The Problems of Corporate Governance: Exploring the Impact of the Conflict Between Boards and Ceos of Public Sector Agencies on Performance in Ghana

The Problems of Corporate Governance: Exploring the Impact of the Conflict between Boards and CEOs of Public Sector Agencies on Performance in Ghana

Derrick Ohemeng-Mensah PhD Candidate School of Public Service and Governance Ghana Institute of Management and Public Administration P.O. Box AH50 Accra - Ghana [email protected] [email protected]

Frank Ohemeng, PhD Department of Political Science Concordia University Montreal-Canada [email protected] [email protected]

Draft

A paper presented at the 4th International Conference on Public Policy (ICPP4) June 26- 28, 2019 – Montréal, Canada

Panel: T02P10 - Bad Governance and Public Management Problems in the Developing World: Frameworks, Evidence and Cases

Please do not quote without the authors’ permission Introduction

Public sector organizational performance in developing countries continues to be an issue of concern to scholars, practitioners, politicians, and international organizations: particularly,

International Financial Institutions (IFIs). Development continues to falter, poverty continues to grow, and public sector institutions continue to fail to deliver basic services. Blame is placed on bad governance or, simply, the lack of “good governance” (Collier, 2007; Gustavson, 2013;

McCourt, 2008; Werlin, 2002). Bad governance, it continues to be argued, has resulted in corruption, inefficiencies and ineffectiveness in these organizations (Collier, 2007; Dahlstorm and

Lapuente, 2017; Moore, 2001), and, in some cases, institutional outright failures. Bad governance results in the mismanagement of public sector agencies, in turn nullifying their performance capacity (Andrews et al. 2006; Owoye and Bissessar, 2014). Bad governance has also resulted in a serious accountability deficit in public sector management (Jordan, 2014; World Bank, 1989;

1992).

Bad governance, including governments that are ineffective and inefficient, not transparent, not responsive to the people, not held accountable for their actions, inequitable and exclusive to the elites, non-participatory, that do not follow the rule of law, and lack policies that are consensus driven, continues to be seen as the main impediment to significant economic growth and improving the welfare of people in developing countries (World Bank, 1992). The outcomes of such bad governance resulted in the development of good governance [and later, good enough governance] by the international community, led by the IFIs for these countries (Williams, 2010).

The assumption is that good governance will change the outlook of government and people in general, as the latter could assert themselves in the policy making process, and demand accountability from the former (Grindle, 2004; Williams, 2010; World Bank, 1994).

Years later, the success of good governance initiatives is still being debated, with the apparent rise in corruption and bad policies in these countries (Sundaram, 2016). A number of scholars seek the reason in what may be described as the traditional society, with traditional values that are inimical to good governance in liberal democracies (Collier, 1997). As noted by Moore

(2001), however, “bad governance’ is neither inherent in the culture or traditions of the people of poor countries nor a product of poverty. It is rather the result of the ways in which state authority in the South has been constructed – and is being maintained – through economic and political interactions with the rest of the world.”

Most explanations for bad governance have focused on politics, with limited attention to public management (Acemoglu, 2008; Collier, 1997), especially the relationship between boards and CEOs; this despite the fact that public management is one of the cardinal points of the World

Bank’s good governance idea. For instance, in discussing how to improve public sector governance, the World Bank (2005) focused on the nature and quality of three main relationships:

“between citizens and politicians, between politicians as policy makers and the bureaucracy (those responsible for providing public goods and services), and between the bureaucracy as delivery agents and the citizenry as clients” (280). This limited literature has also examined bureaucratic corruption and the lack of bureaucratic capacity in state institutions.

A neglected area in this literature is the relationship between Boards of Directors (BoDs) and Chief Executive Officers (CEOs) of public sector organizations within the broader framework of public sector corporate governance, especially in developing countries.1 This is very unfortunate, since “the relationship between the CEO and the BoDs is of central importance in corporate governance” (Shen, 2003: 466), and vital to the performance of public sector institutions.

1In fact, this neglect extends to the private sector: where, at least, corporate governance continues to receive significant discussion in the literature.

The relationship is a necessary one, since public sector organizations make decisions that significantly impact a country’s economic, social, and cultural well-being. In addition, they manage billions of dollars in assets and liabilities, and oversee the delivery of critical services, such as health care, education, and public utilities (Watson, 2004). In addition, corporate governance “directs our attention to the study of behaviour at the strategic apex of organizations, in particular the roles, pattern of relationships and distribution of power and influence at board level” (Ferlie et al. 1995: 374), and that impacts organizational performance.

Good corporate governance promotes trust among all aspects of organizational employees, which can lead to job satisfaction and job commitment among employees, and reduce organizational turnover. It may also lead to effective management and employee engagement, which are important in organizational performance. Unfortunately, public corporate governance continues to be affected by bad politics (Essien), mainly due to the relationship between boards and CEOs.

