ATIVOR'S CORPORATE GOVERNANCE TERM PAPER
CENTRAL UNIVERSITY COLLEGE
CORPORATE GOVERNANCE TERM PAPER
NEWTON SENYO ATIVOR
EXECUTIVE SUMMARY
Contemporarily, most ethicality advocates argue that developing countries are often faced with a multitude of problems that include uncertain economies, weak legal controls, protection of investors and frequent government intervention. These problems make it even more necessary for developing countries to adopt effective corporate governance structures.
The study set off to assess the impact of corporate governance practices in Ghanaian churches growth and performance, specifically, using Ebenezer Methodist Church as the case study religious entity. Among other objectives, the study identified the key benefits of corporate governance as well as ascertained the critical causes of corporate governance challenges confronting churches in Ghana. In conducting the study, the researcher adopted both qualitative and quantitative method of research as well as purposive sampling technique to select respondents at the institution for their views on the study. A questionnaire was adopted as the main survey instrument while 5-Point Likert scale which was later transform into the Relative Importance Index
(RII) was employed to facilitate the analysis of data obtained from the field.
Findings of the study indicated the 6 key benefits of corporate governance practices to churches in
Ghana as enforcing and encouraging transparency, efficient use of resources within the church as a whole, instilling controls, conflict of interest resolution, and promotion of church-wide efficiency and a fair return for church owners as well as sense of ethicality. Furthermore, with respect to the critical causes of corporate governance challenges evident within the teeming churches in Ghana,
6 notable ones were also intimated by the respondents’ namely: power and control, leadership and cultural abuse, ineffective oversight by church’s corporate board of directors, weak legal and regulatory systems, inconsistent accounting and auditing standards via little regards for the rights of minority shareholders.
Having noted the critical causes of corporate governance challenges confronting the Ghanaian churches, specifically at EMC, the study recommended it strictly adheres to Stakeholder, Resource
Dependency, Social Contract, Legitimacy, Agency theories among others to curtail the aforementioned issues that continues to rear its ugly head as far as the efficient functioning of corporate governance practices within the myriads of churches in Ghana and across the globe is concerned.
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TABLE OF CONTENTS
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CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS .......................... 31
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LIST OF TABLES
Table 4.6 Respondents’ View on Key Elements of Corporate Governance Environment, RII
Table 4.7 Respondents’ View on the Critical Causes of Corporate Governance Challenges,
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LIST OF FIGURES
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CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
Over the last two decades, corporate governance has attracted a great deal of public interest because of its apparent importance for the economic health of organizational set-ups and society in general. The headlines of the previous two years in particular portrayed a sad story of corporate ethics (or lack thereof): WorldCom, Anderson, Merrill Lynch, Enron, Martha Stewart, Global
Crossing, Qwest Communications, Tyco International, Adelphia Communications, Computer
Associates, Parmalat, Putnam, Boeing, Rite Aid, Xerox just to mention a few (Harshbarger &
Holden, 2004; France, Carney, Mc Namee & Borrus, 2004).
Falling stock markets, corporate failures, dubious accounting practices, abuses of corporate power, criminal investigations indicate that the entire economic system upon which investment returns have depended is showing signs of stress that have undermined investor’s confidence. Some corporations have grown dramatically in a relatively short time through acquisitions funded by inflated share prices and promises of even brighter futures (many of these corporations have now failed). In others, it seems as if the checks and balances that should protect shareholder interests were pushed to one side, driven by a perception of the need to move fast in the pursuit of the bottom line. While some failures were the result of fraudulent accounting and other illegal practices, many of the same companies exhibited actual corporate governance risks such as conflicts of interest, inexperienced directors, overly lucrative compensation, or unequal share voting rights (Anderson & Orsagh, 2004). In the face of such scandals and malpractices, there has been a renewed emphasis on corporate governance.
Corporate governance is the system by which business corporations are directed and controlled.
The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders and spells out the rules and procedures for making decisions in corporate affairs. By doing this, it also provides the structure through which the company objectives are set and the means of attaining those objectives and monitoring performance (Dandino, 2004; Harshbarger et al. 2004; Anderson et al. 2004).
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Religious and other non-profit organizations have a responsibility to their various constituents to be fiscally responsible and transparent in carrying out their missions. These organizations rely on the public for a significant portion of their annual budget. Support is received by nonprofit organizations in the form of tithes, pledges or donations. Some donations are quite generous such as the $40 million unrestricted gift received from an anonymous donor by a religious organization in the State of Missouri (Preston, 2005a). Others are more modest such as the $1.8 million received by a Baptist church in Alabama for its scholarship fund, and the $1 million received by another religious organization to help victims of the South Asian tsunamis (Preston, 2005b). The Annual
Giving USA study published by the American Association of Fundraising Council noted that
Americans donated $248.52 billion to charity in 2004, with individual donors providing the largest share at 75.6% or $187.92 billion. Religious organizations received the highest percentage of these donations at 35.5% or $88.3 billion.
Churches have always played a role in social services and their involvement in hurricanes Katrina and Rita relief efforts along the Gulf Coast, demonstrate their capability. The federal government recognizes this and it continues to actively promote diverting government funds to faith based organizations to support social service and public health programs such as youth development and substance abuse treatment. For instance, in fiscal year 2003, 5.1% or $6.8 million of the
Department of Education's discretionary grants went to faith based organizations up from 2.1% just two years earlier (Davis, 2004).
Boston (1999) believes that government money is for the first time underwriting social services programs by religious organizations with virtually no significant oversight or strings attached.
Some foundations are not deterred and they are showing their financial support by increasing their donations to religious organizations. A recent report noted that 37 foundations provided $168 million to approximately 700 evangelical Christian organizations over a four year period. The organizations focus primarily on such issues as making abortion illegal, banning same-sex marriage and promoting school prayer (Wilhelm, 2005).
Donors are increasingly looking to nonprofit organizations to provide transparency in their operations. The Sarbanes-Oxley Act of 2002 (SOX) is one legislation that might provide a starting point. SOX placed increased responsibilities on the board of directors of public companies to
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improve their governance practices by having the financial expertise and independence needed to oversee their managers' performance. Although SOX does not apply to non-profit organizations, there is an expectation in the marketplace for non-for-profit organizations to adopt some of its requirements (Elson, Callaghan & Walker, 2007).
In the case of Ghana, following the enactments of the 2002 corporate governance code by the SEC, many codes of best practices have emanated while there have been calls for a single code by various regulators and stakeholders. While full compliance with the codes and its enforcement by the SEC is being canvassed for, corruption which has persisted and continues to grow has been single out as the major bane within the Ghanaian religious system (Olusegun, 2012).
1.2 Problem Statement
The concept of corporate governance began to be used and spoken about more commonly in the
1980s (Parker, 1996) but it originated in the 19th century when incorporation was fronted as a way of limiting liability (Vinten, 2001). Tricker (2011) explains that the 1980s were characterized by corporate collapses, board level excesses, and dominant chief executives in different parts of the world. As more corporate entities in different parts of the world collapsed in 1980s, there was a change of attitude with a much higher performance expectation being placed on management boards to ensure that firms were run effectively and in the right direction (Adams, 2002).
Moreover, there was a growing acknowledgement that improved corporate governance was crucial for the growth and development of the whole economy of a country (Claessens, 2006; Clarke,
2004; Reed, 2002). Other studies established strong links between the performance of corporations and the governance practices of their boards (Hilmer, 1998; Kiel & Nicholson, 2002). Gompers,
Ishii and Metrick (2003) found a strong correlation between good corporate governance practices and superior shareholder performance, with two-thirds of the investors surveyed reporting that they were prepared to pay more for shares of companies that had good corporate governance practices.
To add to this, religious organizations are also caught in the spotlight because of such corporate governance issues such as the sex abuse, nepotism, cronyism, victimization of subordinate religious folks, scandals in the Catholic Church, embezzlement of funds in various organizations
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and the use of government funds to support social services and other programs in faith based organizations not losing sight of the prevalence of crippling parameters like ineffective oversight by church’s corporate board of directors, little regards for the rights of minority shareholders among others. For instance, the director of a Christian community was charged with stealing
$23,000 and other items from the organization over a two year period (Anonymous, 2000). The tax-exempt status of an organization controlled by a well-known televangelist was revoked because of illegal politicking by the organization (Anonymous, 2004a). A Christian charity was accused of using government funds to pay for a job training program that included religious instruction at a local prison (Wilhelm, 2005). A California TV preacher was accused of using donations from supporters to finance a lavish lifestyle that included 30 homes, fancy cars and a private jet (Anonymous, 2004b).
