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Ghana: The Roles of Public Boards

B. Odei Bempong

4 August 2008

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analysis

There are currently serious debates going on about the sale of 70% shares of Ghana Telecom (GT) to Vodafone, UK. The debate is all centered on the government's actions to depart its share of 70%, saying that this is too high for the money being exchanged for.

Whilst I support the sale of GT, I also blame the government of contributing to the problems that might have led to the sale of GT.

PROBLEMS The whole problem is attributed to some lapses in taking serious measures about the way state organizations are being managed. The state organizations are being mismanaged because of people appointed as Chief Executives and Board Directors in these organizations. Let us take an example to buttress these points, on the performance of state organizations.

On Tuesday February 19, edition of the Daily Graphic front page headline, "Graphic & GOIL are Tops" Finance Minister Mr. Baah-Wiredu declares. This is not the first time it has come into the public domain that the State Own Enterprises (SOEs) are not performing. If the Minister's message is clear, then its sad news for Ghana. Only two (2) out of 29 SOE's 6% doing well? It's really sad! These SOEs are supposed to generate more revenues, cut down expenditures, and make profits to declare dividends for the Government, so that ordinary poor workers taxes are reduced, but what do we see, poor performance and excuses due to mismanagement. I can say that, these can be contributed to the roles of various Boards of Directors serving in these Public institutions and their 'negative' impact on the socio-economic developments of the country, Ghana to be specific.

About a year or so ago, and in the morning programme of Peace FM radio, Kokruokoo, the presenter asked Dr. Barfour Agyeman Duah of Centre for Democratic Development (CDD) his views on the roles of the Public Boards some time back. The analysis and comments, made by the learned Professor, were excellent, that I wish to add more to his ideas for the consumption of the government.

In an article published in the Chronicle paper three years ago by me, titled "Roles of Current CEO's Their Impact on Economic developments of Ghana", I emphasized that "In modern day management control systems and good governance, corporate strategies are not left to the CEOs to play with. They are structured and implemented by the Board of Directors".

THE ROLE OF PUBLIC BOARDS

In this paper, I would like to define the role of Public Boards, their composition in advanced countries which allow them to play a greater meaningful role in corporate strategy formulation, implementation, and compare it with what exists in Ghana our motherland. The effects of the negative roles of these Boards in the society and the impact on the economic developments of the country will also be analysed. Lastly, useful suggestions would be made so that the corporate governance of this country as far as these institutions are concerned would live up to expectation.

The principal role of any member of public board of Directors in any organisation is to control the excesses of the existing Chief Executive Officer (CEO). In a working paper of Henley Management College, UK, prepared by Keith Gay, nineteen years ago, Aris, S.(1986) in the Economist Intelligence Unit Special Report No. 244, London Economist Publications, he suggested that, the principal reasons why companies required for the appointment of Boards of Directors were the following:

· To see issues in their totality and to offer a wider perspective than the serving executive directors, who are often preoccupied with their line management responsibilities;

· To provide information about the outside world that might otherwise not be available;

· By focusing attention on long term, forward looking strategic questions to encourage the Chairman and the board to act as a board and not as a day to day management committee;

· To bring specific knowledge, know-how and professional expertise into the board room;

· To facilitate the business by providing contracts with customers, sources of finance or government or with other commercial organizations at home and abroad;

· To provide a counter balance to the Executive Directors;

· To act as independent scrutinizers of the company's overall performance and to act as watchdogs on behalf of the shareholders as members of audit and remuneration committees;

· To act as a referee in cases of conflict, either inside the board or where, as in some takeover situations, the interest of the directors and shareholders are opposed; and

· To fire the Chairman, if necessary. These are nine reasons with which few would take issue: together, they encompass a generally accepted view of the Board of Director's role. In the above nine points, it could be observed that, the first five reasons seem to focus on the positive, business-creating aspects of the Board's role in that company, whilst the last four dwell on position of the Board in governance and conflict resolutions between the company's Chief Executive and the stakeholders of the company, and act as an advisory or service aspects role, rather than be the watchdog or controlling aspects.

