Corporate Governance - The Importance of Board of Directors

Corporate Governance
In every institution, there are certain key people who make decisions that affect the entire  organization. They determine the overall direction and purpose of the entity. In terms of governance of a country, the government determine the macroeconomic targets, distribution of resources, fiscal policies etc. When it comes to companies, the group of people whose decision affect the entire company are called the Board of Directors. The board of directors form part of the corporate governance system with the objective of safeguarding the interest of shareholders.

Corporate governance is a process of supervision and control intended to ensure that the company’s management acts in accordance with the interests of shareholders. Due to various corporate governance scandals in the last decade, organizations are playing more emphasis strengthen their corporate system more than ever. I will not go into details of the corporate governance system but will touch on important aspects such as:

1. The formation of the board
2. Responsibilities of the board of directors
3. Board Committees
 
The formation of the Board
The board is made of the directors appointed by the shareholders. It is recommended that the tenure of each director is renewed periodically. This afford the board the opportunity to review the performance of the individual directors and to ascertain whether a director should be maintained or removed. There are two types of directors, namely, executive directors and non-executive directors. The executive directors are usually employees who are involved in the day-to-day activities of the company. However, non executive directors are external and are expected to have no personal interest in the company.

The board is headed by the board chairman who preside over board meetings. There is no recommended number of directors to constitute the board. However, it is recommended that there should be a good balance of the number of executive and non-executive directors. There should also be a qualified board secretary. According to Ghana Company Act 2019,  the board secretary should be a lawyer, a member of Institute of Chartered Accountants or a qualified secretary from a recognized institution.


The responsibilities of the Board include the following:

1. Ensure that the strategic vision of the company is implemented by management and providing strategic leadership to the Company;
2. Charge management with the responsibility for creating and executing a plan that will achieve the Company’s mandate.
3. Approve management’s Strategic Plan;
4. Review policy and process for managing risk;
5. Evaluate the performance of management and recommend the removal of a manager if necessary;
6. Establish policies with respect to the prudent and ethical operation of the Company;
7. Ensure that the Company conducts its business within the directives of the Shareholders, the Board and applicable law;  
8. Review the financial statements of the Company;
9. Recommend the appointment of an independent auditor;
10. Monitor the organization’s conformance to its Strategic Plan;
11. Approving and monitoring financial and other reporting.


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