In this paper our intention is to contribute to the discussion on bad governance through the lens of corporate governance, and the impact of the latter on employee performance, by examining the relationship between BoDs and CEOs from two major state institutions in Ghana. Our interest in this area follows from noting the importance of boards and CEOs in the management of public institutions. Unfortunately, in the past few years in some organizations, conflicts between some boards and CEOs have become rampant, even spilling into the public domain, with some employees siding with the CEOs, and others with the boards. The questions we intend to answer are: What are the causes of this conflict, and what needs to be done to mitigate them? What is the impact of such conflicts on employee performance in the public sector?

Drawing from the corporate governance literature on both the public and private sectors, it will thus be argued that without an effective and efficient public sector corporate governance

(PSCG) system, public sector organizations will continue to perform poorly. This is because such governance addresses the vital needs of the organization, and ensures their smooth operations.

Without good corporate governance the capacity needs of the organizations -- a major problem in developing countries -- cannot be addressed. The reason is that

[w]hile private-sector corporations play a very important role in our economy, public- sector corporations arguably have a more direct and significant impact on economic, social and cultural life. In addition to running businesses and utilities, public sector corporations are involved in areas such as health, education and worker protection (Watson, 2004).

It is also said that “one of the key pillars of economic development and a clear indication of a healthy economy is [good] corporate governance” (Wadie, 2013). In its absence corruption and unaccountable behaviour may become rampant and sabotage development.

Agreement on the importance of corporate governance in the public sector has not translated into ample research. As explained by Jordan (2014),

There is no real body of research on corporate governance that applies to the public sector. Although there has been a measurable increase worldwide in the attention paid to public sector corporate governance, the practice and implementation of corporate governance in the public sector has been slow in countries other than the British Commonwealth.

This paper attempts to contribute to this limited literature on a subject whose time has arrived

(Wadie, 2013).

The Ghanaian case deserves our attention because in the past couple of years both the electronic and print media have reported major problems [clashes] in the form of turf wars between some boards and the CEOs of public agencies: as the saying goes, “When two elephants fight, it is the grass that suffers”. When the CEO and the board are at each other’s throats, it is the employees who suffer, which affects their overall performance. Boards are expected to set the overall

4 directions for an organization, while CEOs are expected to steer the ship to its performance destination. This relationship has thus the greatest potential significance for organizational success.

Concern has risen over the state of this relationship and of overall public corporate governance in

Ghana (PSC, 2017).2 Scholarly neglect (Boadu, 2016) has created what Prempeh (2002) has described as a “public corporate governance deficit” in that country. We posit that poor corporate governance structure has contributed to the antagonism between BoDs and CEOs, leading to bad governance in the sector.3

We attempt to answer this question and argument through a mixed method approach, concentrating on two public sector organizations, the Office of the Auditor-General and the Ghana

Cylinder Manufacturing Company Limited, which have been embroiled in corporate governance issues. In recent years these two organizations have embodied the fight between BoDs and CEOs, marring the image of public sector corporate governance in Ghana. In this study we identify a number of contributory problems, and suggest ways to address them. It is part of a larger study examining the overall nature and impact of corporate governance in the public sector.

The paper flows this way. First, we will examine the idea of corporate governance in the public sector, and look at the relationship between Boards and CEOs from this perspective. We will follow this discussion with a review of the methodological approaches employed in the study.

We will then look at the Ghanaian case, with a brief discussion of the two organizations selected.

In the next section we will analyze the impact of the conflict between the boards and their CEOs by, first, looking at the quantitative data collected from the field. This will be followed with a

2Various reports from the Auditor-General’s Office, as well as the Public Account Committee of Parliament, show the seriousness of the failure of public corporate governance, and what needs to be done about it. 3The World Bank (2010) recently recognized the improvement in corporate governance in Ghana. Unfortunately, this recognition focused on institutional frameworks of the private sector and companies listed on the Ghana Stock Exchange, to the neglect of the general public sector, with numerous autonomous agencies and their boards.

5 qualitative analysis of the interview data. We will then conclude with some thoughts on the way forward.

Public Corporate Governance: A Review of the Extant Literature

The emergence in the developed world in the late 1970s of the New Public Management

(NPM) and its spread in developing countries led to the public sector adopting a number of private sector practices. One such is the corporate governance structure, with a chief executive, chair, and a small board of directors in a number of public sector agencies (Clatworthy et al. 2000; Daegie,

1998; Farrell, 2005; Ferlie et al. 1995; Matei and Drumasu, 2015).4 As explained by Ferlie et al.

(1995), the rise of the NPM has “involved the importing of a 'board of directors' model into the public sector whereby traditional 'member' roles evolve into those of 'non-executive directors'”

(377). The emphasis on corporate governance has led one scholar to say that “corporate governance is a subject whose time has come” (Tricker, 1995). Similarly, with respect to the public sector, Wadie (2013) wrote, “corporate governance in the public sector: it’s time”. The questions that scholars face now are about what corporate governance means, and how it can be practised to enhance the efficacy of public institutions. Asking them is necessary because “public governance” is the flavour of the month in public management (Frederickson, 2005; Pollitt and Hupe, 2011).

