The Institute of Directors (IoD) Ghana is set to develop Corporate Governance Index (CGI) which will be used as a tool to measure compliance of companies in Ghana to best corporate governance practices.
To ensure full compliance and enforcement by board of directors, IoD is taking stringent measures to give the initiative a legal backing. It is expected to be launched in March this year.
The index will be looking at how stakeholders respond to corporate governance issue in four thematic areas. These will be used to assess both public and private companies in the country.
The four thematic areas are effective culture, good performance, effective controls and legitimacy. These will also serve as indicators to assess organizational output, corporate behaviour and strength to ensure best practices.
This has become necessary in the wake of revelations of critical shortcomings with regards to good corporate governance practices – particularly in the financial intermediation industry – and the implementation of the index as a quantitative measure of compliance to best practice aims to sanitize institutions, most especially focusing on fighting corruption in both State-Owned Enterprises (SOEs) and the private sector.
With respect to effective culture, indicators under this category will focus on effective leadership, corporate citizenship and a host of others whereas good performance will be scientifically measuring to what extent the expectations of stakeholders are being met and the outcome of organizational strategy.
Effective control mechanisms will focus on risk mitigation and risk avoidance while legitimacy will try to quantitatively measure to what extent organisations can be trusted in the corporate environment with a view to boosting investor confidence and improving on the ease of doing business in Ghana’s formal sector.
All of these are set to be measured and will form the bedrock that will be used to index and measure compliance to best corporate practices by corporate entities across all sectors of the economy.
Briefing the Goldstreet Business, president of IoD, Mr. Rockson Dogbegah said since his outfit does not have the authority to impose sanctions on companies who fail to comply with best practices, IoD has instituted an award recognition scheme to celebrate people and institutions who have distinguished themselves in the area of good corporate governance.
“The criteria for selection will be anchored largely on best corporate practices”, he reiterated.
Using a quantitatively designed corporate governance index will offer several crucial advantages. For instance, it will help equity and debt financiers quantify their investment and credit risks respectively. It would also help regulators in their assessment of companies under their purview
When CGI is fully streamlined, it will be looking at the critical parameters that enhance good corporate governance. These critical elements will address the total output of institutions and ethical leadership.
By Dundas Whigham
