By the end of this session, you should be able to:
- explain the concept of Corporate Governance
- appreciate the importance of Good Corporate Governance
- state the signals or symptoms of bad corporate governance
- discuss the Principles of Good Corporate Governance
- explain the major duties of Board/Council member
outline the responsibilities of the Chairperson of a Board/Council
Now read on…
2.1 What is Corporate Governance?
Corporate Governance Manual for the Public Sector (n.d) defines corporate governance as a set of relationships between an organization’s management, governing body, owners and other stakeholders in which power is exercised in the management of economic and social resources for enhanced performance and sustainability development.
It refers to the system by which public sector entities are governed and controlled. These systems include the laws, Institutions Processes and procedures Policies. The purpose of corporate governance in the public sector is to ensure effective and efficient management of public sector entities in order to achieve its objective- value of money.
2.2 Importance of Good Corporate Governance
As a result of such diverse and important roles, good corporate governance in Public Service organizations:
- Encourages global investors to invest in various sectors of the economy.
- Facilitates effective and efficient allocation of resources.
- Assures stakeholders, including the citizens that their welfare is of primary concern to the Government and that the Public Service will be managed effectively and efficiently.
- Creates an enabling environment where the citizens are empowered to voluntarily participate in governance so as to contribute towards national development.
- Assures stakeholders that those who manage or abuse the trust reposed in them shall be sanctioned in accordance with relevant laws, rules and regulations.
2.3 Symptoms of Bad Corporate Governance in the Public Service
An absence of good corporate governance is detected through the following signals of bad corporate governance;
- Disregard to due processes
- Disregard to rule of laws and regulations
- Mal-functioning of key institutions such as ARIC, Internal audit, boards/councils
- Domination of the board by the chief executive officer and few others
- Cases of misappropriation and embezzlements
- Abuse office leading to control override failure to produce financial records or public accounts
- Misleading accounts and information
- Open board-CEO conflict and misunderstanding beyond the board room
- Internal control weakness.
- Poor response to citizens(consumers) complaints and enquires-lack of social accountability.
2.4 Corporate Governance Structure in the Public Service
The Public Services present a complex and challenging corporate governance architecture made up of the following:
They are regarded as the owners of Public Service organizations. Such Public Services were set up for public good.
The Government is elected by the citizens and hold “shares” in trust for the citizenry.
They have strategic control consistent with their responsibility to Parliament and the Public. They have oversight of Public Sector organizations.
They are elected by the people, and take part in the decision-making process in democratically elected countries like Ghana. Parliament passes legislation which underpins the operating framework, including functions and powers of Public Services.
They act as fiduciaries of the citizens.
They are appointed by the President in consultation with the Council of State. They have the responsibility for strategic direction, setting targets and reviewing the performance of management among other functions.
• Management and other Staff
The Chief Executive Officer is appointed by the President on the advice of the Board given in consultation with the Public Service Commission. Management is responsible for implementing strategy, and measuring performance.
2.5 Principles of Good Corporate Governance
Corporate Governance Manual of the Public Service recommended the following ten (10) principles of good corporate governance in public sector.
1. Rule of Law
Boards/Councils shall follow due process. This means that the right of employees shall be upheld during the investigation of an offence.
The employee shall therefore be given the opportunity to defend himself. Penalty to be imposed shall be commensurate with the offence/misconduct so proven.
Article 23 of the 1992 Constitution states that “Administrative bodies and administrative officials shall act fairly and reasonably comply with the requirements imposed on them by law and persons aggrieved by the exercise of such acts and decisions shall have the right to seek redress before a court or other tribunal.”
Board/Council members must be ready to render account of their stewardship to the appointing authority. They shall be held responsible for all the acts of omission or commission on their part. Accountability implies that Board/Council members shall protect the interests of organizations and govern them properly. Personal and parochial interest of Board/Council members should not take precedence over those of organizations where they serve and the interest of the citizens.
Board/Council in their dealings with others shall handle all transactions with a forthright, frank and open manner. Transparency implies full disclosure. There shall be no secrecy about transactions handled by a Board/Council member on behalf of the rest.
If a member is interested in a transaction or contract that the organization is about to enter into, the member shall make his intentions known to his colleagues.
4. Conflicts of Interest
Article 284 of the 1992 Constitution states that “a public officer shall not put himself in a position where his personal interest conflicts or is likely to conflict with the performance of the functions of his office”. Guidelines on conflict of interest issued by CHRAJ provide public officials with adequate information to assist them identify, manage and resolve conflict of interest.
This is a core value that relates to honesty and strong moral values. Integrity also applies to faithfulness and diligence. Board/Council members must avoid exhibiting double standards and misinformation. Members shall be bold to resist fraudulent practices and shall not be complicit in all forms of corrupt practices.