The term corporate governance does not lend itself to a single acceptable definition, even in the private sector (Hodges et al. 1995; Solomon and Solomon, 2004). Most of the literature contents itself with discussing what it is supposed to be, which is how an organization is managed, its corporate and other structures, its culture, its policies and strategies, and the ways in which it

4This structure has become very pronounced with what has been described in the literature as the “agencification” of the public sector.

6 deals with its various stakeholders (Hodges et al. 1996). One may ask: what, exactly, is public sector corporate governance? To explain it, one needs to look at the private sector management literature, which is replete with studies. We will look at a few of the definitions used, and see how they might be applied in the public sector.

Spanhove and Verhoest (2007) have explained corporate governance as a concept referring to the use of power in a proper way for the agreed purpose of the organization. To them, corporate government is all about structures and processes; how an organization is directed and controlled.

Thus, from their perspective, corporate governance deals with the processes by which organizations are directed, controlled, and held to account. Furthermore, the idea encompasses authority, accountability, stewardship, leadership, direction, and control exercised in the organization (3).

The OECD (2015) has defined the concept as a governance structure that “involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined” (9). This definition shows two interrelated issues: (a) relationship and (b) the setting of company/organization objectives. Furthermore, the definition demonstrates that it is this relationship that may help in the setting of such objectives. Thus, one can infer that when the foundation of this relationship is weak, there is every possibility that a cordial relationship among these actors may be jeopardized; and this, in turn, will affect the setting of objectives.

Similarly, Fenwick et al. (2019: 178-9) see corporate governance as an “organization’s structures and procedures that aim to ensure that (1) authority, responsibility and control flows

‘downwards’ from the investors (the economic, legal and moral ‘owners’ of the company) through

7 a board of directors to management and, finally, to the employees; and (2) accountability flows

‘upwards’.” From their perspective, the primary goal of corporate governance is to protect the interests of the investor/owner/shareholders based on the idea of a closed, centralized authority, and of a clearly-defined hierarchy with distinct roles and functions (179).

In the public and non-profit sectors, the concept has been described as the “arrangements of guidance and supervision with certain organizations” (Stiebart and Reichard, 2004); or, simply put, as “some agreement that it is concerned with the procedures associated with the decision- making, performance and control of organizations, with providing structures to give overall direction to the organization and to satisfy reasonable expectations of accountability to those outside it” (Hodges et al. 1996: 7). Be that as it may, corporate governance refers to the relationships or arrangements among the various sets of actors that make up the organization, and how these relationships are managed (Farrell, 2005). To manage this arrangement or relationship badly will be a recipe for performance disaster and a serious accountability deficit. In this paper we will adopt the definition offered by Hodges et al. (1996), as we believe that it is broad enough to be applied to both the private for-profit and not-for-profit, as well as the public, sectors.

Moreover, the definition signifies the fundamental idea of decision making power and its relationship to organizational performance, in which we are interested in our study of public sector corporate governance in Ghana.

Features of Public Corporate Governance

Public organizations are different from private ones inasmuch as there are a variety of stakeholders involved in the former (Dowdall and Martin, 2015; Heald and Steel, 2018; Jordan,

2014). As explained by Armstrong et al. (n.d),

Public sector organisations with governance implications include a diversity of departments, statutory bodies, State owned enterprises, partly owned public companies, public/private partnerships and various kinds of advisory committees...The context is muddied by ministerial directions, reporting requirements that may be to Ministers or Departments or to the public.

Public organizations may thus report to, and be held accountable by, senior civil servants, who run the organization and oversee its goals. They may also be accountable to politicians, to whom these civil servants in turn report. Ultimately, they are accountable to the electorate who voted the politicians into office. Consequently, that corporate governance regime cannot be the same as in the private sector (Dowdall and Martin, 2015; Heald and Steel, 2018). For example, Boards and

CEOs are differently appointed in the sectors (Mitchell, 1997). It is therefore important to identify features of public corporate governance that distinguish it from the private sector.

It must, however, be said that the main principles of good corporate governance are adherence to the rule of law, accountability, transparency, independent mindedness, avoidance of conflict of interest, and exercise of a high sense of integrity in the management of organizational resources (Garret, 2010). Within the overall framework of these principles is the requirement for all public servants to follow due process and adhere to all relevant laws, rules, and regulations of the country and the organizations.

The first main feature of PSCG is how the boards and CEOs are appointed. In the private sector, shareholders elect a board, which in turn appoints the CEO; in the public sector, appointments of both the board and the CEO are the responsibility of the political authorities: i.e., either the president or the prime minister. A minister may do it on their behalf, or constitutional articles may give them the power (Howard and Seth-Purdie, 2005). That minister may thus be held responsible for the actions of organizations under his or her supervision.