Corporate governance is now an international topic due to the globalization of businesses (Reed,
2002). Nevertheless, Davies and Schlitzer (2008) note that corporate governance practices are not uniform across nations while the OECD (2004) and ASX Corporate Governance Council (2007) point out that there is no single model of corporate governance practice that is applicable to all organisations even within one country. Consequently, every country adopts a unique set of corporate governance procedures that are based on such factors as the country’s legal and the financial systems, culture, corporate ownership structures and economic circumstances. However,
Judge (2010) challenges scholars and practitioners to develop globally applicable models of corporate governance.
There is a general lack of research into corporate governance practices of churches in developing countries, especially those prevalent on the African continent (Okeahalam, 2004; Shleifer &
Vishny, 1997). This lack of research can be attributed to the fact that, before the 1980s, the issue of corporate governance received minimal attention in the developing world. In fact, Yakasai
(2001) observes that historically there was little doubt about management's ability to run church organisations and hence there was little emphasis on corporate governance or disclosure and transparency.
It is against this background that the researcher of this scholarly paper attempts to pry into the key benefits of corporate governance practices, critical causes of corporate governance challenges confronting churches in Ghana as well as recommending strategic initiatives to manage the afore-
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mentioned issues with a heavy reliance on the Methodist Church of Ghana (Ebenezer Methodist
Church, Madina).
1.3 Aim and Objectives
The main aim of this study is to assess the impact of corporate governance regimes on church’s performance and productivity within the religious circles in Ghana with a heavy reliance on the
Methodist Church of Ghana (Ebenezer Methodist Church, Madina) as the case study corporate religious entity. The specific objectives are:
1.
To determine the key benefits of corporate governance practices to churches in Ghana.
2.
To identify the critical causes of corporate governance challenges confronting churches in
Ghana.
3.
To recommend strategic intervention mechanisms to manage the critical causes of corporate governance challenges confronting churches in Ghana.
1.4 Research Questions
Stemming from the problem statement, the under-listed research questions are of relevance to the study:
1.
What are the key benefits of corporate governance practices to churches in Ghana?
2.
What are the critical causes of corporate governance challenges confronting churches in
Ghana?
3.
What strategic intervention mechanisms should be used to manage the critical causes of corporate governance challenges confronting churches in Ghana?
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REVIEW OF LITERATURE
2.1 Concept and meaning of corporate governance
A shared definition of corporate governance which is both valuable and consistent has not been easy to find (Borga, 2005), because every economy and country has different systems of corporate governance that differ to each other in accordance to the strength, power and influence being exercised by their various stakeholders and management. Rezaee (2009) defined corporate governance as a process through which shareholders induce management to act in their interest, providing a degree of confidence that is necessary for capital markets to function effectively.
Furthermore, different socio-economic, legal, political and cultural systems existing in each country do have relevant influences on corporate governance (Okike, 2007). That is why the use of the clause: there is “no one size fit all” approach in corporate governance is prevalently being used. Nevertheless, the objectives of corporate governance share common denominator worldwide. However, few definitions from various bodies shall be considered in this piece. The
Ghanaian Securities and Exchange Commission defined corporate governance in 2002 as “the manner in which corporate bodies are managed and operated”. The Organization for Economic
Co-operation and Development (OECD) however defines it (corporate governance) as a set of relationships governing the various members of a corporation. It is further defined by the OECD
(1999) as the system by which business corporations are directed and controlled. It specifies the distribution rights and responsibilities among different participants in a corporation, such as: the board, managers, shareholders and other stakeholders while spelling out the rules and procedure for making decisions on corporate affairs. By doing this, it provides the structure through which the objectives are set and the means of attaining those objectives and performances monitoring
(Olusegun, 2012).
2.2 Corporate governance developments (the past)
The corporate governance developments and disclosures in any country are often shaped by a wide array of internal as well as external factors (Okike, 2007). Accordingly, the internal factors include the state of the economy and the capital market, corporate and business culture, the legal system, government policies, professional/regulatory bodies, amongst others while the external factors
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(such as the old colonial ties, membership of international accounting standard committee, direct foreign investment activities of multinationals such as foreign banks and companies) contribute considerably, if not totally, to the complex reality of corporate governance development in any developing country. The impact of these factors and the differences in the system operating within each country are well documented in the accounting and corporate governance literatures (Rose and Meyer, 2003; Okike, 2007) amongst others. Traces of the corporate governance root in Ghana can be traced to its companies’ laws right from the colonial days. The regulation, control and governance of business enterprises in Ghana as of present, are largely contained within the provisions of the company legislation which has its root in Ghana’s colonial past. Like most other former British colonies, Ghana inherited, at independence, many rules and regulations left behind by the colonial government.
During the colonial period, British company legislation was introduced into the country; hence
Ghana’s legal system and corporate governance practices mirrored the UK pattern (Okike, 2007).
Prior to the independence, foreigners, mostly British, controlled the activities of business enterprises in many of their old colonies and thus bring along with them their economic interest and their (British) legislation. In brief, the Ghanaian Companies Code, 1963 (Act 179) is based largely on the English Companies Act of 1948 (Adda & Hinson, 2006). Although the Code has seen no major changes since the enactment and many attempts at revising it have mainly been mere editorial changes, these historical analysis, therefore, confirms and suggest that the Ghanaian system of corporate governance is essentially an “Anglo-Saxon”, or the “outsider control system”
(Franks & Meyer, 1994), and is a reflection of its colonial heritage (Okike, 2007). Ghana SEC
(2002) identified some common elements that underlie good corporate governance upon which further evolution and developments in governance structures are built upon today. They are: (1) the rights of shareholders; (2) the equitable treatment of shareholders; (3) the roles of stakeholders;
(4) disclosure and transparency; (5) the responsibilities of the board. These pillars are explicitly uncovered in the 2002 code of best practices released by the Ghana Securities and Exchange
Commission.
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2.3 The present and the future
Oertel (2004) argued that despite the establishment of a seemingly robust legal regime governing corporate governance in Ghana via the companies’ code of 1963, not minding lack of its amendments for a very long period (ROSC, 2004), the enforcement of the provisions of the code has been relatively weak thereby leaving Ghana deficiently in the corporate governance practices.
Mensah et al. (2003), however, single out corruption as the major and only bane of the socio, economic and political development of Ghana. According to the Prempeh (2002), corruption has persisted for a long time and still continues to grow while undermining the business corporate and the country’s democratic system. A survey highlighted by Mensah et al. (2003) revealed that
Ghanaian majority express concern with regards to “corruption” which has become endemic in the country. This is supported by the 2010 report releases of transparency international on the corruption perception index where Ghana has been rated the 69th; a slightly better position than in the previous reports.
2.4 Benefits of corporate governance
The effectiveness of corporate governance depends on the application of these principles in a manner which benefits stakeholders, as well as broader industries and economic sectors. Benefits to stakeholders include resolving conflicts of interest, instilling controls and a sense of ethics, and enforcing and encouraging transparency.
Corporate governance promotes efficient use of resources within the firm and the larger economy.
It also helps firm’s to attract low cost investment capital through improved investor and creditor confidence, both nationally and internationally. It also increases the firms’ responsiveness to the need of the society and results in improving long-term performance (Gregory & Simms, 1999).
Good governance promotes firm-wide efficiency and a fair return for investors’. Furthermore, good governance can also benefit a company through better flow of funds and improved access to low cost capital, strong internal controls and discipline, and might achieve better credit ratings which would lead to lower debt funding and higher stock price valuation which can result in equity dilution when additional stock is floated. Companies that are properly governed are supported by deep and transparent financial markets, robust legal systems, and efficient resource allocation. This
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in turn promotes financial and economic stability and increases national and global growth rates, whereas poorly governed companies do the opposite (Banks, 2004).
According to Keong (2002) good corporate governance brings better management and prudent allocation of the company’s resources, and enhances corporate performance which would significantly contribute to the company’s share price, increasing the value of a shareholder’s holdings.
