The importance of corporate governance – Mr Akafia on ServLed Friday

Good foundations are everything. Many a project, venture or company has been initiated with the best of intentions and the most sincere enthusiasm. Within a matter of years, months — at times, even weeks — however, the cracks begin to manifest as critical oversights either sabotage the endeavor completely, or prevent it from ever reaching its full potential.

This is frequently the case with corporate governance. While Africa is experiencing an economic boom that is awakening entrepreneurs across the continent to the opportunities at their disposal, one area we continually trail in is corporate governance. Observing this, the team at ServLed selected this topic as the focus for its second installment of its entrepreneurship seminar series.  

 Michael Akafia of Gold Fields Ghana began his presentation by giving the room of entrepreneurs context for the increased attention which the international community is currently paying to corporate governance in recent times. Given that today’s consumers consider transparency, honesty and trust before even appraising the quality of products or services they buy, it is clear that an organization’s mechanisms of accountability and procedures for decision making have great bearing on its long-term success. 

Using a string of well-researched and sobering examples, Mr. Akafia highlighted the stories of Enron, Merril Lynch and Ghana’s Meridian BIAO, illustrating the colossal risks associated with faulty corporate government structures. Rather than simply follow the letter of regulations, today’s companies are beginning to pursue the spirit and intent behind these regulations as well. This wave has already begun to take hold in Ghana, with the Ghana Business Code, the Code of Conduct of Ghana Chamber of Mines and other charters allowing companies to publicize their commitment to higher standards of governance. 

Mr. Akafia made it clear that these commitments extend beyond financial accountability, encompassing everything that influences a company’s long term viability. This has given rise to the international practice of integrated sustainability reporting, where companies account for the triple bottom line: people, profits and planetary resources (i.e., the environment).

Practically speaking, how does one ensure the best corporate governance structures are in place? It begins with diversity: ensuring the board of directors has a diversity of experience, skills and perspectives. The next step is a detailed board charter that accomplishes several key outcomes, including outlining the board’s mission, specifying policies regarding member selection and addressing legal requirements relating to conflicts of interest. 

As Mr. Akafia continued mining his practical experience for nuggets of gold, he encouraged the entrepreneurs to work on creating a Shareholder Performance Agreement between shareholders and the board. This would not only empower the board; it would clearly outline expectations and, as a result, discourage any shareholder interference later on. 

This all begs the question: what is the incentive for entrepreneurs to expend time and energy establishing these rather complex structures? Beyond a mere issue of conscience, corporate governance has become increasingly linked to venture capital financing, Mr. Akafia revealed. Today’s investors are incredibly hesitant to fund companies built on shaky structures; they are much more enthused about betting their capital on someone who took the time to do it right. 

Clearly, as outlined in Mr. Akafia’s presentation, the benefits of good corporate governance are manifold. As international business trends shift away from short-term exploitative models towards long-term sustainability, a new set of global standard bearers is already emerging. With seminars like these, ServLed is ensuring that the entrepreneurs it partners with will certainly be part of that wave.