Corporate governance practice and incidence of corruption in Ghana
There has been intense interest in the literature in recent times; particularly in respect of possible relationship between them. Corrupt practices have become virtually a norm in the Ghanaian society rather than the exception as in other developed jurisdictions.
Advertisement
The limited application of corporate governance contributes to the high incidence of corruption in Ghana.
Corporate governance mechanism involves a series of monitoring, controls, accountability and responsibilities that serve as checks and balances on actions to reduce inefficiencies resulting from moral hazards and adverse selection. The World Bank defines corruption as the abuse of public office or privilege for private gain.
Corruption is a broad term encompassing bribery, embezzlement and extortion. Bribery is a form of inducement with the effect of improperly influencing how a public function normally undertaken gratuitously is performed (Noonan, 1984).
The Foreign Corrupt Practices Act (FCPA) of the United States (US) has a caveat on bribery as it sees some bribes as legal or facilitating payment that help to expedite routine official functions and actions.
The causes of corruption, especially in developing markets, are complex and stem from a combination of factors; western structures interfering with different politico-economic traditions and practices of other cultures, such as extended family system based on social sharing.
Miller (1999) argues that modern institutional and governance arrangements are an imposition from external agencies and globalisation and create conflicts with local cultures and traditions resulting in corruption.
Complicit governments
In Ghana, all governments since independence have been complicit in one form of corrupt practice or another. However, the menace of judgement debts has assumed frighteningly unprecedented and worrying magnitude under the Mills/Mahama regimes.
The Transparency International (TI) ranked Ghana 63 out of 177 in 2013 and 61 out of 175 in 2014 in its global corruption perception index.
Revelations of corrupt deals and malfeasance by the Auditor-General’s Report have become an annual ritual. The financial loss to the state through the Ghana Youth Employment and Entrepreneurial Development Agency (GYEEDA) management and operations amounted to GH¢4 million in a massive corruption scandal.
Ghana lost over GH¢240 million from a contract signed with Better Ghana Management Services. The judgement debt saga is too alarming with improper payment of a whopping GH¢51.2 million to undeserving Woyome, dubious debts of €25 million to Waterville and $325,000 to Isofoton, not forgetting the rent scandal involving the Commission on Human Rights and Administrative Justice (CHRAJ) Boss.
Ghana’s donor partners withheld about $600 million to the Mahama government due to alleged corrupt practices and they wanted to see greater commitment from government in fighting perceived or real corrupt deals in the country. Ghana loses at least $1billion annually due to corruption with the figure projected to rise to $4 billion if anti-corruption measures are not instituted.
Board capture
Among the factors that contribute to the high incidence of corruption in Ghana are weak corporate governance structures and processes. The board as the governance institution supposed to have supervisory and oversight responsibility over management actions is itself susceptible to the phenomenon of Board Capture by management over whom to monitor and supervise.
Thus, the Auditor-General’s Report indicated that the board, in connivance with management, misappropriated funds amounting to GH¢966,000 at the Korle Bu Teaching Hospital.
The large state intervention in economies such as Ghana creates the enigma of State Capture where firms shape and influence the underlying rules of economic engagements, hence administrative corruption of public officials in kickbacks; creating obstacles to compliance and implementation of good corporate governance standards.
The GYEEDA scandal is an instance of this problem.
There is absence of good internal controls and audit systems. There is lack of procedural assurance that actions of officials conform to standard practices. Poor internal controls in our organisations reflect in improper authorisation for actions and payments and laxity in due diligence in implementing corporate directives.
Thus, senior management proposing their salary increment and implementing it without prior approval by the Chief Executive Officer (CEO) or President of a corporation amounts to fraudulent governance practice and attracts severe sanctions, including termination of appointment.
Thus, it is a poor corporate governance practice to increase sitting allowances for board members of Korle Bu Teaching Hospital without the approval of the respective supervising ministries of Health and Finance.
The remuneration packages of the board and executive of the Korle Bu demand prior approval of the supervising ministries that were clearly disregarded. The 2015 Brazil World Cup scandals were all due to lack of adequate internal control mechanisms.
Cronyism
There is absence of effective and credible accountability compliance and enforcement mechanisms in place. Corrupt practices and non-corporate behaviour is predominant in Ghana because there is pervasive clientelism (cronyism) and weak judicial systems and weak enforcement mechanisms of institutions resulting in low enforcement of legal protocols and contract relationships.
Advertisement
There is insufficient political will to fight the menace seen in the failure of the executive and the judiciary to activate the Financial Administration Act of 2003, Act 654, and Sect. 66 that stipulates the establishment of a Financial Administration Tribunal to deal with issues bordering on irregularities in financial administration in public institutions.
Thus, the Public Account Committee (PAC) of Parliament and CHRAJ has insufficient resources to effectively deal adequately with the three-prone mandate that includes corruption.
The main bane of the canker is the systemic failures and weakness exemplified in weak or poor corporate governance practices. Most institutions of economic and political governance tend to rely heavily on relationship-based transactions than effective rule-based systems and processes as rules and regulations and controls in corporate governance are sidestepped (Caron et al, 2012; Oman, 2003).
There is an inverse relationship between the use of practice of corporate governance processes and the level of corruption in Ghana. This is consistent with the linkage between the two variables in the literature.
Advertisement
Thus, low compliance to good corporate governance standards and limited application of corporate governance practices breed corrupt practices and transparency problems.
The author is a Doctoral/PhD candidate in Business Administration.
Email: kingfula@yahoo.com