2.5 Causes of corporate governance challenges
The issues that have stimulated interests in the phenomenon of corporate governance, point to particular causes of corporate governance crises. These include weak legal and regulatory systems, inconsistent accounting and auditing standards, and poor banking practices. Thin and poorly regulated capital markets, ineffective oversight by corporate boards of directors, and little regard for the rights of minority shareholders are also problems with respect to corporate governance
(World Bank, 2000).
The problem of weak legal and regulatory systems is generally viewed as a problem of developing countries. Developed economies tend to have developed and sophisticated regulatory systems, while less industrialized ones tend to display less efficient systems of law and regulations (Lin,
2000). The thinness and lack of effective stock exchange regulation may also be viewed as mainly part of the problem in developing countries. This is associated with the low level of market development in such economies (Lin, 2000; World Bank, 2000). When legal and regulatory systems are weak, the enforcement of contracts becomes difficult. For example due to weak legal and regulatory systems, particularly the enforcement of laws in Russia and the Czech Republic, controlling shareholders were able to siphon off profits leading to a loss of investments by minority shareholders (World Bank, 2000). The application of varying accounting and auditing standards is another challenge to corporate governance (Clarke & Clegg, 1998). This problem emanates from the use of various financial accounting standards by organizations including churches whose operations span different countries in the preparation and presentation of financial statements
(Bradley et al., 1999). For example, US Corporations employ an American system of GAAPs developed by FASB, whereas UK-based corporations apply a different set of accounting standards
(SSAPs) developed by the Accounting Standards Board (ASB) and the Financial Reporting
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Council (FRC). This use of different accounting standards makes the evaluation of performance across companies operating globally difficult (Bradley et al., 1999). This challenge has led to the need to harmonize standards through the use of accounting standards promoted by the International
Accounting Standards Board (IASB). This initiative is reflected in the current attempts to harmonize accounting standards in Eastern, Central and Southern African regions through the
Eastern, Central and Southern Africa Federation of Accountants - ECSAFA (Gathinji, 2002). The poor banking practices reported by the World Bank are particularly related to the Asian crisis where banks provided credit to companies under the influence of the political elite. Either one family, or a corporation under a family’s control, generally own Asian firms. Such families have close connections with the government, and politicians, and dominate the national economy to a large extent (Hanazaki & Liu, 2003). Using these connections, corporations have been able to borrow funds from banks without the proper disclosure of the information required to enable full evaluation of company performance and establish creditworthiness (World Bank, 2000). The cases of Maxwell, BCCI, Nomura and a number of other large corporations show how the lack of effective oversight by directors can lead to corporate governance crises. This lack of effective oversight by boards of directors has resulted in boards' failures to prevent a large number of fraud cases and the subsequent collapse of corporations (Tricker, 2000; Stiles and Taylor, 2002). Mace
(1971) argues that boards of directors are 'Christmas ornaments' and do not effectively control senior managers. Demb and Neubauer (1992), posit that this is paradoxical since chief executive officers exercise the power of corporations which should be the preserve of directors.
2.6 Miscellaneous factors affecting corporate governance regimes
With regards to the miscellaneous factors affecting corporate governance regimes across the teeming churches of the world, the subsection below cannot be over-emphasized:
2.6.1 Leadership and cultural abuse
Leadership in church-based organisations can have an even greater influence due to the extra dimension of spiritual authority that is often vested in religious leaders. This gives leaders greater opportunity to effect or block change, both positively and negatively. There is common perception that: ‘religious leaders are closer to God than we are. If we question this person we are questioning
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God.’ There are cases where disagreements with leaders are harder to resolve because of deeply held religious views on leadership authority from God.
The particular personality of the religious leader is therefore vital, as this extra power can easily be abused. This is even more of a challenge in a country like Ghana where culturally, power is highly concentrated. Leaders are put on a pedestal by followers and expected to behave like a ‘big man’. The hierarchical structures and cultures of some religious institutions can further exacerbate these tensions (James, 2009).
2.6.2 Mal-functional Systems
There is a considerable religious teaching on themes such as planning, accountability, honesty, fairness, transparency, equity, ethicality and stewardship. These emphasize the value of churchbased organisations developing good systems. But the reality in Ghana is that many churches have undeveloped financial and human resource systems, adversely influencing church-based organisations. While many NGOs in Ghana also face such issues, church organisations can be worse because of the under-listed parameters: (a) Systems often require professional input to set up and maintain, which many religious institutions cannot afford (b) Powerful religious leaders often resist the development of systems which may curtail their power with unwanted checks and balances on leaders (c) Accountability is seen primarily as being to God, not man (d) Management systems are sometimes seen as ‘secularizing’ and things that quench the power of the divine (e)
Teaching about stewardship and accountability is not common in Ghanaian churches (f) Donorimposed systems that church-based organisations use are often cumbersome and not fully understood (James, 2009).
2.6.3 Power and control
There are also often related tensions over power to make strategic decisions, such as appointing the director of the project development office, developing a new programme or even controlling the finances. Even in Ghanaian church project development agency with legally constituted boards, there is a tendency for them to be treated by the church leadership at best as advisory and at worst as rubber stamps (James, 2009).
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2.7 Theories underpinning corporate governance practices
The following illustrates some of the critical theories underpinning corporate governance across the world:
2.7.1 Stakeholder theory
Research into corporate governance also discusses the stakeholder theory in relation to firms’ responsibility to the wider community. A stakeholder is any group of individuals who can affect or is affected by the activities of the firm, in achieving the objectives of the firm (Freeman, 1984).
A similar view has been put forward by the World Business Council for Sustainable Development
(1999), which also identifies stakeholders as the representatives from labor organisations, academia, church, indigenous peoples, human rights groups, government and nongovernmental organizations and shareholders, employees, customers/consumers, suppliers, communities and legislators. According to Ansoff (1965), a firm’s objective could be achieved through balancing the conflicting interests of these various stakeholders. Therefore, a fundamental aspect of stakeholder theory is to identify what the stakeholders an organization is responsible for. Any stakeholder is relevant if their investment is, in some form, subject to risk from the activities of the organization (Clarkson, 1995).
Corporate governance systems are in a state of transition due to internationalization of capital markets, resulting in convergence of the shareholder value-based approach to corporate governance and the stakeholder concept of corporate governance towards sustainable business systems (Clarke, 1998). It can be seen that stakeholder theory is an extension of the agency perspective, where responsibility of the board of directors is increased from shareholders to other stakeholders’ interests (Smallman, 2004). Therefore, a narrow focus on shareholders has undergone a change and is expected to take into account a broader group of stakeholders such as those interest groups linked to social, environmental and ethical considerations (Donaldson &
Preston, 1995; Freeman 1984; Freeman, Wicks & Parmar, 2004). As a result stakeholder theory supports the implementation of CSR and endorses risk management policies to manage diverse interests.
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Criticisms that focus on stakeholder theory identify the problem of who constitutes genuine stakeholders. One argument is that meeting stakeholders’ interests also opens up a path for corruption, as it offers agents the opportunity to divert the wealth away from the shareholders to others (Smallman 2004). But the moral perspective of stakeholder theory is all stakeholders have a right to be treated fairly by an organization, and managers should manage the organization for the benefit of all stakeholders, regardless of whether the stakeholder management leads to better financial performance (Deegan, 2004).
2.7.2 Resource dependency theory
Lawrence and Lorsch (1967) link the resource dependency theory to corporate governance. They state that successful organizations possess internal structures that match environmental demand, which links to Pfeffer’s (1972) argument that board size and composition is a rational organizational response to the conditions of the external environment. Furthermore, directors may serve to connect the external resources with the firm to overcome uncertainty (Hillman, Cannella
Jr & Paetzols 2000), because coping effectively with uncertainty is essential for the survival of the company. According to the resource dependency role, the directors bring resources such as information, skills, key constituents (suppliers, buyers, public policy decision makers, social groups) and legitimacy that will reduce uncertainty (Gales & Kesner, 1994). Thus Hillman et al.
(2000) consider the potential results of linking the firm with external environmental factors and reducing uncertainty is the reduction of transaction cost associated with external linkage. This theory supports the appointment of directors to multiple boards because of their opportunities to gather information and network in various ways.
