Corporate governance in an emergent economy: a case of Ghana

The purpose of this study is to examine corporate governance practices in an emerging economy. It focusses on how ownership control and board control systems operate in corporate organisations in an emergent economy, assuming that these systems are essential for enhancing good corporate governance practices in emerging countries.

The paper builds on descriptive multiple-case study with multiple units of analysis to divulge how ownership control and board control systems function to ensuring effective corporate governance in publicly listed corporate organisations in Ghana. A criterion-based sampling technique is used to select the companies. Thereafter, three techniques of data collection are used to gather data from the companies: archival records, semi-structured interviews and observation.

By linking the gathered data to the paper’s theoretical propositions, the study highlights that all the companies are characterised by the presence of large shareholders, and, in consequence, they tend to exert extensive control over the activities of the companies through their involvement in the decision-making processes. However, whilst the presence of large shareholders has the tendency to solve the agency problem, it poses challenges in regards to minority shareholders’ interests in these corporate organisations. The study also reveals that boards of directors tend to exercise control over corporate organisations when majority shareholders stop interfering in their dealings. This implies that when major shareholders fully partake in corporate decision-making processes of companies, boards of directors seem to be sheer advisory bodies to management.

This is a paper to shed light on corporate governance practices in four large publicly listed corporate organisations on the Ghana Stock Exchange, so the observable facts do not apply to other emergent economies. In addition, the sample does not represent all corporate organisations in Ghana; thus, the empirical observations cannot be generalised to other organisations that have not been included in this study. However, the empirical results can be applied to other similar corporations in Ghana and other emergent economies in an analytical sense. With the application of inductive reasoning, the results can be applied to provide important appreciation in an effort to understand the structure of corporate governance practices in organisations in developing countries.

A comparative analysis of the empirical observations from this study and the recommended guidelines of corporate governance of Ghana has been carried out, and aspects in which organisations need to reform and improve to fully comply with the guidelines are highlighted: director independence, director evaluation, introduction of new directors and board education. This could possibly be the foundation upon which corporate governance structures in these organisations can be restructured and further enhanced.

The majority of the studies of corporate governance in emergent economies have used quantitative techniques to examine the relationship between corporate governance mechanisms and firm performance. However, this study takes a different approach to examine corporate governance practice in an emergent economy by using a comprehensive and defensible qualitative analysis to examine relations between ownership structure and shareholder control, and board of directors and board control. In addition, it highlights how ownership and board control systems interact in corporate organisations in emergent economies.