Corporate Governance Framework in Ghana: Principles, Legal Structure and Board Responsibilities

By Seth Doe Esq and Philipa Hagan Mensah

Introduction

Corporate governance refers to the system by which companies are directed and controlled. It provides the architecture within which decision making authority is exercised, reported and supervised. Within the Ghanaian context, corporate governance serves the essential purpose of promoting effective, entrepreneurial and prudent management that ensures the long term success of the company.[1]

The Board of Directors is charged with the central responsibility of governing the company, setting its strategic direction and supervising management. Shareholders, on the other hand, appoint directors and auditors and exercise residual powers collectively in general meeting.[2] Corporate governance therefore defines the relationship among these parties and ensures that authority is exercised in good faith, with accountability and in accordance with the law.

This essay examines the corporate governance framework in Ghana, analyses its core principles, evaluates the statutory distribution of corporate power and discusses the enhanced governance regime in the banking sector.

The Legal and Regulatory Framework

The primary legislation governing corporate governance in Ghana is the Companies Act 2019 (Act 992). It codifies the duties of directors, rights of shareholders, obligations of officers and the mechanisms through which companies are managed. Act 992 places strong emphasis on accountability, transparent reporting and the protection of minority shareholders.[3]

For State Owned Enterprises, corporate governance is influenced by additional legislation including the Public Finance Management Act 2016 and the State Interests and Governance Authority Act 2019 (Act 990). These statutes impose enhanced accountability standards because State Owned Enterprises manage public resources and perform strategic national functions.

Together, these instruments form the statutory foundation for corporate governance in Ghana.

The Core Principles of Good Corporate Governance

Four core principles anchor the governance framework: fairness, accountability, responsibility and transparency. These principles shape the behaviour of directors and officers and guide decision making processes within companies.

Fairness

Fairness requires equal treatment of all shareholders irrespective of the size of their shareholding. It also extends to other stakeholders such as employees, creditors, customers and the community.[4] Fairness promotes trust, legitimacy and reputational stability, particularly in competitive corporate environments.

Accountability

Accountability requires that directors explain and justify their decisions and actions. This principle demands accurate financial reporting, truthful communication with shareholders, and a robust relationship with auditors. Directors must ensure that the company presents a balanced assessment of its financial position and business prospects.[5]

Responsibility

Responsibility involves the proper exercise of powers by the Board of Directors. Directors must act in the best interest of the company, supervise management diligently, appoint competent executives and ensure compliance with law and policy.[6] Responsibility is inseparable from accountability, because directors must report on how they exercise the authority granted to them.

Transparency

Transparency demands openness in financial reporting, disclosure of material information and clarity regarding the roles of the Board and management. It strengthens stakeholder confidence and reduces opportunities for concealment, misconduct or manipulation.[7]

Benefits of Strong Corporate Governance

Companies that adhere to good governance principles tend to enjoy improved operational performance, stronger investor confidence and a more stable corporate culture. Effective governance contributes to long term corporate sustainability and enhances the credibility of the business environment.[8]

Common Challenges in Corporate Governance

Common governance issues include conflicts of interest, inadequate oversight, weak enforcement of policies, opacity in decision making and ethical breaches. These challenges undermine accountability and can lead to poor performance or institutional collapse.[9]

Causes of Corporate Governance Failure

Corporate governance failure in Ghana is often the result of poor ethical leadership, lack of integrity, mismanagement, fraud, corruption and violation of governance rules. These deficiencies contribute significantly to financial instability and corporate collapse.[10]

Distribution of Corporate Power under Section 144 of the Companies Act 2019

Section 144 provides that a company acts through three main organs:

1. The Board of Directors
2. The members in general meeting
3. Officers or agents appointed by the members or the Board[11]

This structure reflects a balance of powers whereby the Board exercises managerial authority, members exercise ultimate oversight and officers perform delegated functions.

The Role of the Board of Directors

Under Act 992, the Board is responsible for managing the business and affairs of the company. Its responsibilities include:

1. Setting the strategic aims of the company
2. Providing leadership to implement those aims
3. Supervising management
4. Reporting to shareholders on their stewardship[12]

The Board influences policy formulation, strategic planning, risk management, financial reporting and human resource development. It must act honestly and in good faith for the benefit of the company.

Limitations on the Powers of the Board of Directors

Although the Board has broad managerial authority, its powers are subject to checks through shareholder action. The members in general meeting may:

1. Act when directors are disqualified or a deadlock exists
2. Institute legal proceedings in the name of the company where the Board fails
3. Ratify or confirm actions taken by the Board
4. Make recommendations to the Board[13]

These safeguards ensure that the Board remains accountable to shareholders.

Officers of the Company

Company officers typically include the chairperson, non executive directors, the managing director, employees and the company secretary. Directors and the company secretary are central to governance. The secretary ensures compliance with statutory requirements, maintains corporate records and facilitates communication between the Board and shareholders.[14]

Corporate Governance in the Banking Sector

The financial sector crisis revealed significant governance deficiencies within several institutions. The Banks and Specialised Deposit Taking Institutions Act 2016 (Act 930) therefore introduced strengthened governance standards for the banking industry.

Disqualification Requirements

Section 58 disqualifies persons who are insolvent, of unsound mind, convicted of offences involving dishonesty or associated with collapsed institutions from serving as directors or key management personnel.[15]

Disclosure of Interests

Section 59 requires directors and key management personnel to declare their professional and business interests to prevent conflicts of interest.[16]

Disclosure in Specific Transactions

Directors must disclose their interest in proposed credit facilities and abstain from deliberations relating to those transactions.[17]

Approval of Key Appointments

Section 60 mandates prior written approval of the Bank of Ghana for the appointment of chief executives and key management personnel.[18]

These measures aim to ensure the integrity, competence and ethical conduct of officers within regulated financial institutions.

Conclusion

The development of the corporate governance framework in Ghana reflects an increasing commitment to transparency, accountability and ethical leadership within the corporate sector. Act 992, Act 930 and related legislation provide mechanisms that promote responsible management, protect shareholders and reduce the likelihood of corporate failure.

Strict adherence to these principles is essential for strengthening investor confidence, attracting capital, protecting depositors and fostering sustainable economic development. Good corporate governance therefore remains a foundation for long term corporate success and national growth.

FOOTNOTES

[1] Companies Act 2019 (Act 992), general principles on corporate direction and control.
[2] Ibid, provisions on shareholder powers and appointments.
[3] Ibid, enhanced provisions on disclosure and accountability.
[4] Ibid, principles relating to fair treatment of shareholders and stakeholders.
[5] Ibid, corporate reporting and stewardship obligations.
[6] Ibid, fiduciary duties of directors.
[7] Ibid, disclosure and transparency requirements.
[8] Based on widely recognised governance principles within statutory and regulatory frameworks.
[9] Issues identified within statutory commentary and governance literature.
[10] Failures identified within the governance issues provided.
[11] Companies Act 2019 (Act 992), section 144.
[12] Ibid, board responsibility provisions.
[13] Ibid, limitations on board power.
[14] Ibid, statutory functions of officers.
[15] Banks and Specialised Deposit Taking Institutions Act 2016 (Act 930), section 58.
[16] Act 930, section 59.
[17] Ibid, conflict of interest provisions relating to transactions.
[18] Act 930, section 60.