2.7.3 Social contract theory
Among the other theories reviewed in corporate governance literature social contract theory, sees society as a series of social contracts between members of society and society itself (Gray, Owen
& Adams, 1996). There is a school of thought which sees social responsibility as a contractual obligation the firm owes to society (Donaldson, 1983). Integrated social contract theory was developed by Donaldson and Dunfee (1999) as a way for managers to make ethical decision making, which refers to macro-social and micro-social contracts. The former refers to the
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communities and the expectation from the business to provide support to the local community, and the latter refers to a specific form of involvement.
2.7.4 Legitimacy theory
Another theory reviewed in corporate governance literature is legitimacy theory. Legitimacy theory is defined as a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate with some socially constructed systems of norms, values, beliefs and definitions (Suchman, 1995). Similar to social contract theory, legitimacy theory is based upon the notion that there is a social contract between the society and an organisation. A firm receives permission to operate from the society and is ultimately accountable to the society for how it operates and what it does, because society provides corporations the authority to own and use natural resources and to hire employees (Deegan, 2004).
Traditionally profit maximization was viewed as a measure of corporate performance. But according to the legitimacy theory, profit is viewed as an all-inclusive measure of organizational legitimacy (Ramanathan, 1976).
The emphasis of legitimacy theory is that an organization must consider the rights of the public at large, not merely the rights of the investors. Failure to comply with societal expectations may result in sanctions being imposed in the form of restrictions on firms operations, resources and demand for its products. Much empirical research has used legitimacy theory to study social and environmental reporting, and proposes a relationship between corporate disclosures and community expectations (Deegan, 2004).
2.8 Concept of theocracy in corporate governance (Global)
The terminology “Theocracy” refers to the exercise of political power by the clergy of a particular religion, usually (although not necessarily) claiming to be acting primarily on behalf of a divinity and governing according to its principles and requirements. Although the worldwide influence of religious political ideologies has grown over the past three decades, there are very few theocratic
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states, or theocracies, in the world. Nonetheless, those that do exist can have profound and highly idiosyncratic impacts on development (Megoran, 2009).
Theocracy also epitomizes a term invented by the Hellenistic Jew Josephus Flavius (against Apion
2: p. 16) to describe the Hebrew political system by which God is acknowledged as ruler over
Israel. It is therefore understood as a political organization in which God himself is recognized as head of state. Such government or state is believed to be under the immediate direction of God.
Generally, the divine will is mediated through some charismatic or constituted leadership, or through an authoritative priesthood by which the system becomes a hierocracy. This was the case in the hierocratic government set up in Israel after the exile when the monarchy had disappeared.
The theocratic form of government existed among many ancient peoples. In Mesopotamia it was accepted that “Kingship was a divine institution and that it came down from heaven (Mackenzie,
1976: p. 475). In Sumeria, the god ruled the city through his viceroy, the ensi. The city itself was regarded as a temple community and as the estate of the god of the city (Ibid). Babylonian dynasty was believed to have come down from heaven at the beginning (Von Rad, 1975: p. 308).
In Egypt, the idea of divine choice was carried to extremes. This tradition affirmed the divinity of the king because he was the son of Re and Osiris. As Mackenzie (1976: p. 475) pointed out, “The divine power of kingship reached the Egyptian state directly through the person of the monarch.
Hence the King was not a cultic officer but an object of cult”. The king was physically begotten by deity and was therefore the incarnation of the deity. The Pharaoh without any qualification was called “god” or “the good god” for he is the son of Re the creator god (De Vaux, 1961: p. 101).
The history of Christianity reveals quite a widespread theocratic impulses, ideas and indeed situations that were in essence theocratic. The influential church of the middle ages embodied the theme conspicuously.
The papal title of Vacarius filii dei or the papal right of ex cathedra pronouncements which were considered as proper mediations of divine will is clear examples. Medieval heresies reacting against orthodox teachings often entertained theocratic ideals that were given expressions in millennial overtones. The theocratic idea even gained prominence when the Pope possessed also territorial sovereignty as was the case before the Italian unification in the 19 th
century. In British
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protestant traditions and also in American religious history, theocratic loyalties are known to have flourished (Braner S. V. theocracy). In modern times and outside Christianity, theocratic ideas have been conspicuously exemplified in Tibetan Lamaism and in Islam. While some forms of theocracy have become extinct, others have survived to the present and even with reinforced intensity such that the subject dominates any discussion in modern political theology (Dike, 2013).
2.9 Brief history of Methodist Church (World)
Methodism, or the Methodist movement, is a group of historically related denominations of
Protestant Christianity which derive their inspiration from the life and teachings of John Wesley.
George Whitefield and John's brother Charles Wesley were also significant leaders in the movement. It originated as a revival within the 18th-century Church of England and became a separate Church after Wesley's death. Because of vigorous missionary activity, the movement spread throughout the British Empire, the United States, and beyond, today claiming approximately 80 million adherents worldwide (Olson, 2009).
Distinguishing Methodist doctrines include Christian perfection, an assurance of salvation, the priesthood of all believers, the primacy of scripture and works of piety. Methodism also emphasizes "social holiness", missionary zeal, charity, and service to the poor and vulnerable.
These ideals are put into practice by the establishment of hospitals, universities, orphanages, soup kitchens, and schools to follow Jesus Christ's command to spread the Good News and serve all people. Most Methodists teach that Christ died for all of humanity, not just for a limited group, and thus everyone is entitled to God's grace and protection; in theology, this view is known as
Arminianism. It denies that God has pre-ordained an elect number of people to eternal bliss while others are doomed to hell no matter what they do in life. However, Whitefield and several others were considered Calvinistic Methodists (Butler, 2013; Tucker & Westerfield, 2001).
The Methodist movement has a wide variety of forms of worship, ranging from high church to low church in liturgical usage. Denominations that descend from the British Methodist tradition tend toward a less formal worship style, while American Methodism in particular the United Methodist
Church is more liturgical. Methodism is known for its rich musical tradition; Charles Wesley was instrumental in writing much of the hymnody of the Methodist Church, and many other eminent hymn writers come from the Methodist tradition (Tucker et al. 2001; Schmitt, 1983).
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Early Methodists were drawn from all levels of society, including the aristocracy, but the
Methodist preachers took the message to labourers and criminals who tended to be left outside organized religion at that time. In Britain, the Methodist Church had a major effect in the early decades of the making of the working class (1760-1820). In the United States it became the religion of many slaves who later formed "black churches" in the Methodist tradition (Butler, 2013).
2.10 Origin of the Methodist Church
The Methodist revival began with a group of men, including John Wesley (1703-1791) and his younger brother Charles (1707-1788), as a movement within the Church of England in the 18th century. The Wesley brothers founded the Holy Club while they were at Oxford, where John was a fellow and later a lecturer at Lincoln College. The Holy Club met weekly and they systematically set about living a holy life. They were accustomed to receiving communion every week, fasting regularly, abstaining from most forms of amusement and luxury and frequently visited the sick and the poor, as well as prisoners. The fellowship were branded as "Methodist" by their fellow students because of the way they used "rule" and "method" to go about their religious affairs.
Wesley took the attempted mockery and turned it into a title of honour.
Initially the Methodists merely sought reform, by way of a return to the gospel, within the Church of England, but the movement spread with revival and soon a significant number of Anglican clergy became affiliated with the movement in the mid-18th century. The early movement acted against perceived apathy in the Church of England, preaching in the open air and establishing
Methodist societies wherever they went. These societies were divided into groups called classes - intimate meetings where individuals were encouraged to confess their sins to one another and to build each other up. They also took part in love feasts which allowed for the sharing of testimony, a key feature of early Methodists. Three teachings they saw as the foundation of Christian faith were: (a) People are all, by nature, "dead in sin," and, consequently, "children of wrath (b) They are "justified by faith alone and lastly, (c) Faith produces inward and outward holiness.
Methodist preachers were notorious for their enthusiastic sermons and often accused of fanaticism.
In those days, many members of England's established church feared that new doctrines promulgated by the Methodists, such as the necessity of a new birth for salvation, of justification
17
by faith, and of the constant and sustained action of the Holy Spirit upon the believer's soul, would produce ill effects upon weak minds. Theophilus Evans, an early critic of the movement, even wrote that it was "the natural Tendency of their Behaviour, in Voice and Gesture and horrid
Expressions, to make People mad." In one of his prints, William Hogarth likewise attacked
Methodists as "enthusiasts" full of "Credulity, Superstition and Fanaticism." But the Methodist movement thrived among the working class despite the attacks mostly verbal, but sometimes violent against it (Bratt, 2006; O’ Brien, 2006; Tusker et al. 2001).
