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18.03.2004 Feature Article

Corporate Governance: Fairness Must Triumph at Ghana Airways

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Since independence in the 1960s, African leaders, with few exceptions, have attributed almost every malaise to external agents. But a new and angry generation of Africans has emerged. [They] blame local systems of governance: excessive state intervention and corruption. ~ Dr. George B.N. Ayittey [[email protected]], Professor of Economics, American University, Washington, DC In Ghana, when a Government or Minister appoints someone to be CEO, they continue to expect that CEO to take management decisions upon their instructions or with their prior approval. Sometimes, even the Board Chairman alone can override the CEO on operational matters. This is a deep and worrisome problem, and has been at the ROOT of the failure of our state-owned enterprises since the 1960s. ~ H. Kwasi Prempeh, Associate Professor of Law, Seton Hall Law School, Newark New Jersey, March 12, 2004 For markets and private sectors to take root, there must be a sound underpinning of institutions, laws, regulations, policies and good governance. ~ Kofi Annan, United Nations Secretary General, New York, New York It seems nothing has been learned. ~ Dr. George B.N. Ayittey [[email protected]], Professor of Economics, American University, Washington, DC We must collectively work towards defeating the Ghana Airways Gate – the board's misguided efforts to remove Chief Executive Philip Owusu from office because they don't get their way is the latest in a long history of scandals that continue to destroy state-owned corporations in Ghana. ~ Kofi A. Korley [[email protected]], Vancouver, British Columbia, Canada Board members in Ghana will start fighting with a CEO if they do not get expected handouts or welfare. This trend of affairs [persistent board interference in a firm's operations] is FOOLISH and suicidal. The board is not a supreme court. It is only supposed to guide the CEO from excesses. They should not run the company. They are shadow figures who are not directly responsible for the operation of the company. They have destroyed several companies in the country. ~ Amankwatia, USA, March 12, 2004 Ghana must condemn all forms of unconstitutional means of removing leaders from office, from the irresponsible call for a coup in Ghana by NDC MP Edward Doe Adjaho, to the Ghana Airways board's illegal and reckless attempt to terminate Philip Owusu's appointment as CEO of Ghana Airways. ~ Nii Oquaye Layea [[email protected]], San Francisco, California, March 14, 2004 The decision to remove a CEO from office should be based on how the company is performing financially [not on a hollow and deceptive charge of insubordination]. There may be a good reason why Ghana Airways CEO Philip Owusu does not see eye-to-eye with the board. We need to know that. Maybe the board itself should be fired. ~ Amankwatia, USA, March 12, 2004 It is individuals such as Philip Owusu who can make a difference in our work ethic and managerial mentality. Mr. Owusu [the former World Bank Country Director in Angola] would hardly need even his salary in order to survive..and could remain incorruptible. He can make an excellent name for himself and Ghana by streamlining the management procedures at Ghana Airways. ~ Dr. Kofi Ellison [[email protected]], Washington, DC The attempt by the Ghana Airways Board to remove Philip Owusu from office must be condemned by Ghanaians with basic understanding of the importance of corporate governance and its influence on successful capitalism and economic growth. ~ Kabatin Ismaila [[email protected]], Helsinki, Finland, March 14, 2004 Board interference of corporate leaders' management operations and removal of CEOs for reasons other than proven record of non-performance continue to be a great disincentive for talented future leaders of businesses in Ghana. ~ Afia N. Sarpong [[email protected]], Sao Paolo, Brazil, March 13, 2004 They tried UNSUCCESSFULLY to destroy the Ashanti Goldfields Chief Executive Sam Jonah. They would fail again in bringing down the Ghana Airways CEO Philip Owusu. ~ Kokou Amekudzi [[email protected]], London, England, March 14, 2004 Normally, it is for the CEO, with the help of a team of managers, to take charge of the day-to-day management of the corporation. The board must keep its distance from the routine operations of the SOE and focus, instead, on the "results." ~ H. Kwasi Prempeh, Associate Professor of Law, Seton Hall Law School, Newark New Jersey Ghanaians must NEVER tolerate the nonsense coming from the Ghana Airways board. Absolutely NO WAY! ~ Dr. Kwame Appiah Dankwa, Long Island, New York, USA In May 2003, a new team led by E.R.K Dwemoh was selected to form the board of the Ghana Airways. It's time to dissolve the board again and bring in a new team. ~ Sowah Quarshie [[email protected]], Attorney @ Law, San Francisco, California, March 13, 2004 Although the ideological context of state enterprises has changed significantly from the "socialist" heydays of the 1960s when state enterprises were the order of the day, the model of corporate governance for state enterprises in Ghana remains practically unchanged. Today, like the 1960s, the governance of Ghana's state enterprises is dominated by politics, patronage, and populism, with considerations of merit, competitiveness, and efficiency still relegated to secondary importance at best. Ghana has in fact been living with a costly corporate governance problem since the 1960s. ~ Center For Democracic Development, Accra, Ghana I am deeply disappointed that this dysfunctional model of corporate governance persists to this day. ~ H. Kwasi Prempeh, Associate Professor of Law, Seton Hall Law School, Newark New Jersey, March 12, 2004 The unlawful termination of Philip Owusu's tenure as the Chief Executive of Ghana Airways is a coup and will FAIL. President Kufuor MUST VETO the decision, reinstate Philip Owusu as CEO of the airline and dissolve the board immediately.

