Corporate Goverance: Its Impact on the perfromance of State-Owned-Enterprises (Ghana case)

Abstract

In Ghana, development decision usually focus on peoples’ well-being and among other things bring to fore the concept of ”Gross National Happiness”. It is largely agreed that good governance is a fundamental building block of a just and economically prosperous society. In pursuance of this credible goal towards development, the government instituted state-owned enterprises as the vehicle to facilitate development. With time the performance of the SOEs became unfavorable to the development of the country. Ghana’s economy has seen a decline in the past decade as a result of poor corporate governance among the State Own Enterprises (SOE). This study was conducted to unravel the relationship between corporate overnance and financial performance of the SOE.

The research questions raised in this study was that, whether good corporate governance actually has an impact on financial performance of SOEs and the relationship that exist between governance and performance.

Desk research was the main method used in obtaining data and information for this study. This was complemented by one-on-one structured interview and self administered questionnaire survey (primary data), and analyzed with Kendall rank correlation analysis. A sample of eight (8) SOE were examined from the period 1999-2003 to establish a relationship between the financial and operational performance of the SOEs and the kind of corporate governance practiced in these organizations.

The findings of the test result carried out vividly show that there is a weak positive relationship between the corporate governance practices of the SOEs and their financial and operational performance. In examining the corporate governance culture of the selected SOEs, gave one clear result - there is weak corporate governance culture in all of them since none of them made the mark of meeting the basic tenets of good corporate governance in the study. The financial and operational performance of the SOEs under the study shows that all the SOEs were performing below expectation. There is therefore some logic in concluding that the poor corporate governance practices prevailing in the SOEs have some impact on the poor financial and operational results obtained in the years under study.

It is however, recommended that, the government as shareholder should determine the overarching purpose of the SOE and reaches an agreement with the board of directors on what the key objectives and priorities should be. The board then in turn determines the vision, values and strategies of the public enterprises based on the direction given by the shareholder. The government has a duty to locate its relationship with the board of directors in a way that adds value to the performance of the SOEs.