A second feature concerns accountability. Private sector companies are accountable to shareholders on the basis of financial performance. This is quite different from the public sector

(Shaoul et al. 2012), where the accountability regime is much more complex, in the sense that the government (the main shareholders) only holds fiduciary powers for the citizens. The government is thus answerable to the larger citizenry through elections. While the government can appoint both boards and CEOs, it is in turn accountable to the electorate, and held accountable at election time.

Thus, the stewardship of the government in ensuring the effectiveness of public entities is paramount. This is what has been described as “democratic accountability” (Smith et al. 2014).

A third feature is the relationship between boards and CEOs/management in general. There must be a clear delineation of responsibilities between boards and management, an idea in consonance with the framework of conformance and performance (Tricker, 1995), especially on the part of the board. Garret (2010) has also noted that

Board conformance involves two aspects: ensuring accountability (conformance to legislation, regulation, shareholder and stakeholder rights and wishes, and audits); and supervision of management (conformance to key performance indicators, cash flows, budgets, projects and organizational capability), while board performance involves policy formulation and foresight and strategic thinking, which drive the whole enterprise forward, allowing it to survive and grow by maintaining learning and developing its position in its energy niches.

As can be seen from the above discussion, in its conformance functions the board focuses on compliance with legal and regulatory requirements and accountability to shareholders or other stakeholders, internally manifested through oversight, monitoring imposition of adequate internal controls. On the other hand, performance is about driving the corporation [organization] forward to better achieve its goals, which consist of policy formulation and strategic thinking meant to take the corporation forward (Lafuente et al. 2019: 3). In all, Lafuente et al. (2019: 3) say that boards need to be concerned with both the conformance and the performance dimensions of corporate governance. When the boards play these two roles well, it enhances an effective relationship with management, and ensures better organizational performance.

Methodological Approaches to the Study

To ascertain the impact on employee performance of the relationship between CEOs and

Boards, we adopted the mixed methods approach. This method has been “defined as research in which the inquirer or investigator collects and analyzes data, integrates the findings, and draws inferences using both qualitative and quantitative approaches or methods in a single study or a program of study” (Creswell, 2011). Mele and Belardinelli (2019) have described mixed methods as “a methodology, that is, a design and process of research, based on the combination of methods for data collection and analysis” (335).

We chose this approach mainly for three reasons. First, since this is a preliminary study of public sector corporate governance, we felt that using this method will best give us a broad picture of the issue we are trying to develop and research. We have based our hopes on the idea that combining qualitative and quantitative data collection will help us develop better ideas for future research (McKim, 2017; O’Cathain et al. 2010). Second, we felt that it would have been difficult to explore in detail through qualitative interviews because of the sensitive nature of the topic, as well as the cases involved. Time constraints also did not allow us to interview officials, as other persons knowledgeable in the subject matter. Second, we wanted to obtain insights from employees that would facilitate further questions in our broader research on public corporate governance. As already stated, this study is a preliminary one for a research project on PSCG.

In using the mixed methods, with both qualitative and quantitative techniques, we may be in a position to provide some level of generalizability, despite the number of cases involved and, also, the fact that although both organizations are public, one is a state-owned enterprise, while the other is an agency. We therefore agree with Woolcock (2019:5) that “the main rationale for the systematic integration of qualitative and quantitative methods…is that both approaches

11 complement the others’ limitations; this is particularly so with regards to the ‘breadth’ and ‘depth’ of information that together is needed to optimally describe and explain outcomes stemming from complex phenomenon [sic]”.

The qualitative and quantitative data were collected simultaneously. We intentionally approached it this way to reduce bias among participants, especially those selected for interviews and for the quantitative questionnaire. In terms of the quantitative data, a total number of 85 questionnaires were sent out, and 58 were returned. The breakdown of questionnaire distribution is as follows: 25 were sent to Ghana Gas Cylinder Manufacturing, while 60 were sent to the

Auditor General’s department. These numbers were used based on the number of employees provided to us by the human resources departments. Out of the 58 retrieved, 18 came from Ghana

Gas and 40 from Auditor General. The questionnaires were hand delivered to the personnel of the organizations during the week of April 4th - 8th, and were collected the following week, April 11th and 15th.

Two main approaches to the quantitative collection were used. First was a purposive sampling and snowball technique for the selection of interviewees (Battaglia, 2008). The purposive technique or sampling allowed us to select senior level officers with enough knowledge and experience. They are also unit and department heads at the two organizations, as well as in the civil service. We applied snowballing when two senior level officials were recommended by their colleagues after these latter had been interviewed. In all, a total of 11 interviews were conducted, from the schedule of 15, because we had reached saturation point, and were not getting any new information. The interviews took place at the premises of the organizations during working hours on agreed days and at times that were convenient, and were recorded after obtaining individual permission.

