A Professor of Accounting and Finance at the Kwame Nkrumah University of Science and Technology School of Business (KSB), Kingsley Opoku Appiah, has advised independent board members to think, act and communicate independently in advancing the interest of financial institutions.
Professor Opoku Appiah said that to minimize re-occurrence of the financial scandals that led to the collapse of 347 microfinance institutions and 7 local banks, Ghanaians must set the tone for a sound corporate culture in risk awareness, risk-taking and risk management. He made this statement in his lecture at a webinar organized by the Institute of Chartered Accountants Ghana for its members. In all, 320 Accountants, Auditors, Board members and persons with interest in good corporate governance participated in the 1-Day lecture.
The lecture was themed Corporate Governance Reforms: Post Financial Sector Clean Up & Covid-19. The event sought to highlight the relevance of the main corporate governance reforms to mitigate the related party transactions that preceded the financial sector crisis and clean-up.
Prof. Opoku Appiah says prescriptions in the Bank of Ghana Corporate Governance Directive, 2018 and The Corporate Governance Code for Listed Companies 2020 are moving towards a “one-size fit all approach”, with few exceptions. These exceptions seek to address the corporate governance weaknesses leading to the recent banking crisis. He continued that the “tick box approach of Corporate Governance”, in the Ghanaian corporate environment with lax enforcement of regulation must not be encouraged. He said that research suggests that in an environment with higher corruption, the independence of the board is a tick box, with no relevance on a firm's profitability, growth, and survival. “Accordingly, we must embrace the “comply or explain” approach but not a one-size fits all approach”, he added.
On the need for corporate governance reforms in the Covid-19 era, he was of the view that the global pandemic has brought hardship on individuals financially and non-financially. The social distancing is more likely to result in irregular board meetings, and in this way, reduce boards’ ability to discharge their monitoring duties. He explained further that from this point, Section 42 of the Corporate Governance Directive 2018 prescribes that a Director can participate in the meeting via tele-conference, suggesting online meetings are encouraged. Further, the health implications of Covid-19 suggest boards should re-assess risk in relation to their human resource, financial management, products or services, technology infrastructure, information held, and physical premises as well as the potential for internal fraud and any other material risks. This justifies the rationale for the mandatory risk committee proposed by Bank of Ghana Corporate Governance Directive (2018), Section 50.
He continued that, here, the board must establish a risk committee with formal terms of reference. The board, and risk committee among others must exercise their oversight role by assessing the impact of Covid-19 on the firm strategy, prioritizing the extent of the impact of Covid-19 on the firm strategy, outlining the impact of Covid-19 risk profile on firm’s strategy, selecting the strategies to manage the risk identified, executing the risk management strategy, and monitoring and reviewing the risk management strategy.
Professor Appiah hopes to create awareness of the new direction of Ghana’s corporate governance reforms, in particular the board’s mandate to advance the interest of the firm, a shift from the previous shareholders’ interest to the University community.
The event was under the chairmanship of the distinguished Kwadwo Mpeani-Brantuo, Senior Partner at EY Ghana.