~ Kofi Agyenim-Boateng, Port Adelaide, Australia, March 14, 2004

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H. KWASI PREMPEH, Associate Professor of Law, Seton Hall Law School Newark New Jersey ~ Proper oversight begins with a clear definition of the roles, functions, and responsibilities of the various players in the state-owned enterprise (SOE) "chain of command" - namely, the CEO, the board, the chairman of the board, and the Minister.

Normally, it is for the CEO, with the help of a team of managers, to take charge of the day-to-day management of the corporation. The board must keep its distance from the routine operations of the SOE and focus, instead, on the "results."

Specifically, it must concern itself with overseeing and assessing, on a periodic basis (say, bi-quarterly), whether and how the state enterprise is staying on course with respect to its budgets, capital plans, performance targets, and other goals and milestones that will have been agreed in advance in the form of a memorandum of understanding or performance contract among the board, the CEO, and the sector Minister.

Except for decisions involving top-management hiring and firing, entry into new lines of business, and non-routine borrowing, expenditure, or procurement above a pre-determined threshold amount, the board must leave all decisions in the normal course of business in the hands of the CEO and management.

The board, in turn, must review with the Minister periodically (say, half-yearly) or upon the Minister's request the SOE's, the board's, and CEO's performance. Where the Minister deems it necessary to issue directives or instructions for specific actions or decisions to be taken (or not to be taken) by the board or CEO, the Minister must be required (preferably by statute) to put such directives or instructions in writing. A requirement of this kind serves two important purposes.

First, a written directive provides a record and, thus, a possible defence for the CEO and the board if acts or omissions taken in compliance with "higher orders" produce undesirable outcomes or are otherwise queried at a later date.

Second, requiring direct ministerial interference in SOE decision-making to be rendered in writing is likely to deter needless ministerial meddling. Past the board and the Minister, the next level in the state enterprise oversight system is Parliament.

As a matter of constitutional practice and doctrine, Ministers are accountable to Parliament for the proper management of all entities, including SOEs, within their respective portfolios. Parliament has various means for enforcing such ministerial accountability.

First, Ministers can be asked, by order of the House, to appear before the House to answer questions about matters within the scope of their portfolios.

Second, Members of Parliament may use the time routinely allotted them to make Statements on the floor of the House to raise concerns of public interest, which necessarily includes matters concerning a state-owned enterprise.

Third, committees of Parliament can conduct investigations and inquiries into the activities of a government-owned corporation.

Regrettably, Ghana's Parliament has yet to assume its rightful role in ensuring good governance in the SOE sector. Significantly, despite the colossal amounts of public funds at stake as well as the wider social and economic implications involved in the GNPC, SSNIT, and Ghana Airways crises, there was no timely intervention, whether by way of investigation or inquiry, from any committee of Parliament.

In fact, the responsible sector Ministers have not even been invited to the House to explain how these public corporations got into the messes they are known to be in.

Parliament must insist on seeing in a timely fashion the annual audited financial statements of all SOEs. For SOEs that continue to depend, for some curious reason, on government for annual budget support, Parliament must withhold budget allocation for any such SOE that has not met its financial audit and reporting obligations. In addition, Parliament must use the opportunity of the Auditor-General's report to initiate investigations or recommend action to remedy any malfeasance or other deficiencies that such reports may reveal about a particular SOE. Unless Parliament takes a keen and timely interest in the goings on within the SOE sector, scarce public resources will continue to be squandered. Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.

Sowah Quarshie
Sowah Quarshie, © 2004

The author has 1 publications published on Modern Ghana. Column Page: SowahQuarshie

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