Efficiency and Effectiveness
These principles refer to leadership that produces results. Efficiency and effectiveness imply that resources shall be used at best to produce maximum results. Board/Council members shall refrain from misuse of corporate resources. Board/Council member shall participate in all Board/Council meetings to make decisions and retain full and effective control over the organizations. Appropriate internal controls shall be instituted and monitored to prevent or reduce waste in organization.
Board/Council members shall adhere to international principles as appropriate on human rights; labour; environment; health and safety; and corruption.
Code of Conduct
Board/Council members shall impose upon themselves a Code of Conduct which shall cover among others,
- The personal conduct of members
- Relationship with the organization and its staff members especially; management relationship with stakeholders.
- Attendance and active participation at meetings by members.
- Adherence to the oath of secrecy, oath of office and unauthorized disclosure of information.
NB: Code of Conduct shall have sanctions to make them effective.
Board/Council members must demonstrate independence of mind and thought. Members shall not allow themselves to be pressurized to engage in shady transactions for the benefit of others.
Independence starts with self-confidence. Members shall seek a second opinion or legal advice when they are not sure about the consequences of their action, especially when the request to perform that transaction or activity came from a third party.
The independence of a member is likely to be assured if he refrains from seeking favours from management or third parties.
The Board/Council shall on annual basis assess its performance and effectiveness as a team and that of individual members, including the Chief Executive Officer. This is in line with good corporate governance. Weaknesses noted shall be corrected through appropriate capacity development programmes and other behavioural changes.
2.6 Board/Council Responsibilities of Public Sector Entities
- The major duties of Board/Council members are to:
- Keep themselves abreast with the organization’s business.
- Ensure good corporate governance.
- Exercise fiduciary duty of care not to put themselves in a position where there is a potential conflict between their own personal interest and their duty to the organization.
- Ensure critical review of all proposals and other issues placed before the Board/Council.
- Prepare for Board/Council meetings, study working papers and be prepared to ask pertinent questions at meeting.
- Uphold the values of accountability, efficiency, probity and transparency.
- Periodically update themselves on corporate governance.
- Have the general knowledge, skills and experience that may reasonably be expected of a Board/Council member carrying out the specific duties in relation to the organization.
- Undertake to act for the organization in a relationship of trust and confidence.
- Ensure that, decisions are made methodically and promptly and that the reasons for such decisions are recorded and when necessary, seek expert advice.
- The responsibility of a Board/Council Chairperson include:
- Determination of agenda, venue and date of Board/Council meetings in consultation with the Chief Executive and the Secretary.
- Convening Board/Council meetings.
- Presiding over the meetings of the Board/Council and ensuring smooth functioning of the Board/Council in line with good corporate governance.
- Providing overall leadership to the Board/Council without limiting the principle of collective responsibility.
- Acting as the main link between the Board/Council and Sector Minister or National Development Planning Commission, and also between the Board/Council and the Chief Executive Officer.
- Leading the Board/Council in the determination of the organization’s strategy and in monitoring the achievement of its goals.
- Ensuring that Board/Council committees are properly established and composed with clearly defined terms of reference.
- Projecting a positive image for the organization.
- Leading in evaluation and monitoring the compliance with organizational policies and governance processes.
- What is Corporate Governance?
- Explain the purpose of Corporate Governance in the Public Sector.
- State five benefits of good corporate governance.
- List four symptoms or signals of bad corporate governance in the public service.
- State four principles of good corporate governance in the public sector.
- State four duties of Board/Council members.
- Outline five responsibilities of the Chairperson of the Board/Council.
Conclusion of Section
The purpose of corporate governance in the public sector is to ensure effective and efficient management of public sector entities. An absence of good corporate governance is detected through the following signals of bad corporate governance:. Disregard to due processes, Mal-functioning of key institutions, conflict and misunderstanding are some of the symptoms.
Ghana’s public sector follows the five (5) 5 Principles of Good Corporate Governance. The Public Service Manual of the Public Service recommended the following ten (10) principles of good corporate governance.
Conflicts of Interest: Article 284 of the 1992 Constitution states that a public officer shall not put himself in a position where his personal interest conflicts or is likely to conflict with the performance of his office.
Guidelines on conflict of interest issued by CHRAJ provide public officials with adequate information to assist them identify, manage and resolve conflict of interests.
The major duties of a Board/Council Chairperson are to keep themselves abreast with the organization’s business and to ensure good corporate governance.
The Chairperson also has the responsibility of deciding the agenda, venue and date of Board/Council meetings in consultation with the Chief Executive and Secretary.
Please leave comment below