The Bank of Ghana (BoG) has introduced new reforms to financial institutions in the country, in a bid to address the corporate governance challenges that have bedevilled the sector in recent years.
The new reforms, dubbed ‘The Banking Business — Corporate Governance Directives 2018’, seek to vividly define the roles of each member of a board, their tenure and age-limit, and board structure among others.
Notable among the reforms is capping the tenure of Managing Director/CEO of regulated financial institutions at a maximum of 12 years, split into three terms not exceeding four years per term.
Again, directors shall have a maximum tenure of three terms at three (3) years per term.
Also, no regulated financial institution shall have more than two (2) members serving on its board that are related persons.
The directive also states that where a regulated financial institution is a member of a financial holding company, no director shall be allowed to serve on the board of a regulated financial institution within the Group at the same time.
Also, a regulated financial institution shall notify the Bank of Ghana before it appoints a key management personnel.
Furthermore, to promote checks and balances in the governance structure of regulated financial institutions, the board chairperson shall not serve as a chair of any board sub-committee; and shall also be proposed for re-election within the maximum tenure of two (2) terms consisting of three (3) years per term.
Dr. Atuahene asks questions
Reacting to the directives, corporate governance expert Dr. Richmond Atuahene said some of the provisions are inconclusive.
“The directives are good, but have some shortfalls in them. The Bank of Ghana did not specify what will happen to the existing board members who no longer qualify per the new directives. Will those board members continue to retain their positions on the board? Will the MDs or CEOs who have served 20 years and over continue to serve in that capacity?”
He went on to say that the directives did not specify the orientation and training of board members, urging that the system must specify how they will be trained and certified.
“The new directives say a board should have a maximum of 13 members. So, what happens to those that have more than 13 members?
The governor should come and specify whether the directives are retrospective or not. If they are not retrospective, what are they doing to address the lapses that exist in the system,” he quizzed.
Again, he said the provision that “where a director or key management personnel associated with the management of an institution whose licence has been revoked be subject to approval of the central bank” before being appointed as a management member of another financial institution, is seriously flawed.
“Those who are known by the Bank of Ghana to have caused the demise of banks should not be allowed in any way to hold any office in a financial institution. They should be debarred,” he said.