Officials were informed in advance about the rationale for the interview and the study in general. It was also explained that while they were going to be asked some questions, the form of the interview was narrative. The idea was to allow the interviewees to narrate their own stories about the issue at stake, expecting such a narrative to enrich the content of the research, as many could share their individual experiences and how their operating environment shaped these

(Czarniawska, 2011; Haydon et al. 2018). It is noteworthy that many, if not all, were prepared for the technique, because they came with “stories to tell”, allowing them the freedom to express themselves and give vivid examples of the problems associated with corporate governance in their organizations and the country’s public sector in general. The interviews were conducted over a period of 6 weeks (April to May, 2019).

The Delicate Relationship between Boards and CEOs and Employee Performance

In this section we will draw on both the quantitative and qualitative data to examine the impact of the delicate relationship between boards and CEOs, and the effect it continues to have on employee performance. We begin with the quantitative analysis of employee perception of the relationship between the two actors and perhaps, protagonists.

Profile of Respondents

This section presents the results on demographic characteristics of the respondents. Out of the 57 respondents, 27 (49.1%) were male and 27 (47.4%) were female. The majority of the respondents were between the ages of 31-50 years (78.95%), 14.04% were below 30 years, and

5.26% were above 50 years. Most of the respondents had worked with their organization for 6 to

10 years (33.3%), 19.3% had worked for 11 to 15 years, and 26.3% had worked with their

13 organization for 16 years and above. In terms of educational qualification, 5 (8.8%) had completed secondary, 7 (12.3%) had a diploma, 22 (38.6%) had a bachelor’s degree, 21 (36.8%) had a master’s degree, and only 2 (3.5%) had completed a PhD. With respect to positions in the organization, 32 (56.1%) of the respondents were at the middle level, 13 (22.8%) were junior staff, and 10 (17.5%) also occupied senior level positions.

Table 1: Profile of the respondent

Variables frequency Percentage

Sex Female 27 47.4 Male 28 49.1 Age group Up to 30 yrs 8 14.04 31-50 yrs 45 78.95 50 and above 3 5.26 Years of Employment 1-5 11 19.3 6-10 19 33.3 11-15 11 19.3 16 and above 15 26.3 Educational Qualification Secondary 5 8.8 Diploma 7 12.3 Bachelor’s Degree 22 38.6 Master’s degree 21 36.8 2 3.5 PhD Position Senior level mgt. 10 17.5 Middle level mgt. 32 56.1 Junior Staff 13 22.8 Total 57 100

Employee Perception of the Causes of CEO-Boards Conflict

Here we explored the perceptions of employees of the causes of Board-CEOs conflict in their organizations. The respondents were asked to rank the extent to which they agree with 15 items measured on the scale of (1= Strongly Disagree; Strongly Agree). Table 2 presents the perception of employees of the causes of conflict between CEOs and the Board of Directors. The majority of the respondents (54.4%) strongly agreed that the existing institutional arrangement for appointments of Boards and CEOs is a major cause of the conflict between boards and CEOs. The breakdown is as follows: 21.1% agreed, 14.0% were neutral, and only 5.3% disagreed. Thus, on average respondents agreed that CEO-Board conflict is caused by the existing institutional arrangement for appointments of Boards and CEOs.

On the question of politicization as a cause of such conflict, an overwhelming 70% of the respondents strongly agreed that politicization of appointments of both Boards and CEOs is a major cause. Of the remainder, 14% agreed, 10.5% were neutral, while 3.5% Strongly Disagreed.

Thus, on average, respondents strongly agreed that politicization of Board and CEO appointments is a major cause of the conflict. We further asked about the issue of the appointment of former

(retired) heads of public sector institutions as board chairpersons and board members, and more than half of the respondents (57.9%) strongly agreed that appointing former heads of state institutions to occupy board chairmanship positions creates Board-CEOs conflict. Here, 26.3% agreed and 8.8% were neutral, and 7% disagreed. On average, respondents agreed that appointing former heads of state institutions to occupy board chairmanship positions creates problems for the

CEOs. We further asked if personal antagonism (or what we may describe as “who is who” between boards and CEOs) is a major factor in such conflict. On this question, 52.6% of the respondents strongly agreed that personal antagonism and personality clashes are sources of

15 conflict in the organization. The breakdown of the responses is as follows: 28.1% agreed and 8.8% were neutral. Thus, on average, respondents generally agreed that personal antagonism and personality clashes are sources of conflict. Table 2 presents results on employees’ perception of causes of Board-CEOs conflict.

