By Dominick Andoh
Professor Mervyn King, Chairman of the International Integration Reporting Council, has called for a change in mindset that will ensure the practice of modern quality corporate governance to address the phenomenon of poor corporate governance on the continent.
“The quality of governance on the African continent needs improvement; it’s one of the great problems of our continent. It’s about governance. It’s about quality not quantity. Over the years, we have established rules for people to comply with, but they have become mindless compliances instead of applying our mind honestly to make decisions in the best interests of an entity — be it the public sector, government department or a company in the private sector. “You have to change that mindset. In the same way, the directors of a company must not act in the interest of some family members.
It’s that mindset.” Professor King was speaking to the B&FT on the sidelines of a corporate governance lecture organised by the PwC Business School in Accra and attended by business leaders and senior public servants in Accra. “Integrated reporting is the latest advancement on how a company should report the state of play inside the company. It incorporates how the company makes its money, not only how much money is made.
In other words, how is the company making its money if it impacts on the three critical aspects of the economy, society and the environment? “We have for years just reported on the financial since the 1930s. But from the financials, a reader cannot tell whether the company is going to sustain value creation because of its changing role in the 21st century,” he said. Given the benefits of good governance in the private and public sectors, Prof. King called for an “honest intellectual exercise” that will ensure businesses do not carry on their businesses as usual but rather adopt modern integrated reporting principles.
“It’s been empirically established that if you practice quality governance people can measure risk on a more informed basis, that you can raise capital more cheaply, borrow money more cheaply; and very importantly you can attract young people who are 30 years and younger — who today are aware that companies carrying on business as usual probably will not survive in the 21st century because of the changing world we live in.
“The first thing is to make sure of the collective mind of the Board of Directors, because when the Board makes a decision it is a collective-mind decision. The critical issue is: ‘does that collective mind think the same thing when it makes that decision?’ “The Board needs to have a lot of discussion beforehand to make sure they all understand what the purpose of the company’s business is. What are the value-drivers of this business? Who are our stakeholders? What are their expectations? And after that, make a decision which is in the best interests of long-term consequential interests of all the stakeholders linked to the company. So it’s an honest intellectual exercise.
“Those principles are applicable to governments. Ministers and governments are supposed to be acting in the best interest of the citizens of Ghana, not in the interest of a political party.” Suresh Kana, Africa Senior Partner, PwC said: “A month ago we launched the PwC Business School in Ghana and this lecture is on the important topic of good governance. Our belief is that good governance is good business and really improves the lives of every citizen of a country. “We have business schools across the continent and it is just part of the evolution that we are undergoing, and we are doing it in a very responsible way. What we have is a tremendous body of knowledge, and is very good to share that. “Gone are the days when we talked only about shareholders of a business and owners of the business.
Today, we all operate the businesses within a community and so are interconnected with each other. “I think corporate governance is evolving. It is a world-wide development and with attention on Africa at the moment — from the world as an investment destination — it is absolutely critical to have good governance: in our companies, businesses and our governments as well, and right across society,” he added.
The PwC Business School aims at providing training programmes in the areas of entrepreneurship, leadership and general skills development for business leaders. Other areas the business school will be offering training courses in include corporate governance, corporate reporting and accounting, auditing, tax planning, sustainability, and integrated reporting as well as customer and service management. With sessions taking place at hotels or at the premises of participants, these sessions do not last more than two weeks and are very intensive, focusing on the core needs of the client — especially SMEs.