and reduces the overall effectiveness of governance initiatives.
For example, stronger collaboration between IoD-Gh and the Bank of Ghana could ensure that governance standards are uniformly applied and enforced across the financial sector. IoD-Gh can also work with the Ministry of Education to inculcate ethical behavior in youth at the basic education level. IoD-Gh is supposed to equip directors and aspiring leaders with the skills and knowledge needed to guide their organizations effectively.
However, criticisms have been raised about the insufficiency and outdated nature of the training content provided by IoD-Gh. This gap results in a lack of skilled and knowledgeable directors, undermining the overall goal of promoting excellent corporate governance. For example, the directors of the collapsed banks were found to lack the necessary expertise in risk management and financial oversight, leading to poor decision-making that contributed to the banks’ failures.
IoD-Gh was seeking to promulgate a bill to establish the Institute of Directors-Ghana as a statutory body to set standards for the practice of sound corporate governance in Ghana, and to provide for related matters, under the Companies Act, 2019 (Act 992) section 136(1)(e) which requires companies ‘to demonstrate steps taken to build the capacity of its directors to discharge their duties, and section 211(3) which prescribes minimum academic and professional qualifications or training for company secretaries, emphasize the importance of the director and company secretary as critical players in sound corporate governance’.
The functions of IoD-Gh in this regard include setting standards and providing training in line with international best practices, improving the skills and competencies of corporate directors and secretaries, conducting innovative research, and advocating for responsible and ethical corporate governance practices.
To do this effectively, IoD-Gh needs to enhance its own credibility by reviewing its internal structures and governance practices in line with global standards and approaches adopted by similar Institutes of Directors worldwide. Cultural resistance to change in Ghana poses another significant obstacle to promoting sound corporate governance practices.
Traditional ways of doing things are deeply entrenched in many organizations, making it difficult to adopt new governance practices. Addressing these challenges requires a comprehensive approach involving stronger regulatory frameworks, better training and development programs, increased advocacy efforts, enhanced funding, and a cultural shift towards valuing good governance and ethical leadership.
By overcoming these obstacles, IoD-Gh can better fulfill its mandate and significantly contribute to the country’s corporate governance landscape, preventing future collapses like those seen in the banking sector and addressing broader governance failures in Ghana.
>>>Constance is a Governance Expert and Bernard is a Financial Economist
