Ghana has spent two decades writing better governance rules. Our institutions keep failing anyway. The missing ingredient is not another code. It is conscience.
The question that will not go away
Every time a Ghanaian institution collapses, we ask the same question. Where was the board?
Usually, the board was there. It met on schedule. It had committees for audit, risk and remuneration. The annual report carried a fine statement on corporate governance. The auditors signed off. On paper, everything was in order.
And still the institution failed. Depositors lost their savings. Workers lost their jobs. Taxpayers picked up the bill.
I have spent many years as a governance adviser, a lecturer and a board member. I have come to believe that we keep asking the wrong question. We ask whether an institution had the right rules. We should be asking whether the people running it had the courage and the conscience to follow them when it mattered.
Better rules, the same failures
We cannot say Ghana has ignored governance. Between 2017 and 2019, the Bank of Ghana cleaned up the financial sector. Nine banks lost their licences, along with hundreds of microfinance companies and savings and loans firms. The cost to the public ran into billions of cedis.
The response was serious. The Bank of Ghana issued its Corporate Governance Directive in 2018. Parliament passed a new Companies Act in 2019. Boards now face stricter rules on independence, tenure and related party lending. These were real and necessary reforms.
But look at what the inquiries found. In bank after bank, the problems were not hidden from those in charge. Insiders borrowed money they did not repay. Related companies received loans no prudent lender would approve. Warnings were raised and ignored. In our state enterprises, from SADA to GYEEDA to the Tema Oil Refinery, the story was similar. The rules existed. People chose not to follow them, and nobody stopped them.
The pattern runs through our recent history. When DKM Diamond Microfinance collapsed in 2015, customers learned that their deposits had been spent on buildings and vehicles. When the Securities and Exchange Commission stopped Menzgold’s gold trading in 2018, thousands of ordinary Ghanaians discovered that promises of extraordinary returns had no lawful basis. The KPMG review of Unibank, published by the Bank of Ghana in 2018, described large sums flowing to shareholders and related parties. None of these institutions failed for lack of rules. Each failed because the people in charge decided the rules did not apply to them, and the people around them said nothing.
Across Africa, the same story
Ghana is not alone. In 2009, the Central Bank of Nigeria removed the chief executives of eight banks after examinations exposed reckless lending, much of it to insiders and friends. In South Africa, the Public Protector’s 2015 report on the Passenger Rail Agency, titled Derailed, described contracts awarded without proper process. In 2018, an investigation into VBS Mutual Bank, published under the title The Great Bank Heist, found that close to two billion rand had been taken from a bank that served pensioners, burial societies and rural municipalities. In Kenya, scandals at the National Youth Service cost the public billions of shillings.
South Africa also gives us Steinhoff. In December 2017, the retail giant admitted accounting irregularities and its share value collapsed within days. Steinhoff was listed in Johannesburg and Frankfurt. It had independent directors, audited accounts and a board full of respected names. The structures were in place. What was missing was the willingness of someone in authority to say, early and loudly, that the numbers did not add up.
And around the world
The richest countries have not escaped either. Enron had a published code of ethics when it collapsed in 2001. At WorldCom, an internal auditor named Cynthia Cooper uncovered billions of dollars of false accounting, working against a culture that had made misconduct normal. In 2012, British regulators fined Barclays £59.5 million after its traders manipulated the LIBOR interest rate. In 2015, Volkswagen admitted that about 11 million diesel vehicles carried software designed to cheat emissions tests. Wells Fargo staff, under heavy sales pressure, opened millions of accounts that customers never asked for.
The most painful example is the Boeing 737 MAX. Two crashes, in Indonesia in 2018 and Ethiopia in 2019, killed 346 people. The investigations that followed described a company where commercial pressure had pushed safety concerns aside. Boeing was one of the most admired and closely regulated companies in the world. Its rules did not fail. Its conscience did.
What the rules cannot reach
Governance codes are good at regulating what we can see. They set out how many directors a board should have, which committees it needs and what it must disclose. What they cannot easily reach is what happens inside people and between people. That is where most failures begin.
Culture. Every institution has a written code and an unwritten one. The unwritten code tells staff what is really rewarded. If it says that results matter more than how they are achieved, no policy manual will stop people cutting corners.
Silence. In almost every collapse, someone saw the problem early. A junior officer noticed the strange loans. An accountant questioned the figures. But speaking up felt dangerous, so they kept quiet, or they spoke and nobody listened. Ghana has had a Whistleblower Act since 2006. Yet many workers still believe that the person who raises the alarm is the one who gets punished. A board that never hears bad news should not feel comforted. It should feel worried.
Loyalty and power. This is the part we rarely discuss in public. In our society, loyalty is a virtue. We honour the founder who built the company, the elder who appointed us and the party that gave us the job. These are good values. But when a director owes his seat to the chief executive he is supposed to question, independence becomes a word on paper. When appointments to state boards follow political loyalty rather than competence, we should not be surprised when those boards fail to challenge anyone.
Why conscience and ethics matter
Some readers will say that conscience is too soft a word for the boardroom. Governance, they argue, is about law, control and enforcement. I disagree, and the evidence is on my side. There are five reasons why conscience and ethics are not optional extras but the foundation of good governance.
First, rules always arrive after the problem. Every code we have was written in response to a scandal. The Cadbury Report followed British corporate collapses. The Sarbanes Oxley Act followed Enron and WorldCom. Our own 2018 directive followed the banking crisis. Clever people will always find the gap the new rule did not foresee. Only conscience works before the rule is written.
Second, no regulator can watch everything. The Bank of Ghana cannot sit in every credit committee. Auditors test samples, not every transaction. Most decisions in an institution are taken when no outsider is looking. What people do in those moments depends on their character, not on the next inspection.