John Wesley came under the influence of the Moravian Church and of the Dutch theologian
Jacobus Arminius (1560-1609). Arminius (the Latinized form of the name Jakob Harmaens) denied that God had pre-ordained an elect number of people to eternal bliss while others perished eternally. Conversely, George Whitefield, Howell Harris and Selina Hastings, Countess of
Huntingdon were notable for being Calvinistic Methodists. Whitefield, who had been a fellow student of the Wesley brothers at Oxford, became well known for his unorthodox ministry of itinerant open-air preaching and inspired Wesley to likewise preach to those excluded from the
Anglican Church. Differences in theology put serious strains on the relationship between
Whitefield and Wesley, with Wesley becoming quite hostile toward Whitefield in what had been previously very close relations. Whitefield consistently begged Wesley not to let these differences sever their friendship and, in time their friendship was restored, though this was seen by many of
Whitefield's followers to be a doctrinal compromise. As a final testimony of their friendship, John
Wesley's sermon on Whitefield's death was full of praise and affection (Tucker et al. 2001; Schmitt,
1983).
2.11 Overview of the Methodist Church in Africa
Methodist denominations in Africa follow the British Methodist tradition and see the Methodist
Church of Great Britain as their mother church. Originally modelled on the British structure, since independence most of these churches have adopted an episcopal model.
The Nigerian Methodist Church has around two million members in 2000 congregations. It has seen exponential growth since the turn of the millennium. The church was founded in 1842 by
18
British Wesleyan Methodist missionaries. Today, the church has a prelate, eight archbishops and
44 bishops (World Council of Churches, 2016).
The Methodist Church operates across South Africa, Namibia, Botswana, Lesotho and Swaziland, with a limited presence in Zimbabwe and Mozambique. It is a member church of the World
Methodist Council. Methodism in Southern Africa began as a result of lay Christian work by an
Irish soldier of the English Regiment, John Irwin, who was stationed at the Cape and began to hold prayer meetings as early as 1795. The first Methodist lay preacher at the Cape, George Middlemiss, was a soldier of the 72nd regiment of the British Army stationed at the Cape in 1805. This foundation paved the way for missionary work by Methodist missionary societies from Great
Britain, many of whom sent missionaries with the 1820 English settlers to the Western and Eastern
Cape. Among the most notable of the early missionaries were Barnabas Shaw and William Shaw.
The largest group was the Wesleyan Methodist Church, but there were a number of others that joined together to form the Methodist Church of South Africa, later known as The Methodist
Church of Southern Africa. The Methodist Church of Southern Africa is the largest Mainline
Protestant denomination in South Africa - 7.3% of the South African population recorded their religious affiliation as 'Methodist' in the last national census (Millard-Jackson, 2008; Foster, 2008;
Grassow, 2008).
2.12 Contemporary Methodism
Today, millions belong to Methodist churches, which are present on all populated continents.
Although Methodism is declining in Great Britain and North America, it is growing in other places; at a rapid pace in, for example, South Korea. In these new places, it often takes shapes that diverge from its roots. For example, the Arminian heritage is ignored or simply unknown, and an exclusive,
Neo-Calvinist emphasis is played up. Many such denominations highlight Methodism's traditional emphasis upon holiness. Almost all Methodist denominations are members of a consultative body called the World Methodist Council, which is headquartered at Lake Junaluska, North Carolina, in the United States (World Council of Churches, 2016; Cracknell & White, 2005).
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2.13 Methodist Church of Ghana in Perspective
Methodism in Ghana came into existence as a result of the missionary activities of the Wesleyan
Methodist Church, inaugurated with the arrival of Joseph Rhodes Dunwell to the Gold Coast
(Ghana) in 1835. Like the mother church, the Methodist Church in Ghana was established by people of Protestant background. Roman Catholic and Anglican missionaries came to the Gold
Coast from the 15th century. A school was established in Cape Coast by the Anglicans during the time of Philip Quaque, a Ghanaian priest. Those who came out of this school had scriptural knowledge and scriptural materials supplied by the Society for the Propagation of Christian
Knowledge. A member of the resulting Bible study groups, William De-Graft, requested Bibles through Captain Potter of the ship Congo. Not only were Bibles sent, but also a Methodist missionary. In the first eight years of the Church's life, 11 out of 21 missionaries who worked in the Gold Coast died. Thomas Birch Freeman, who arrived at the Gold Coast in 1838 was a pioneer of missionary expansion. Between 1838 and 1857 he carried Methodism from the coastal areas to
Kumasi in the Asante hinterland of the Gold Coast. He also established Methodist Societies in
Badagry and Abeokuta in Nigeria with the assistance of William De-Graft (Bartels, 1965).
By 1854, the church was organized into circuits constituting a district with T.B. Freeman as chairman. Freeman was replaced in 1856 by William West. The district was divided and extended to include areas in the then Gold Coast and Nigeria by the synod in 1878, a move confirmed at the
British Conference. The district were Gold Coast (Ghana) District, with T.R. Picot as chairman and Yoruba and Popo District, with John Milum as chairman. Methodist evangelization of northern
Ghana began in 1910. After a long period of conflict with the colonial government, missionary work was established in 1955. Paul Adu was the first indigenous missionary to northern Ghana. In
July 1961, the Methodist Church in Ghana became autonomous, and was called the Methodist
Church Ghana, based on a deed of foundation, part of the church's Constitution and Standing
Orders (Bartels, 1965).
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CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research methodology
The research approach that the study will adopt is the descriptive method. A descriptive research intends to bring to the fore, reality encompassing the magnitude and position of a scenario, in existence at the exact time the study was undertaken (Creswell, 2009). This research will also be cross-sectional as a result of time constraint. That is to say, this research is a survey of a distinct episode at a specified time period (Saunders, Lewis & Thornhill, 2003). Accordingly, crosssectional studies often employ the survey strategy, and they may be advocating to delineate the event of an episode.
In the strict perspective, the study will be heavily reliant on primary data. That is to say, the primary research will provide the raw data to meet the targets set for the study. The primary data, made up of flawless raw type will be gathered directly from the members and staff of Ebenezer Methodist
Church (EMC) (Madina). It must be accentuated that primary data will constitute figures, views, facts, opinions and personal experiences of the respondents belonging to the above-mentioned religious body.
Put unreservedly, questionnaires epitomize one of the much sought after data gathering technique employed in survey research. That is to say, the questionnaire that will be effectively utilized consist of a sandwich of both open and closed-ended feedbacks. Owing to the quantitative and qualitative nature of the data that will be garned, both techniques will be relied upon in the analysis as postulated by Saunders, Lewis and Thornhill (2007). This strategic procedure is opted for principally in the natural sciences and heavily reliant on information that can quantitatively be accounted for. Both Burell and Morgan (1979) opined that surveys, questionnaires, tests of personality, and standardized research instruments are undoubtedly hypothetical scenarios of apparatuses effectively utilized within the quantitative approach perspective. Conversely, Crotty
(1998) postulated that qualitative approach to research accentuates on systematic protocols and methods, where subjective parameters of the researcher are crafted and interwoven into the fact findings and its concluding part (Crotty, 1998).
21
The population in a statistical study is the entire group of individuals about which we want information (Moore et al., 2009). The targeted population for the study comprised of 50 members and staff of Ebenezer Methodist Church, Madina. A sample on the other hand is the part of the population from which we actually collect information used to draw conclusions about the whole”
(Moore et al., 2009). The entire sample size for the study was 44 congregants belonging to the chosen church organization. The determination of the sample size was reliant on Saunders, Lewis and Thornhill (2007) mathematical equation (Refer to Appendix I). That notwithstanding, only 36 of the congregants returned their questionnaires, which invariably represented 81.8% responsive rate.
Interview of key employees and members of the religious organization in contention with some particular attributes in unison. The researcher of the topic is of the candid opinion that the aforementioned personalities are indispensable as far as identifying the critical causes of corporate governance challenges confronting churches in Ghana as well as recommending strategic intervention mechanisms to manage the issues raised earlier.