Table 2: Employees Perception on causes of Board-CEOs conflict Items SD D N A SA AVG The existing institutional arrangement for 5.3 14.0 21.1 54.4 4.31 appointments of Boards and CEOs The complicated and confused legal regime. 12.3 14.0 49.1 22.8 3.84 The absence of clear corporate governance 5.3 3.5 12.3 42.1 29.8 3.94 guidelines Differences between board and CEO roles are 3.5 3.5 12.3 33.3 43.9 4.15 unclear Boards do not appoint CEOs and therefore have no 5.3 1.8 14.0 22.8 54.4 4.21 control over them CEOs believe they are accountable to the president 1.8 7.0 8.8 26.3 56.1 4.28 who appoints them, and not the board. CEOs do not “respect” the boards because they 5.3 7.0 14 28.1 45.6 4.02 feel they are not accountable to them. Boards believe that they have control of the CEOs, 3.5 5.3 8.8 31.6 47.4 4.19 and can hold them accountable. Boards are getting more involved in day to day 1.8 10.5 12.3 17.5 57.9 4.19 activities Personal antagonism and personality clashes are 1.8 8.8 8.8 28.1 52.6 4.21 the sources of conflict Some boards can be a nuisance. They don’t bring 5.3 15.8 28.1 50.9 4.19 anything to the organization. Appointing former heads of state institutions to 7.0 8.8 26.3 57.9 4.35 occupy board chairmanship positions creates problems for the CEOs Appointing former CEOs as Board members 1.8 3.5 12.3 29.8 52.6 4.28 creates problems with CEOs Some former CEOs see their appointments as their 1.8 10.5 8.8 19.3 57.9 4.74 second coming to complete their CEO jobs Politicization of the appointment of both the board 3.5 10.5 14.0 71.9 4.51 and the CEOs is problematic

Perception of the Effects of the Conflict on Organizational Performance

We further inquired with employees about their perception of the effect of CEO-Board conflict on organizational performance. This inquiry is important, because “when two elephants fight, it is the grass that suffers.” As many scholars have argued, boards are supposed to determine the overall direction of the organization, and CEOs are expected to then pursue it. Where there is a conflict, employees will become confused about where and from whom they should take directions to better the organization.

The majority of respondents (54.4%) strongly agreed that Board-CEO conflict affects the direction and productivity of the organization, while 26.3% of the respondents agreed, and 10.5% were neutral. It can be seen from the responses that the respondents agreed that CEO-Board conflict affects the direction and productivity of the organization. Similarly, 51% also strongly agreed that CEO-Board conflict has created tensions among employees. At the same time, nearly

55% of the respondents also strongly agreed that CEO-Board conflict has split the management by creating supporters for both the boards and CEO. Unfortunately, this has affected, and continues to affect, the direction of the organizations' and the employees’ performance. 47% of the respondents strongly agreed that CEO-Board conflict has negatively affected their performance inasmuch as it leaves them with no sense of direction. In line with this, we see a majority of employees also claiming that such conflicts affect their overall performance.

Last, 45.6% of the respondents strongly agreed that a result of the conflict has been that

CEO-board conflict has made it difficult to create an effective performance management system for employees. When the question about such conflicts making the organization look bad was posed, 47% of the respondents strongly agreed that CEO-Board conflict has given them a bad image.

Table 3: Employees' Perceptions of the effect of Board-CEOs conflict on organizational performance Items SD D N A SA AVG When CEOs proactively seek the board's input 3.5 7.0 14.0 35.1 38.6 4.00 outside of board meetings, it helps to reduce conflict Conflict between boards and CEOs impacts 1.8 5.3 8.8 33.3 47.4 4.24 negatively on my performance due to the lack of direction The public feud between CEOs and Boards has 3.5 15.8 31.6 47.4 4.25 given a bad image to the organization. The conflict has affected the direction and 3.5 10.5 26.3 54.4 4.39 productivity of the organization We could not develop and implement an effective 3.5 19.3 28.1 45.6 4.20 performance management system for employees because of the conflict. The conflict has split the management, as we have 1.8 3.5 19.3 21.1 54.4 4.23 supporters of both the board and CEO, and this has affected the direction that needs to be taken to enhance employee’s performance The conflict has created tensions among 3.5 21.1 22.8 50.9 4.23 employees. The conflict has affected my capacity 1.8 7.0 14 19.3 52.6 4.2 development.

Qualitative Analysis of the Impact of Boards and CEO Conflict

As explained earlier, the research utilized both qualitative and quantitative data collection to examine the phenomenon under study. In the previous section we looked at the quantitative data. In this section we will explore the idea further, with the qualitative interview undertaken with some employees in the public service. The questions asked centred almost entirely on the problems of corporate governance, which then leads to conflict between CEOs and boards, the impact of such conflict on employee performance, and what needs to be done to curb such conflicts and ensure good corporate governance in the sector.

With respect to why corporate governance is a big problem in Ghana, one that has led to conflict between CEOs and Boards, most, if not all, of our interviewees pointed to the issue of politicization via appointments to the public services in general, and including how both CEOs and boards are appointed. Many believe that the principles and practices of good corporate governance have been insufficiently appreciated and adhered to in the country, and this is impacting the performance of organizations. Below are how some expressed their frustrations about the appointments and the politicization of the service in general. An interviewee noted:

Corporate governance in the Public Sector, which is supposed to be independent of political interferences, is now marred with 100% political influence, especially when it comes to the appointment of officials into positions established as Public Service Post. As a result, square pegs are put into round holes, which in furtherance affects the objectivity, performance, and professionalism in the sector.