Third, ethical failure is far more expensive than ethical conduct. Ghana’s financial sector clean-up cost the public billions of cedis. Volkswagen has paid many billions of dollars in fines and settlements. Boeing lost not only money but lives and its reputation for safety. Against these losses, the cost of a board that asks hard questions is small.
Fourth, trust is capital. A bank survives because depositors believe their money is safe. A public institution works because citizens believe it is fair. When trust breaks, it falls quickly and returns slowly. The empty banking halls of 2018 and the long lines of anxious Menzgold customers showed how fast confidence disappears.
Fifth, conscience works, and we have proof. In 1982, when seven people in Chicago died after taking Tylenol capsules that had been poisoned with cyanide, Johnson & Johnson did not wait for a regulator. It recalled about 31 million bottles from shelves across the United States, guided by a company credo that put customers first. The company’s reputation recovered and grew stronger. In 1995, when fire destroyed the Malden Mills factory in Massachusetts, its owner, Aaron Feuerstein, kept paying his workers while the factory was rebuilt. Closer to home, Nelson Mandela showed that a leader who holds power as a trust can rebuild a divided nation’s faith in its institutions. Conscience is not weakness. It is what makes institutions worth trusting.
From compliance to conscience
Compliance asks one question: is this allowed? Conscience asks a harder one: is this right? An institution can pass the first test every day and fail the second. Many of our failed banks did exactly that until the day the money ran out.
We do not need to borrow this idea from abroad. Our own traditions already hold it. The Ghanaian philosopher Kwame Gyekye whom I am proud to say I knew personally and who also taught me showed that Akan ethics judges conduct by its effect on human wellbeing, not by who gave the order. In the Akan political tradition, a chief held office in trust for the people and could be removed for abusing it. Our ancestors understood that authority is a trust, not a possession. Somewhere between the village and the boardroom, we seem to have forgotten.
So, what should change?
- Boards should test decisions for what is right, not only for what is legal. Every major board paper should answer one plain question: is this right for the people it affects? Minutes should record dissent honestly instead of presenting every decision as unanimous. Consider Enron. In 1999 its board formally suspended the company’s own code of ethics so that its finance chief could run private partnerships that traded with Enron. The decision was taken properly and minuted. It was permitted. It was not right, and those partnerships became the vehicle for the losses that destroyed the company. Closer to home, picture a rural bank in the Ashanti Region where one director objects to a large loan for a company linked to the chairman. Her objection never reaches the minutes, which record a unanimous decision. Two years later the loan has gone bad, and the regulator reads minutes that say everyone agreed. The one person who saw the danger has no record that she ever spoke.
- Directors should be chosen for character as well as competence. A brilliant director who will not challenge the chief executive adds little. Integrity should be assessed when directors are appointed and reviewed in every board evaluation.
The American blood testing company Theranos had one of the most famous boards in the world, including two former US Secretaries of State and a retired general. Few of them understood the technology, and none forced the hard questions until journalists and regulators did. The company collapsed in 2018 and its founder was later convicted of fraud. In Ghana, we know a quieter version of the same story. After each election, new boards of state enterprises are often filled with loyal party members. Many are able people. But a director who owes his seat to a political patron will think twice before challenging the chief executive that same patron appointed. - Those who speak up must be protected in practice. Whistleblowing channels mean nothing if the person who uses them loses a promotion. Boards should ask regularly how many concerns were raised, what was done about them and what happened to the people who raised them. In Kenya, John Githongo, the official appointed to lead the government’s fight against corruption, exposed the Anglo Leasing contracts in 2005. He had to leave the country to stay safe. In South Africa, staff at the rail agency PRASA who reported irregular contracts were suspended or dismissed while those they named kept their jobs. Now picture an accounts officer at a Ghanaian district assembly who reports that payments are being made to a contractor who never delivered. Within a month she is transferred to a distant district “in the interest of the service”. Nobody else in that office will report anything for years.
- Regulators should look at culture, not only at structure. Ticking off board committees is easy. Asking staff whether they feel safe to report wrongdoing tells a regulator far more.
Some regulators already do this. Since 2011, the Dutch central bank has supervised the behaviour and culture of banks, using psychologists to observe board meetings and interview staff. After the LIBOR scandal, the United Kingdom introduced its Senior Managers Regime in 2016, which makes named senior bankers personally answerable for what happens in their areas. Ghana took an important step with the Bank of Ghana’s 2018 Corporate Governance Directive. The next step is for our regulators to ask not only whether a bank has a board risk committee, but whether its tellers feel safe to report a suspicious transaction made by a senior manager. - Citizens and shareholders should ask harder questions. Annual general meetings should be places for real questions, not ceremonies. Public trust is not a gift to institutions. It must be earned, and we are entitled to ask whether it has been.
In 2012, shareholders of the British insurer Aviva voted against the company’s pay report, and within days the chief executive resigned. Ordinary investors had made the board listen. Compare that with a familiar scene at many AGMs in Ghana: a long speech, a free lunch, and resolutions passed by acclamation in minutes. Imagine a retired teacher at a savings and loans AGM who stands up and asks, “How much has this company lent to its own directors, and how much has been repaid?” If more of us had asked that question in 2016, some of the institutions that collapsed in 2018 and 2019 might have been forced to answer it in time.
The governance we choose
The next institutional failure in Ghana will not happen because we lack a law. It will happen because, at some decisive moment, people who knew better chose silence, loyalty or convenience over what was right.
That is why governance is, in the end, a matter of choice. Every director chooses whether to ask the difficult question. Every manager chooses whether to report the irregular transaction. Every regulator chooses whether to look beneath the paperwork. Good governance is not merely the management of power. It is the responsible stewardship of trust.
We have built the structures. Now we must build the conscience to make them work.
