Recent attendances at annual general meetings of some listed and non listed companies have revealed one common concern of most shareholders.
It is a fact that Ghana does not yet have a culture of shareholder activism so annual general meetings have not generated the intense shareholder scrutiny of the board as pertains in other countries.
As a consequence, boards of directors have had relatively ‘‘easy’’ times at annual general meetings with shareholders giving a stamp of approval to every resolution.
Nevertheless, on some few occasions, shareholders’ concerns have been about remuneration paid to directors and auditors.
However, in as much as the chairman has often times explained the justification for the fees earned by directors and auditors, some suspicions and apprehensions linger on but are eventually accepted by the enquiring shareholders.
Elements of Directors’ and Auditors’ remuneration
The Companies Act, provides for remuneration to directors as follows:
194 (1) Subject to this section the fees and other remuneration payable to the directors in whatever capacity shall be determined from time to time by ordinary resolution of the company and not by a provision in the regulations or in an agreement which provision or agreement is void.
194 (2) The fees payable to the directors as directors shall be determined from time to time by ordinary resolution of the company and not in any other way.
194 (3) Unless otherwise resolved, the fees payable to directors shall be deemed to accrue from day to day and directors are also entitled to be paid the travelling and other expenses.
211 (1) A company shall not make to a director or former director of the company or an associated company a payment by way of compensation for loss of an office in the company or an associated company or as consideration for or in connection with retirement from office of that director or former director without particulars with respect to the payment being disclosed to the members and the proposal being approved by an ordinary resolution of the company agreed to or passed in the manner provided or for in section 206.
211 (2) A payment shall not be made whether by the company or otherwise to a director or former director of a company in connection with the transfer of the whole or part of the undertaking or property of the company or an associated company whether the payment is expressed to be by way of compensation for loss of office or otherwise unless particulars with respect to the proposed payment including the amount of the payment have been disclosed to the members of the company and the proposal approved by an ordinary resolution of the company agreed to or passed in the manner provided in section 206.
Under the Companies Act in Ghana, the remuneration of directors is made up of basic salary, transport and travelling allowances paid for meetings, payment for loss of office and payment on acquisition or takeover of the company.
However, in accordance with modern day practices and also depending on the health of the company, a company could offer a director several benefits including healthcare, transportation, accommodation, products of the company if the company is a manufacturing company as well as shares.
It is also provided in section 134 (11) that the remuneration of the auditors may be fixed by the directors for the period expiring at the next annual general meeting and shall be approved by an ordinary resolution of the shareholders passed at the annual general meeting.
Section 128 (1) of the Companies Act provides that the aggregate amount of directors’ emoluments, pensions and compensation paid for loss of office should be shown in the company’s books and accounts.
All these provisions in the Companies Act are to ensure that shareholders exercise ultimate control over the remuneration of the auditor and also the remuneration and emoluments paid to directors who are entrusted with the responsibility to ‘‘direct and administer’’ the business of the company.
The mandate of the remuneration committee
In conformity with the evolution of best practices in corporate governance most especially in the United Kingdom, where remuneration and other board committees were established to streamline board procedures, most Ghanaian listed companies have also adopted the practice.
The remuneration committee which evolved in response to the prying eyes of investors and sometimes the press over directors’ remuneration has the mandate of fixing executive remuneration in a transparent manner.
The remuneration committee is expected to fix the remuneration at levels which are sufficient enough to attract the right calibre of professionals to the board but should fix the remuneration at levels which must not be more than necessary.
Sometimes, the remuneration committee may carry on its work on the advice of remuneration consultants who may be engaged for the purpose. However, ultimately, in the determination of remuneration levels, the remuneration committee is expected to have recourse to commensurate remuneration in similar companies, the size of the organisation and the financial resources available.
In certain cases, where directors are offered share options as part of their remuneration, this must be done with the view of getting directors to align their interest with that of shareholders by ensuring an upward appreciation of the shares.
Carrying into effect the mandate of the remuneration committee
Even though corporate governance practices in Ghana have not evolved to the level currently in existence in such notable places as the United Kingdom, there is no doubt that the state of corporate governance in Ghana presently is quite healthy.
This at least could be said of listed companies which dutifully organise annual general meetings in conformity with the companies’ code and also publish accounts regularly in accordance with the rules of the Stock Exchange.
Thus, it is not uncommon to have the members of the committees of the listed companies listed in their annual reports. However, it is regrettable to say that either by omission or oversight, a few listed companies omit to state members of the board subcommittees.
Most importantly, what is sometimes a bother with the omission to state the board subcommittees in the annual reports is the absence of the authentication of the auditor’s report by the audit committee.
Nevertheless, this does not actually create a problem in so far as shareholders trust the auditors to do a good job.
It is be noted that in Ghana presently, almost all issues for discussion at annual general meetings are handled by the chairman who also handles the enquires as well. It is suggested that as Ghana advances in her march towards effective corporate governance, it would do a world of good to the corporate governance fraternity to adopt substantially the best practices in corporate governance elsewhere particularly the Greenbury Report and its accompanying code of practice on corporate governance in the UK.
The Greenbury Report on corporate governance in the United Kingdom made the most far reaching recommendations by far on directors’ remuneration among all the corporate governance committees. This was in response to shareholder agitations over executive remuneration paid in some companies like Glaxo Smith Kline PLC, Royal Dutch Shell, Bank of Scotland, British Gas, and British Telecom etc.
In the first place, the remuneration committee should state the guidelines for fixing remuneration for directors in addition to any other benefits which shall be paid to the directors.
The chairman of the remuneration committee should take centre stage at annual general meetings with respect to all matters related to enquiries about the remuneration paid to directors and answer all questions and enquiries on directors’ remuneration satisfactorily.
The remuneration committee’s report on the guidelines on remuneration should be stated in a comprehensive manner in the company’s annual report.
If possible, the broad policy guidelines proposed by the remuneration committee should be voted on by the shareholders at annual general meetings. This will ultimately be in conformity with sections 134 (11) 194 and 211 of the Companies Act which entrusts the shareholders with the mandate for fixing the remuneration of directors and the auditor.
It should also be of the most importance that the members of the remuneration committee should always be listed in the annual report and be made to deliver a brief statement as an overview of their activities.
It is envisaged that the effective handling of the mandate of the remuneration committee will in no small measure contribute to assure the highest confidence of shareholders in the directors.
The writer is a lawyer with specialisation in international business law.
Email: