ATIVOR'S CORPORATE GOVERNANCE TERM PAPER

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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
EXECUTIVE SUMMARY ......................................................................................................................... i
LIST OF TABLES ..................................................................................................................................... iv
LIST OF FIGURES .................................................................................................................................... v
CHAPTER ONE: INTRODUCTION ....................................................................................................... 1
1.1 Background of the Study ...................................................................................................................... 1
1.2 Problem Statement................................................................................................................................ 3
1.3 Aim and Objectives ............................................................................................................................... 5
1.4 Research Questions ............................................................................................................................... 5
REVIEW OF LITERATURE .................................................................................................................... 6
2.1 Concept and meaning of corporate governance ................................................................................. 6
2.2 Corporate governance developments (the past) ................................................................................. 6
2.3 The present and the future ................................................................................................................... 8
2.4 Benefits of corporate governance ........................................................................................................ 8
2.5 Causes of corporate governance challenges ........................................................................................ 9
2.6 Miscellaneous factors affecting corporate governance regimes...................................................... 10
2.6.1 Leadership and cultural abuse........................................................................................................ 10
2.6.2 Mal-functional Systems ................................................................................................................... 11
2.6.3 Power and control ............................................................................................................................ 11
2.7 Theories underpinning corporate governance practices ................................................................. 12
2.7.1 Stakeholder theory ........................................................................................................................... 12
2.7.2 Resource dependency theory........................................................................................................... 13
2.7.3 Social contract theory ...................................................................................................................... 13
2.7.4 Legitimacy theory ............................................................................................................................ 14
2.8 Concept of theocracy in corporate governance (Global) ................................................................. 14
2.9 Brief history of Methodist Church (World) ..................................................................................... 16
2.10 Origin of the Methodist Church ...................................................................................................... 17
2.11 Overview of the Methodist Church in Africa ................................................................................. 18
2.12 Contemporary Methodism ............................................................................................................... 19
2.13 Methodist Church of Ghana in Perspective.................................................................................... 20
CHAPTER THREE: RESEARCH METHODOLOGY........................................................................ 21
3.1 Research methodology ........................................................................................................................ 21
CHAPTER FOUR: RESULTS AND DISCUSSION ............................................................................. 25
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4.1 Socio-Demographic Characteristics of Respondents ....................................................................... 25
4.2 Achievement of Objectives ................................................................................................................. 30
CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS .......................... 31
5.1 Summary.............................................................................................................................................. 31
5.2 Conclusions .......................................................................................................................................... 31
5.3 Recommendations ............................................................................................................................... 32
5.4 Limitations of the Study ..................................................................................................................... 34
REFERENCES .......................................................................................................................................... 35
APPENDICES ........................................................................................................................................... 44
APPENDIX I – TABLES.......................................................................................................................... 44
APPENDIX II: QUESTIONNAIRE........................................................................................................ 46
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LIST OF TABLES
Table 4.1 Gender of Respondents .............................................................................................. 25
Table 4.2 Ages of Respondents .................................................................................................. 25
Table 4.3 Marital Status of Respondents .................................................................................. 26
Table 4.4 Worshipping Duration of Respondents at EMC ..................................................... 26
Table 4.5 Educational Background of Respondents ................................................................ 27
Table 4.6 Respondents’ View on Key Elements of Corporate Governance Environment, RII
& Ranking.................................................................................................................................... 28
Table 4.7 Respondents’ View on the Critical Causes of Corporate Governance Challenges,
RII & Ranking............................................................................................................................. 29
iv
LIST OF FIGURES
Figure 4.1 Key Benefits of CG Practices ................................................................................... 29
Figure 4.2 Critical Causes of CG Challenges ........................................................................... 30
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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 afore4
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
14
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 19th century. In British
15
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).
16
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).
19
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).
20
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 5Point 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
Frequency
11
Male
25
Female
Total
36
Source: Author’s Field Survey Report, 2016
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)
Frequency
Percentage (%)
21-30
12
33.3
31-40
16
44.4
41-50
5
13.9
51-60
2
5.6
Above 60
1
2.8
Total
36
100.0
Source: Author’s Field Data, 2016
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 (2nd) and 16 (1st) 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% (3rd) in the pecking order. Furthermore, respondents within the age
range of 51 and 60 years were ranked 4th 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 (5th) and 2.8%
respectively.
Table 4.3 Marital Status of Respondents
Marital Status
Frequency
Percentage (%)
Single
16
44.4
Married
20
55.6
Total
36
100.0
Source: Author’s Field Data, 2016
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
Percentage (%)
(Years)
1-5
5
13.9
6-10
11
30.6
11-15
17
47.2
Above 16
3
8.3
Total
36
100.0
26
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 (1st) 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 2nd 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 (3rd) 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 (4th).
Table 4.5 Educational Background of Respondents
Highest Qualification Attainment
Frequency
Percentage (%)
Diploma/HND
9
25.0
Bachelor’s Degree
15
41.7
Master’s Degree
4
11.1
PhD/Other Doctoral Degree
2
5.6
Other Professional Qualifications
6
16.6
Total
36
100.0
Source: Author’s Field Data, 2016
Table 4.5 above, epitomizes that 25.0% of respondents have Diploma/HND qualification with a
frequency of 9 (2nd) , 41.7% were First Degree Holders and had occurrence numbers of 15 (1st) ,
11.1% were Master’s Degree Holders with an accompanying frequency of 4 (4th) . Candidly
speaking, 16.6% of the respondents at EMC with a frequency of 6 (3rd) 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 (5th).