Responses will then be scripted and effectively utilized in consonance with both quantitative and qualitative data gathered to map out strategic mechanisms to address the issues mentioned earlier as regards the research objectives in consonance with the research questions. A Five-Point Likert’s scale will be relied upon to develop the questionnaire in order to allow respondents to identify the disparities in the responses vis-à-vis ensuring they had a myriad of options. The Likert scale was opted for because it has been successfully utilized in similar studies within the past few years as opined by Haider & Rasid (2002) not losing sight of the publication credited to Raje, Dhobe &
Deshpande in 2002.
Reliability of a test is a degree of how precisely the instrument measures a construct (Döring &
Bortz, 2002). An instrument is considered reliable if it measures the true score of the construct without any errors whereas validity is the degree to which a test is measuring what it purports to measure (Bortz, 1999; Kline, 2000).
22
Measures will be taken to ensure that the data collecting instruments that will be employed are reliable and valid. The first measure will be to use multiple data collection instruments to collect data for the study. The findings from these different data collection tools will subsequently be triangulated or compared in order to authenticate whether they provided similar findings.
Ethics has become a cornerstone for conducting effective and meaningful research. As such, the ethical behaviour of individual researchers is under unprecedented scrutiny contemporarily and can under no circumstance be underestimated as far as formidable research study is concerned
(Best & Kahn, 2006; Trimble & Fisher, 2006).
In lieu of this, potential respondents to the questionnaires will then be given assurance that the data collected will be used for the stated purpose and in no way identified the provider of such data.
Also, respondents will be informed to be objective since the researcher will under no circumstance be looking for right or wrong answers.
The study will effectively utilize the Relative Importance Index (RII) method to determine the relative importance of the critical causes of corporate governance challenges confronting churches in Ghana, specifically employing Ebenezer Methodist Church, Madina as the case study church organization in point. The 5-Point Likert Scale ranging from 1(Completely irrelevant) to 5 (Highly relevant) will be applied and transformed to Relative Importance Indices (RII) for each of the critical causes of corporate governance challenges confronting churches in Ghana, not losing of the strategic initiatives to employ in order to manage the issues mentioned earlier.
The Relative Importance Index (RII) is calculated using the formula employed by Fugar and
Agyarkwah - Baah (2010) in their extensive research project captioned “Delays in Building
Construction Projects in Ghana” cited as below:
RII
=
∑
Pi ×Ui
N ×n
Where RII = Relative importance index
Pi = respondent rating of severity of the challenges
23
Ui = respondent’s placing identical weighting or rating
N= sample size; n =the highest attainable score (The greater the RII score, the highly relevant the factor. It is worth noting that RII values ranges between 0 and 1).
24
CHAPTER FOUR: RESULTS AND DISCUSSION
4.1 Socio-Demographic Characteristics of Respondents
This section of the chapter touches on the demographic characteristics of respondents at Ebenezer
Methodist Church, Madina (EMC). It begins with the age distribution, marital status, worship duration, educational background, key benefits of corporate governance practices as well as the critical causes of corporate challenges confronting churches in Ghana, specifically using the 5-
Point Likert Scale’s significance order which was later upgraded into the Relative Importance
Index (RII). The study first prompted respondents to indicate their gender. The responses garned were then analyzed using frequency and percentage table as indicated below:
Table 4.1 Gender of Respondents
Gender
Male
Female
Total
Source: Author’s Field Survey Report, 2016
Frequency
11
25
36
Percentage (%)
30.6
69.4
100.0
The table (4.1) above clearly depicts that out of the 36 respondents’ made up of employees and members worshipping with EMC, 25 connoting 69.4% belonged to the male category whereas 11 which symbolized 30.6% were females.
Table 4.2 Ages of Respondents
Age Ranges (Years)
21-30
31-40
41-50
51-60
Above 60
Total
Source: Author’s Field Data, 2016
Frequency
12
16
5
2
1
36
Percentage (%)
33.3
44.4
13.9
5.6
2.8
100.0
25
Table 4.2 depicts that the age bracket within the ranges of 21 to 30 years and 31-40 years recorded maximum respondents’ frequency scores of 12 (2 nd
) and 16 (1 st
) with their corresponding percentage marks of 33.3% and 44.4% respectively. The 2 categories mentioned earlier were closely accompanied by those within the age bracket of 41 and 50 with a frequency of 5 as well as a percentage score of 13.9% (3 rd ) in the pecking order. Furthermore, respondents within the age range of 51 and 60 years were ranked 4 th
with an accompanying frequency of 2 in addition to a percentage mark of 5.6%. That notwithstanding, those respondents’ above 60 years were firmly rooted at the bottom (see table 4.2) with a frequency and a percentage score of 1 (5 th ) and 2.8% respectively.
Table 4.3 Marital Status of Respondents
Marital Status Frequency Percentage (%)
Single
Married
16
20
44.4
55.6
Total
Source: Author’s Field Data, 2016
36 100.0
With regards to table 4.3, out of the 36 respondents that took part in the survey at EMC, only 16 employees representing 44.4% were made of bachelors and spinsters while the remaining larger part representing the married category amounted to 20 and subsequently recorded a percentage figure of 55.6%.
Table 4.4 Worshipping Duration of Respondents at EMC
Duration of Worship Frequency
(Years)
1-5
6-10
11-15
Above 16
Total
5
11
17
3
36
Percentage (%)
13.9
30.6
47.2
8.3
100.0
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Source: Author’s Field Data, 2016
With respect to table 4.4, respondents who have been worshipping at EMC for the past 11 to 15 years recorded the optimum frequency of 17 (1 st
) representing approximately 47.2%. This was closely followed by respondents’ who have been with the religious body for the past 6 to 10 years.
The category had the 2 nd
highest occurrence number of 11, with an accompanying percentage score of 30.6%. Respondents’ within the worship duration of between 1 to 5 years followed suit and subsequently recorded a frequency of 5 (3 rd ) as well as a percentage score of 13.9% in that pecking order. However, the respondents’ above service duration of 16 years were the last in the pecking order and eventually attracted a woeful percentage score of 8.3% via a frequency of 3 (4 th
).
Table 4.5 Educational Background of Respondents
Highest Qualification Attainment Frequency
Diploma/HND
Bachelor’s Degree
Master’s Degree
PhD/Other Doctoral Degree
Other Professional Qualifications
Total
Source: Author’s Field Data, 2016
9
15
4
2
6
36
Percentage (%)
25.0
41.7
11.1
5.6
16.6
100.0
Table 4.5 above, epitomizes that 25.0% of respondents have Diploma/HND qualification with a frequency of 9 (2 nd ) , 41.7% were First Degree Holders and had occurrence numbers of 15 (1 st ) ,
11.1% were Master’s Degree Holders with an accompanying frequency of 4 (4 th ) . Candidly speaking, 16.6% of the respondents at EMC with a frequency of 6 (3 rd ) represented various professional qualifications when the survey was carried out. However the category of respondents’ who recorded the least percentage score of 5.6% were those in possession of PhD/Other Doctoral
Degrees and attracted a frequency of 2 (5 th
).
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Table 4.6 Respondents’ View on Key Elements of Corporate Governance Environment, RII
& Ranking
Key Benefits of Corporate Governance Practices RII Ranking
Enforcing and encouraging transparency (ENFOP)
Efficient use of resources within the church as a whole (ERASE)
Instilling controls (INCOS)
Conflict of interest resolution (COIRT)
Promotion of church-wide efficiency and a fair return for church owners
0.567
0.525
0.498
0.459
0.421
1 st
2 nd
3 rd
4 th
5 th
(POWER)
Sense of ethicality (SETHI)
Source: Author’s Field Data, 2016
0.358 6 th
The table 4.6 above and figure 4.1 below indicates that participants at EMC selected “Enforcing and encouraging transparency (ENFOP)” construct as the most significant in relation to the key benefits of corporate governance practices to churches in Ghana. “ENFOP” recorded an extremely optimal RII value of 0.567 in consonance with the 5-Point Likert scale’s order of importance and was rated 1 st
. The category in contention was closely followed by “Efficient use of resources within the church as a whole (ERASE)”, “Instilling controls (INCOS)” as well as “Conflict of interest resolution (COIRT)” with RII scorings of 0.525 (2 nd
), 0.498 (3 rd
) and 0.459 (4 th
) in that pecking order. Nevertheless, both “Promotion of church-wide efficiency and a fair return for church owners
(POWER)” in addition to “Sense of ethicality (SETHI)” categories were ranked 5 th
and 6 th
with corresponding RII figures of 0.421 and 0.358 respectively. Strictly speaking, the fact findings of the respondents at EMC coincides with the extensive research projects embarked upon by the likes of Gregory and Simmis (1999), Banks (2004) as well as the postulate of Keong (2002).