Another interviewee lamented:

Corporate governance is compromised. Decisions which are supposed to be carried out by boards are now being carried out by CEOs and other politically appointed persons, whose views are based on politics and self-interest, and not the public interest.

Further to this comment, another interviewee said:

In corporate governance, “it is new king new law sort of.” These appointees (both Boards and CEOs) owe allegiance to the politicians, especially the president, and not to the citizenry. If every government that comes to power wants to bring its own people to do their own things and leave after 4 years, as it is the case, then no matter what we do, the problems affecting the sector and its organizations cannot change. Of course, “the winner takes all” too might be part of the problem.

Another interviewee simply said that politics should be separated from corporate governance in order to have a successful public administration system.

On the issue of board selection, these interviewees expressed similar sentiments. In fact, one person indicated:

Here in this country for both the public and private sector spaces, selection of board members is about political composition or party affiliation. Once you supported a particular political party effectively during the electioneering campaign, you are assured of a board position. Thus, board selection is not based on merit, but politics.

There is also the problem of the president appointing both the CEOs and the boards rather than allowing the boards to appoint the CEO, and in some, if not the majority, of cases, appointing the CEO even before appointing a board. As one writer recently put it, “we have the abnormal but regular instances when a president announces the appointment of a CEO before appointing a

Board. In some cases, the Board and CEO are announced at the same time.” When this happens, the CEO may feel that the board should not have control over his or her activities, and cannot give him or her direction; neither can the board hold such a person responsible and accountable for the performance of the organization. In fact, CEOs feel more emboldened to challenge even their boards in the public domain. Commenting on the appointments of CEOs and their behaviours,

Rockson Dogbegah, the President of the Institute of Directors of Ghana (IDS), a professional organization committed to the professional practice of corporate directorship, noted:

In some cases, they (CEOs) even think that they are more powerful than the board, because the appointment did not come from the board; and so, in terms of performance, they don’t see themselves as having to report to the board. Thus, right from there we lose the fight of good performance and of effective leadership. So, what happens is that there will not be good performance and controls will not be effective, because in this case, while even instructing the CEO to do something, he doesn’t see you as somebody he reports to, and then at the end of the day the whole organization loses trust.

An issue that creates conflict between CEOs and boards is when an appointed chairperson is a former head of the institution. Such heads are often removed by a new government, which sees them as politically tainted. At the same time, the outgoing government may perceive such removal as a case of victimization, and thus reward the “dismissed” CEO with the chairmanship of the board. When this happens, such board chairpersons tend to behave as if they are the CEOs, and attempt to micromanage. Some interviewees expressed the opinion that the politicization of such appointments, especially in the attempt to “reward” former CEOs, has contributed to the tensions and outright public spats between some boards and CEOs, thus affecting the performance of their organizations.

These assertions were not surprising to us. In 2018, in a seminar presentation, the Auditor-

General bemoaned the practice of appointing former heads of state institutions to occupy board chairmanship positions, since such practices, according to him, foster tension and facilitate undermining the current leadership. He commented:

The practice of bringing back former public servants to their old positions or bringing former Chief executives as Board members leaves much to be desired, because clearly there will be conflict. Since I came to office, I have removed more than 200 people from office last year and this year. If they bring you back years later as a board member or board chairman, [you] can easily undermine who is there, and so we have to take a second look at this. And some of the board members, even if they are appointed, they think it’s their second coming of Christ; they will not be leaving.

Many interviewees, referring to the particular case of [the Auditor-General and the Board], agreed with the Auditor General, who had argued that that “it [appointing a former CEO as board chairperson or to the board] is really disturbing. We find board members overriding laws. Public

Servants in Ghana, from my point of view, are governed by laws, and therefore the universal principles of corporate governance cannot override the laws of Ghana.”

One interviewee in the discussion, however, asserted a caveat to this idea. While they agreed that such appointments, in some instances, have created tension and in-fighting, he was of the view that:

We should be mindful and tread carefully about such things. Former CEOs who have come back as Board Chairmen or board members can be a blessing in terms of performance, via the direction of the organization and institutional memory. On the other hand, some have come back to continue unfinished business and, in the process, do all sorts of funny things. It is up to the appointing authority to clearly state the mandate of these all-knowing Chairmen and boards.

On the question of the impact of such conflicts on performance, interviewees generally agreed that employees and the organization in general are affected by such poor relationships between CEO and Boards and corporate governance. One remarked:

Yes, this where organizational strategic objectives, which the staffs and management are striving to achieve, is jeopardized. There are conflicting demands, and in most cases, these demands, or decisions, are an individual’s decisions. Unfortunately, most of these

people who are government appointees barely understand the strategic direction of the organization, and yet we are expected to be “obedient” employees, and thus not question such decisions.

Another interviewee went back and linked the conflict and its impact of organisational performance again on the appointment problem. The interviewee conceded:

The idea of governments appointing people who in most cases to head and become board chairpersons of this institutions who in most cases, lack knowledge of the dealing in that particular sector, and are fighting even among themselves but for the fact that they have been appointed by the government make them overlord of everyone which turn to create problems., in particular, the direction that the organisation is expected to go.