27
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)
0.567
1st
Efficient use of resources within the church as a whole (ERASE)
0.525
2nd
Instilling controls (INCOS)
0.498
3rd
Conflict of interest resolution (COIRT)
0.459
4th
Promotion of church-wide efficiency and a fair return for church owners
0.421
5th
0.358
6th
(POWER)
Sense of ethicality (SETHI)
Source: Author’s Field Data, 2016
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 1st. 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 (2nd), 0.498 (3rd) and 0.459 (4th) 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 5th and 6th 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).
28
Key Benefits of Corporate Governance (CG) Practices, RII & Ranking
ENFOP
ERASE
INCOS
COIRT
POWER
SETHI
Source: Author’s Field Data, 2016
Figure 4.1 Key Benefits of CG Practices
Table 4.7 Respondents’ View on the Critical Causes of Corporate Governance Challenges,
RII & Ranking
Critical Causes of Corporate Governance Challenges
RII
Ranking
Power and control obsession (POCO)
0.574
1st
Leadership and cultural abuse (LEAB)
0.531
2nd
Ineffective oversight by church’s corporate board of directors (COBD)
0.498
3rd
Weak legal and regulatory systems (WLRS)
0.470
4th
Inconsistent accounting and auditing standards (INAC)
0.411
5th
Little regards for the rights of minority shareholders (LROM)
0.363
6th
Source: Author’s Field Data, 2016
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 (1st) 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 2nd, 3rd, 4th and 5th 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 6th 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
Source: Author’s Field Data, 2016
Figure 4.2 Critical Causes of CG Challenges
4.2 Achievement of Objectives
The research objectives have been duly achieved in the preceding chapters. The 1st 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 2nd 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 2nd and 6th
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-RelatednessGrowth (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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43
APPENDICES
APPENDIX I – TABLES
Table 1: Key Benefits of Corporate Governance Practices per the Respondents’ Scoring,
Computed RII & Classification/Rating
No
1
Key Benefits of Corporate Governance
Respondents’ Scoring
Practices
Number
Efficient use of resources within the church as a
RII
Rating
1
2
3
4
5
33
30
29
32
33
0.525
2
whole
2
Sense of ethicality
22
23
19
18
25
0.358
6
3
Conflict of interest resolution
30
27
24
28
29
0.459
4
4
Enforcing and encouraging transparency
32
34
33
34
35
0.567
1
5
Promotion of church-wide efficiency and a fair
26
25
22
28
25
0.421
5
30
31
27
30
31
0.498
3
return for church owners
6
Instilling controls
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
Respondents’ Scoring
Challenges
Number
1
2
3
4
5
RII
Rating
1
Power and control obsession
33
34
35
34
35
0.574
1
2
Little regards for the rights of minority shareholders
25
21
24
22
20
0.363
6
3
Weak legal and regulatory systems
30
28
31
26
28
0.470
4
4
Leadership and cultural abuse
34
31
33
32
31
0.531
2
5
Ineffective oversight by church’s corporate board of
31
30
32
29
29
0.498
3
28
25
27
24
23
0.411
5
directors
6
Inconsistent accounting and auditing standards
Determination of Sample Size
The researcher used the sample size determination by (Saunders et al., 2007) which is shown
below:
n=
N
1+N (α)(α)
where n = sample size, N = Population,
and (α) = Margin of error (0.05)
n=
50
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:
Respondents’ Responsive Rate =
=
No.of Returned Questionnaires
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
blank spaces (dotted lines) where necessary:
Demographic Features of Respondents
46
provided where applicable and fill in the
1. Gender:
Male
Female
2. Age range
Years
21 - 30
31 – 40
41 – 50
51 – 60
Above 60
Tick (√)
3. Marital status
Single
Married
4. What is your highest academic qualification?
Diploma/HND
First Degree
Master Degree
PhD/Other Doctorate 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
(d) Important
(b) irrelevant
(c) Average 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
17. Does church secretary work here on full time basis? (a) Yes
(b) No
(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
1
2
3
4
5
6
Key Benefits of
Corporate
Governance
Practices
Efficient use of
resources within
the church as a
whole
Sense of
ethicality
Conflict of
interest
resolution
1=Completely 2=Rarely
irrelevant
relevant
3=Averagely
relevant
4=Relevant
5=Highly
relevant
Enforcing and
encouraging
transparency
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
1
2
Critical Causes
of Corporate
Governance
Challenges
Power and
control
obsession
Little regards for
the rights of
1=Completely 2=Rarely
irrelevant
relevant
50
3=Averagely
relevant
4=Relevant
5=Highly
relevant
3
4
5
6
minority
shareholders
Weak legal and
regulatory
systems
Leadership and
cultural abuse
Ineffective
oversight by
church’s
corporate board
of directors
Inconsistent
accounting and
auditory
standards
51
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