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Key Benefits of Corporate Governance (CG) Practices, RII & Ranking
ENFOP ERASE INCOS COIRT POWER SETHI
Figure 4.1 Key Benefits of CG Practices Source: Author’s Field Data, 2016
Table 4.7 Respondents’ View on the Critical Causes of Corporate Governance Challenges,
RII & Ranking
Critical Causes of Corporate Governance Challenges
Power and control obsession (POCO)
Leadership and cultural abuse (LEAB)
Ineffective oversight by church’s corporate board of directors (COBD)
Weak legal and regulatory systems (WLRS)
Inconsistent accounting and auditing standards (INAC)
Little regards for the rights of minority shareholders (LROM)
Source: Author’s Field Data, 2016
RII Ranking
0.574
0.531
0.498
0.470
0.411
0.363
1 st
2 nd
3 rd
4 th
5 th
6 th
With respect to table 4.7 above and figure 4.2 below, respondents at EMC opted for “Power and control abuse (POCO)” as the most critical cause of corporate governance challenges in Ghanaian churches as it recorded an RII scoring of 0.574 (1 st ) based on the 5-Point Likert scale’s order of significance. The parameter was closely accompanied by “Leadership and cultural abuse (LEAB)”,
“Ineffective oversight by church’s corporate board of directors (COBD)” including both “Weak legal and regulatory systems (WLRS)” and “Inconsistent accounting and auditing standards
(INAC)”. The above-mentioned constructs had RII values of 0.531, 0.498, 0.470 as well as 0.411 respectively and were subsequently ranked 2 nd
, 3 rd
, 4 th
and 5 th
accordingly. However, the last in
29
the pecking order as far as the critical causes of corporate governance challenges is concerned happens to be “Little regards for the rights of minority shareholders (LROM)” with an accompanying RII score of 0.363 and was rated 6 th
amongst the other 5 determinants. Simply put, the comprehensive works of Lin (2000), Gathinji (2002), Hanazki and Lin (2003), Bradley et al.
(1999), Tricker (2000) and James (2009) is synonymous to the findings of the participants at EMC.
Figure 4.2 is thus illustrated diagrammatically as below:
Critical Causes of Corporate Governance (CG) Challenges, RII & Rating
POCO LEAB COBD WLRS INAC LROM
Figure 4.2 Critical Causes of CG Challenges Source: Author’s Field Data, 2016
4.2 Achievement of Objectives
The research objectives have been duly achieved in the preceding chapters. The 1 st
objective dubbed “What are the key benefits of corporate governance practices to churches in Ghana?” has been vividly dealt with. Put simply, 6 key constructs were discovered by the respondents’ at EMC, specifically: ENFOP, ERASE, INCOS, COIRT, and POWER in addition to SETHI. It has thus been captured in table 4.6 and figure 4.1 cited earlier. The 2 nd objective was captioned “What are the critical causes of corporate governance challenges confronting churches in Ghana” has also been accentuated on tentatively. This was made possible through the distribution of questionnaires to 36 members and employees at EMC. In the strict perspective, 6 pivotal parameters (POCO,
LEAB, COBD, WLRS, INAC and LROM) were realized by the researchers’ based on the respondents’ preferred options as it relates to the Relative Importance Index (RII) order of significance on the Five Point Likert scale (see table 4.7 and figure 4.2 spelt out earlier).
30
CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Summary
A central theme for corporate governance research is to what extent good corporate governance practices can be universal, i.e. is there a one size fits all strategy for corporate governance, or are good practices instead country, culture or firm dependent. There is much evidence that there are no universal laws in corporate governance and that optimal church governance differs, for example, between protestants and Pentecostal churches and between emerging or so-called mushroom churches Thus, also the corporate governance codes in different religions and countries should be different and reflect the for example surrounding environment’s history, economic development, church growth and culture.
Strictly speaking, as ascribe to the key benefits of corporate governance practices to churches in
Ghana, 6 parameters were intimated for by the respondents based on the Five Point Likert Scale significance order relating to the Relative Importance Index values exemplified in table 4.6 and figure 4.1, specifically: Enforcing and encouraging transparency (RII=0.567); Efficient use of resources within the church as a whole (RII=0.525); Instilling controls (RII=0.498); Conflict of interest resolution (RII=0.459); Promotion of church-wide efficiency and a fair return for church owners (RII=0.421) as well as Sense of ethicality (RII=0.358). Lastly, as regards the critical causes of corporate governance challenges confronting churches in Ghana, again, 6 pivotal determinants were realized by the participants namely: Power and control obsession (RII=0.574); Leadership and cultural abuse (RII=0.531); Ineffective oversight by church’s corporate board of directors
(RII=0.498); Weak legal and regulatory systems; Inconsistent accounting and auditing standards in addition to Little regards for the rights of minority shareholders.
5.2 Conclusions
In a nutshell, it is so clear that all the 36 participants belonging to EMC suggested ENFOB as the most crucial as far as the key benefits of corporate governance practices is concerned in view of the fact that it recorded an RII value of 0.567 in tandem with the 5-Point Likert scale’s order of significance which was closely followed by ERASE, INCOS, COIRT, POWER and SETHI with
31
their respective RII values of 0.525; 0.498; 0.459; 0.421 and 0.358. More so, in connection with the critical causes of corporate governance challenges evident in Ghanaian churches, respondents’ opined POCO as the most pivotal as exhibited by its RII scoring (0.574). However, the 2 nd
and 6 th most critical causes of CG challenges recorded RII scorings in the range of 0.531 and 0.363 accordingly.
Comparing, contrasting and tentatively evaluating the results with literature from past studies carried out by CG top echelons worldwide clearly reaffirms that the strict adherence to ethicality, equity, fairness, openness, stakeholders participation in corporate governance regimes will invariably not only boost EMC’s religious corporate image, but also, the efficiency, performance, productivity, effectiveness of the teeming Ghanaian churches in its entirety and the world at large.
5.3 Recommendations
With respect to providing a perpetual panaceas to the critical causes of corporate governance challenges realized during the study, the under-listed recommendations cannot be underestimated:
There should also be political/religious awareness, willingness and courage from the government and religious top echelons to fight the “holy” corruption that pertains to most churches in Ghana and the world at large. In addition, the government should increase the institutional capacity of the regulators, as well as improving the administrative and judiciary system while reforming the legal framework. The awareness and significance of corporate governance should be published while updating the code of best practices to represent the current realities as well as improving the quality of disclosures expected from the religious bodies across the nooks and crannies of Ghana.
Corporate governance practices used in developed country’s churches are not directly applicable in developing economies because of political, economic, technological and cultural differences.
This means that there is a need to develop models of church’s corporate governance that consider the conditions in each developing country and that are not directly borrowed from developed countries.
Churches of all vintages across the ranks and file of Ghana and beyond should inculcate strategic initiatives such as embracing stakeholder model, ethical leadership principles and expectations,
32
strengthening of disclosure practices; enforce mandatory fully and encourage voluntary disclosures, developing religious entity’s purpose statements that cover stakeholder interests, implementation of board self-assessment, rigorous board membership requirements, requisite competencies in board composition, asking tough questions about controversial issues and embrace objectivity as well as strengthening capacity of regulatory religious bodies vis-à-vis reviewing the church’s code to strengthen its corporate governance credentials –Debate on executive compensation.
Furthermore, the strict adherence to making ethical standards part of the church’s corporate agenda, broadening of ethical awareness, striving to lead in setting ethical standards, ensuring the enforcement of ethical behaviour, building commitment and respect for values, meeting social obligations as well as the training of employees, church members, management and the board in best religious corporate practices.
Basically, ethics is concerned with what we are and not just what we do. Hence, in addition to the afore-mentioned strategic intervention mechanisms, the four cardinal virtues for ethical behaviour, namely: (a) Prudence: Good judgment, competence, practical reasoning (b) Justice: Fairness, transparency (c) Self-mastery: Discipline or temperance (d) Trust, integrity, fairness matter and are crucial to the bottom line and can under no circumstance be left out of the context as far as the mitigating factors of effective corporate governance practices in our modern-day religious entities is concerned.