TRICKER

In another version of the Board's role as termed "Tricker's description of various roles played by Board of Directors", Tricker, R.I (1990), from London Institute of Directors - The Director's Manual (pp A6/1-A6/18), Tricker listed the following roles that a board member should be:

· Wise man - Bringing knowledge and experience to the identification, discussion and decision on board level issues;

· Specialist - Adding special skills, expertise and know-how on board matters, not other otherwise available on the board;

·· Window on the Word - Being the source of external information for board discussion, for example on markets or technology;

· Judge - Seeing issues in their totality, from various perspective and providing objective judgment;

· Contact man - Connecting the board to networks of useful people for example in banking, government or internationally;

· Catalyst - Questioning existing assumptions, introducing new ideas and approaches stimulating change;

· Figure head - Representing the company outside, for example on government commissions, enquiries or other committees;

· Status Provider - Bringing standing, credibility, reputation and position to the board;

· Monitor - Being an objective overseer a management performance and executive decisions; hiring and firing top management;

· Watchdog - An independent voice for the various interests in the company, for example minority shareholders or lending Bankers;

· Confidant - A sounding board for the chairman and other directors;

· Safety-Valve - To act in crises, for example in major conflicts between executives, or when a fundamental problem arises in the business;

In the above twelve roles described, only three roles, 'Monitor', 'Watchdog', and 'Safety Valve' are specifically concerned with corporate governance, in the sense in which it is now widely debated. The above two types of roles of the board did not explicitly or implicitly show that the companies they serve are training grounds for inexperienced members of a board to get experience, neither they are grounds for acquiring wealth or being a bleeder of the company's financial resources. They evidently show what type of person a member of a board should be. They are roles that measurements of the competence of each member can be made to ascertain the member's creditability to serve continuously at that board. They reveal how important knowledge about the organization they serve is, or where there's none, external knowledge, contacts, and personal judgment from outside of the organization are very vital to be required and be imported to the company, to support the current CEO of the company. Unfortunately, these qualities, if exist in many a board member in Ghana, they are never exhibited, for fear that they would contrary go to the detriment and behaviour of the CEO, and the little incentives that would be requested, will be denied. Most likely, these incentives are packaged in such a way to bribe the members of the Board to tighten their lips and actions.

The above roles as defined by the two authors show that, the setting of a board is not as simple task as it can be. It requires men of integrity, high qualification, knowledge and expertise on the job and more importantly, should be people who might have been in those capacities of being Chief Executives themselves. The composition of a board cut across all boundaries if the company is to benefit from their contributions during their meetings, upon which allowances are given. In fact, the composition of a board should be as a consortium of consultants that could turn the company's misfortunes into fortunes, and straighten up the mess being created by the Chief Executive or Managing Director. The modern businesses are meeting complex strategies from competing companies, and the fast changes in technology have made control of organizations very difficult and complex, that it requires efficient and dynamic board to assist the CEO to overcome these complexities.

What IS the composition of present boards in Ghana?

Do we have such a mixed core of talents that can evaluate the performance of an incompetent CEO? The ninth of their roles specified earlier by Tricker, R.I, states, "Monitor - being an objective overseer, a management performance and Executive decisions; hiring and firing top management". If the board, being an objective overseer, has not the competent men and women, then how can they fire a CEO? It means the CEO can bulldoze his/her own way through them, more specifically when the CEO gets to know that, no board member has the technical know-how of the business in question. The CEO can have many answers to their queries, and the work of the company can be a standstill.

In my previous article, I quoted an article written by Paapa Stephens on the topic "Fielding Square pegs in Councils, Boards and authorities-who pays the price", he stated, "the problem really appears to be the selection of membership to these councils and corporate boards. It has never ceased to raise eyebrows and legitimate question". What are the compositions of present public institutional boards? At least the government knows the composition, or whoever advises the government to appoint the membership knows the composition. However, one becomes surprised when a board to a public institution is mentioned. One wonders what bearing those personalities, their qualifications and experience have on the functions of the company or establishment. The question is what are criteria for selection? Are they on partisan lines, qualification or operational lines of the business? There is an urgent call for the government to break off from the old norms of selecting board members on partisan basis. The dangers are many, and the true reflections go to the detriment of the very government who selected them, if they do not provide suitable solutions to the organizations which they serve.

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