Boards of directors; Are they serving their purpose?
In most parts of the world, the practice of having Board of Directors to oversee the activities of corporations seems to have been accepted as the epitome of good corporate governance since time immemorial. The practice, which takes its roots from the western capitalist corporate world, dates back to the evolution of companies.
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A Board of Directors is a group of individuals elected by the shareholders of a company or the government, as the case may be, to oversee the management of an organisation. Boards meet at specified times to discuss company problems, growth, profits, market trends and future development among other issues. Most boards would appoint a chief executive who will be answerable to the board.
The ultimate aim of Boards of Directors is to provide group decision- making, check the potential arbitrariness and excesses of CEOs and ensure good corporate governance in general. This is in obvious resonance with the traditional Ghanaian saying that, “Ti kro enko egyina,” to wit, collective decision-making is better.
Functions of boards
The broad duties of boards of directors may include:
• governing the organisation by establishing broad policies and objectives;
• selecting, appointing, supporting and reviewing the performance of the chief executive;
• ensuring the availability of adequate financial resources;
• approving annual budgets;
• accounting to the stakeholders for the organisation's performance;
• setting the salaries and compensation of company management.
In Ghana, though we embraced the concept at a much later date in our national life, it does not seem to be working for us. This assertion is drawn from the legion of our public or private corporations, which have gone down in the past and the equally large number which can be aptly described as living dead. The reasons for this state of affairs are, however, not far-fetched.
Composition
Boards are supposed to be composed of people with diverse experiences that they can bring to bear on the growth of an organisation. However, in our case what do we see? Some of our boards have membership drawn from political cronies, family members and friends irrespective of their professional backgrounds.
Then also is the issue of the duration that a board should be in office. Ideally, a board should be in office for a limited period so that if it is not performing, it could be replaced at the end of the term. But in our case, some boards seem permanent.
Another disturbing issue is making time for board activities. Some individuals are saddled with membership of several boards and this, coupled with their own private commitments, makes them virtual liabilities as they persistently absent themselves from board activities. Yet being Ghanaians, they would not hesitate to accept offers onto new boards so long as they go with financial and other rewards.
There are also several instances where people who have served the nation for several decades and must be enjoying their extra time with their grandchildren quietly, would still desperately cling on to boards due to the trappings while younger persons who are hungrier to achieve results are denied such opportunities. Though the old people may have tons of experiences, the reality is that life is dynamic and so the old ways of doing things also change.
Conflict of interest
There have been instances where conflict and power struggle have characterised relations between boards and management. In some cases, board members have commandeered the organisations’ resources, including vehicles and houses, for their private use at the expense of the work of corporations. We have even had clear cases of conflict of interest where the wives of board members are suppliers for the same organisations.
We cannot also lose sight of situations where board members and members of management may be classmates, clansmen or belong to social groups and therefore condone and connive in certain situations to the detriment of the achievement of corporate goals.
Extra cost
At the end of the day, it must be noted that boards are not run on charity basis but add up to the operational costs of running organisations. This is even more crucial especially in our part of the world where personal gains usually take precedence over all others.
Though there are examples of boards which are performing creditably, recent disclosures of the activities of the boards of the Korle Bu Teaching Hospital, the National Service Scheme and several others in the past point to the fact that we are not deriving the maximum benefits from the western board of directors system.
Perhaps, the hardest to take is when boards shun responsibility and refuse to be identified with the failures of the organisations they presided over. This is most unfair and should be looked at again.
I think it is about time we took a second look at the wholesale adoption of this system with the view to modifying it to suit our socio-cultural dynamics. Alternatively, we can do away with it entirely . As they operate now, most of them are more of liabilities than assets.
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The writer is Head of Public Relations and Protocol of the University of Cape Coast and a retired senior military officer. Writer’s email:[email protected]