Lastly, the factoring of Agency, Resource Dependency, Integrative Social Contract, Legitimate,
Geertz Hofstede Cultural Dimension, Human Relations, Contingency, Existence-Relatedness-
Growth (ERG), Mc Clelland Need, Frederick Herzberg’s 2 Factor theories, Total Quality
Management (TQM), Fiduciary Responsibility, Ethical Requirement for Managers and Directors
(Fairness, Openness/Transparency, Independence, Probity/Honesty, Judgement, Reputation,
Integrity, Responsibility) among others into EMC’s and churches across the globe’s scheme of things will inadvertently go a long way in decimating and if possible, manage the malfeasances as well as challenges associated with corporate governance practices contemporarily.
33
5.4 Limitations of the Study
Every study, no matter how well it is conducted, has some limitations. It is in lieu of this assertion that the under-listed limitations cannot be over-emphasized in this study:
1.
Failure to complete all the sections on the questionnaires by some members and employees at EMC really affected the overall results obtained to a significant extent.
2.
Some participants felt reluctant to elicit precise answers to the questions (veered-off) on the questionnaires.
3.
Reluctance on the part of some respondents to elaborate on the critical causes of corporate governance challenges confronting churches in Ghana.
34
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APPENDICES
APPENDIX I – TABLES
Table 1: Key Benefits of Corporate Governance Practices per the Respondents’ Scoring,
Computed RII & Classification/Rating
No Key Benefits of Corporate Governance
Practices
1 Efficient use of resources within the church as a whole
2 Sense of ethicality
3 Conflict of interest resolution
4 Enforcing and encouraging transparency
5 Promotion of church-wide efficiency and a fair return for church owners
6 Instilling controls
Respondents’ Scoring
Number
RII
1 2 3 4 5
33 30 29 32 33 0.525
22 23 19 18 25 0.358
30 27 24 28 29 0.459
32 34 33 34 35 0.567
26 25 22 28 25 0.421
30 31 27 30 31 0.498
Rating
1
5
6
4
2
3
Table 2: Critical Causes of Corporate Governance Challenges Confronting Churches in
Ghana of Respondents’ Scoring, Computed RII & Classification/Rating
44
No Critical Causes of Corporate Governance
Challenges
Respondents’ Scoring
Number
RII Rating
1 Power and control obsession
1 2 3 4 5
33 34 35 34 35 0.574
2 Little regards for the rights of minority shareholders 25 21 24 22 20 0.363
3 Weak legal and regulatory systems
4 Leadership and cultural abuse
5
Ineffective oversight by church’s corporate board of directors
30 28 31 26 28 0.470
34
31
31
30
33
32
32
29
31
29
0.531
0.498
6 Inconsistent accounting and auditing standards 28 25 27 24 23 0.411
Determination of Sample Size
The researcher used the sample size determination by (Saunders et al., 2007) which is shown
6
4
1
2
3
5 below:
N n =
1+N (α)(α)
where n = sample size, N = Population, and ( α) = Margin of error (0.05)
50 n =
1+50 (0.05)(0.05) n = 44.44
, Hence, the chosen sample for the study = 44.0
AP’s Respondents’ Responsive Rate
The calculation of the respondents’ responsive rate is illustrated as below:
No.of Returned Questionnaires
Respondents’ Responsive Rate =
Total No.of Questionnaires Distributed to Respondents′
=
36
44
× 100
= 81.8%
45
APPENDIX II: QUESTIONNAIRE
CENTRAL UNIVERSITY COLLEGE
QUESTIONNAIRE FOR EBENEZER PRESBYTERIAN CHURCH (EMC), MADINA
EMPLOYEES AND MEMBERS (CONGREGANTS)
I am undertaking a study on the topic “Assessing the Impact of Corporate Governance Practices on Ghanaian Church’s Performance: A Case Study of Ebenezer Methodist Church, Madina” which happens to be one of the term papers in partial fulfillment of the requirements for the award of
Master of Business Administration Degree in Finance by Central University College. It is purely for an academic purpose and therefore your honest response will determine the creditability of the findings. Please be assured that your responses will be treated as highly confidential and therefore be forthright with your answers.
Section A
Instructions : Please kindly tick (√) in the boxes provided where applicable and fill in the blank spaces (dotted lines) where necessary:
Demographic Features of Respondents
46
1.
Gender: Male
2.
Age range
Years
Tick (√)
21 - 30 31 – 40
Female
41 – 50 51 – 60 Above 60
3. Marital status
Single Married
4. What is your highest academic qualification?
Diploma/HND First Degree
PhD/Other Doctorate Degree
Master Degree
Other professional qualifications, please kindly specify______________________
5. How long have you been worshipping with EMC? _______________________________
1-5 Years 6-10 Years 11-16 Years
Above 16 Years
SECTION B
Questions on Corporate Governance Practices
6. Do you think it is important to implement corporate governance in Ghanaian churches?
(a) Not important at all (b) irrelevant (c) Average important
(d) Important (e) Very Important
7. What’s your understanding on Corporate Governance?
47
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
8. Do you think your religious body fully comply on cooperate governance guidelines?
(a) Yes (b) No
If “Yes”, please kindly explain further _______________________________________________
______________________________________________________________________________
If “No”, please do elaborate _______________________________________________________
______________________________________________________________________________
9. What types of benefits are received with respect to instilling good corporate governance practices in this church?
______________________________________________________________________________
______________________________________________________________________________
10. Who are mainly responsible for developing corporate governance policies in this church?
(a) Board of Directors (b) Minister-In-Charge (c) Church Secretary
(d) Compliance Officer
11. Is there any corporate governance reform within churches in Ghana? (a) Yes (b) No
If “Yes”, please specify the types of reforms
______________________________________________________________________________
______________________________________________________________________________
If “No”, do assign a reason for that __________________________________________________
______________________________________________________________________________
12. What reasons work behind the scene to initiate CG reforms within the churches in Ghana?
______________________________________________________________________________
48
______________________________________________________________________________
13. What are the barriers to the improvements of CG practices in Ghanaian churches?
_____________________________________________________________________________
_____________________________________________________________________________
14. What duties & responsibilities basically does the board perform?
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
15. What are the criteria required to become a church board member?
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
16. In your religious entity, are Chairman & General Overseer the same? (a) Yes (b) No
17. Does church secretary work here on full time basis? (a) Yes (b) No
18. Which departments are mainly responsible for implementing CG strategic initiatives in the church?
_____________________________________________________________________________
_____________________________________________________________________________
19. Does your church comply with IAS & IFRS in preparing financial statements? (a) Yes
(b) No
20. How does your religious body monitor corporate governance regimes?
______________________________________________________________________________
______________________________________________________________________________
21. What are the constraints to obtaining information from congregants?
______________________________________________________________________________
______________________________________________________________________________
49
______________________________________________________________________________
22. What are the key benefits of corporate governance practices to churches in Ghana? Kindly indicate by degree of your compliance with each statement by ticking the precise and accurate answer: (1) Completely irrelevant (2) Rarely relevant (3) Averagely relevant (4) Relevant (5)
Highly relevant
No Key Benefits of
Corporate
Governance
Practices
1 Efficient use of resources within the church as a whole
2 Sense of ethicality
3 Conflict of interest resolution
4 Enforcing and encouraging transparency
1=Completely irrelevant
2=Rarely relevant
3=Averagely relevant
4=Relevant 5=Highly relevant
5
6
Promotion of church-wide efficiency and a fair return for church owners
Instilling controls
23. What do you think are the critical causes of corporate governance challenges confronting churches in Ghana? Kindly indicate by degree of your compliance with each statement by ticking the precise and accurate answer: (1) Completely irrelevant (2) Rarely relevant (3) Averagely relevant (4) Relevant (5) Highly relevant
No Critical Causes of Corporate
Governance
Challenges
1 Power and control obsession
2 Little regards for the rights of
1=Completely irrelevant
2=Rarely relevant
3=Averagely relevant
4=Relevant 5=Highly relevant
50
minority shareholders
3 Weak legal and regulatory systems
4 Leadership and cultural abuse
5 Ineffective oversight by church’s corporate board of directors
6 Inconsistent accounting and auditory standards
51
