Appraisal of corporate governance in a lower middle income country: The case of Ghana

This paper, therefore, sought to explore whether or not gaps exist between the corporate governance policy and practices in Ghana and extant literature. This paper achieves this by examining characteristics of the board as they exist in Ghana in relations to the literature.
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Appraisal of corporate governance in a lower middle income country: The case of Ghana Accounting 2 (2016) 37–44 Contents lists available at GrowingScience Accounting homepage: www.GrowingScience.com/ac/ac.htmlAppraisal of corporate governance in a lower middle income country: The case of GhanaSeth Opponga,b*, Rajesh Arorac, Paul R. Sachsd and Mamuda T. Seiduea PhD Candidate, University of Ghana, Legon, Ghanab Lecturer at African University College of Communicationsc President and CEO, TQMS, Mumbai, Indiad Exexutive Director, NHS Human Services – Philadelphia, Philadelphia, PA, USAe Director, African Institute of Management Science, Accra, GhanaCHRONICLE ABSTRACT Article history: Accountability is instrumental for ensuring that a trusting relationship exists between Received December 17, 2015 shareholders and management of corporations in order that there will be enhanced investor Received in revised format confidence. Towards this end, corporate governance measures are instituted to make the December 18, 2015 executives or management of business organizations accountable for their stewardships of the Accepted December 21 2015 Available online organizational resources or shareholders’ investments. It is against that backdrop that the December 23 2015 Securities and Exchange Commission in Ghana has also developed a code on best practices on Keywords: corporate governance. However, the extent to which the provisions in the code are consistent Corporate governance with the theoretical and empirical literature is unknown. This paper, therefore, sought to Accountability explore whether or not gaps exist between the corporate governance policy and practices in Ghana Ghana and extant literature. This paper achieves this by examining characteristics of the board Board of directors as they exist in Ghana in relations to the literature. The characteristics examined in this paper Board size include responsibilities, optimal size, independence, board composition, and audit and Board composition compensation committees of boards. Recommendations are made based on the literature to address gaps that exist. © 2016 Growing Science Ltd. All rights reserved.1. IntroductionAccording to the World Bank (2012), countries can be classified into clusters based on per capitaincome. These clusters include (1) the low income countries (LIC) which is characterized by less than$1,005 per capita GNI in 2010, (2) the lower middle income countries (LMIC) characterized by percapita incomes between $1,006 and $3,975, (3) the upper middle income countries (UMIC)characterized by incomes between $3,976 and $12,275 and (4) the high income countries (HIC), withmore than $12,276 per capita income.* Corresponding author.E-mail address: oppon.seth@gmail.com (S. Oppong)© 2016 Growing Science Ltd. All rights reserved.doi: 10.5267/j.ac.2015.12.00538 Per capita income, however, is of limited use in classifying the economic status of countries because itdoes not consider the socio-political factors that accompany a given level of per capita income.Vázquez and Sumner (2012) offered an alternative classification of developing countries comprisingfive clusters. These include (1) Cluster 1: High poverty rate countries with largely traditionaleconomies, (2) Cluster 2: Natural resource dependent countries with little political freedom, (3) Cluster3: External flow dependent countries with high inequality, (4) Cluster 4: Economically egalitarianemerging economies with serious challenges of environmental sustainability and limited politicalfreedoms, and (5) Cluster 5: Unequal emerging economies with low dependence on external finance.Ghana has been classified as a lower middle income (Organization for Economic Cooperation andDevelopment, 2012). However, Vázquez and Sumner (2012) classified Ghana as a Cluster 3 ...