Another respondent explained that “Ghana has a good public sector corporate governance. The governance structure of public service is regulated by laws. So, it cannot be said to have bad governance. The problem is that due to interference from the politicians sometimes the laws, procedures and principles do not work well. Furthermore, it is this interference that leads to CEO-

Board conflict, because each wants to please the president rather than focusing on what the organization can do better for the citizens. When it happens this way, “we the employee sit aloof, i.e., basically sit and watch what is going on.” When this happens, says another interviewee, “we are not able to perform to the best of our ability due to conflicting instructions, unstable environment, etc., which eventually affects the quality, timeliness, efficiency, and effectiveness of delivery of the public services to the citizenry.”

A number of interviewees went on to say what they believe needs to be done to enhance good corporate governance in Ghana. Most of them emphasized the politicization and appointment processes, which they believe may be determined by institutional problems; in particular, the appointing authority of the president, granted to him by the constitution. Some called for constitutional reconfiguration as a solution. One maintained that government must desist from creating institutions, especially within the civil service. The individual commented: “Politicians

22 should properly integrate and institutionalize their plans into the formal structures of Ministries,

Department and Agencies (MDAs). They should stop setting up new offices in the Ministries, which are occupied by their political cronies [special assistants] with the claim that they know better than the career bureaucrat.”

The interviewee in question gave the example of Planting for Food and Jobs (PFJ), a central government initiative for food sustainability in the country. According to him, it is managed by a

Secretariat full of special assistants and consultants who are not staff of the Ministry of Food and

Agriculture, meaning that worthy policies like the Planting for Food and Jobs (PFJ) initiative will collapse when the sitting government exits. All those special assistants and consultants would be driven out of the system. However, if PFJ is properly institutionalized and managed by the technical directorates of the Ministry, the project can continue under the new government.

Another interviewee identified three areas for good corporate governance: (a) competent persons with the right skills, abilities, and knowledge must be recruited as board members; (b) there must be an effective span of control, with lots of superiors monitoring the work of subordinates; and (c) information must flow freely to prevent rumour mongering. Another person, agreeing with these sentiments, said that recruiting competent staff is more important than the politicization of recruitment that is currently the norm; that communicating decisions and policies by boards and CEOs, and management in general, is key, as is sharing information on time to ensure timely completion of job schedules; and developing, conducting, and evaluating annual performance appraisals must be shared to identify the gaps and strengths within the organization, as well as promptly filling such gaps. Another identified three points as critical: the appointment of heads of institutions and organizations should be based on merit and capabilities; appointments should also be based on competitive bidding and hiring processes, to hire the most competent

23 person, without political reference; and finally, there should be no tolerance for imposing government appointees on staff and management, because of its tendency to sow commotion and chaos.

Conclusion

The main purpose of this study was to examine the idea of bad governance in the public sector by looking at some factors that continue to contribute to it, and that impair the sector’s organizations' ability to achieve their objectives. The rationale for the study was born out of the fact that notwithstanding the acknowledgement of “bad governance” and its effect in developing countries, little attention has been given to public management and, in particular, [good] public corporate governance. We find this unacceptable, inasmuch as these countries' ability to address their persistent “wicked problems” depends on how their public sector organizations work, because it is their responsibility to develop and implement public policies.

Public corporate governance, as discussed here and in the limited literature, comes down to the ability of persons in charge of public sector organizations to ensure effective accountability and performance. These persons are normally the CEOs and Boards, with the latter expected to provide the overall direction, and the former implementing it. Unfortunately, in many developing countries, as our case shows, significant problems continue between boards and CEOs, in turn undermining employees' performance. These conflicts sometimes turn these organizations into

“headless chickens”, running in all directions and accomplishing nothing. We set ourselves to examine the brewing conflict between these important actors in the management of public organizations in Ghana, and did so by asking questions about the causes of this conflict, and what needs to be done to mitigate them, as well as the impact such conflicts may have on employee performance in the public sector.

Using the mixed methods approach, we learned that the main factors provoking such conflicts are the politicization of the sector and the issue of appointment. Both the quantitative and qualitative data emphasized these two areas. Another problem ensuing from the politicization and appointments is the appointment of former heads of such organizations as either board chairs or board members. Such appointments create tension between the CEO and the board, especially when the chairperson feels that he or she has unfinished business. Such board chairs tend to attempt to micromanage, generating tension between them and the CEOs, who feel that their turf is being violated.

As discussed earlier, and as shown in the paper, this conflict has detrimental effects on employee performance. A number of interviewees suggested ways in which the conflict can be resolved or mitigated. The questions that need to be explored in future research, though, are: how can some of the suggested issues, especially the appointments and politicization, be addressed?

What are the institutional barriers to good public corporate governance in Ghana? What theoretical perspective should be used in studying and understanding the problems at hand? It is our hope to explore and answer these questions in the future.

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