Senior lecturer at the Finance department of the University of Ghana Business School, Dr. Lord Mensah has commended the decision of the Central Bank of Ghana to scrutinise compensation policies of top key management personnel in banks.

In an exclusive interview with Ghanaweb, the economist explained that the publication exercise will help reduce the problem of cronyism.

In his words, “there is a term in corporate governance called cronyism where managers can use huge reimbursements to influence the decision of board of directors. However, if these kickbacks and allowance are published, it will bring some circumspection.”

According to the Bank of Ghana, “to ensure transparency, banks will be required to publish Value Added Statements disclosing details of the compensation packages of key management personnel and Boards of Directors separately from total employee compensation.”

Dr Lord Mensah also believes the structures of compensation packages play a role in the efficiency of bank executives. Hence the need to associate the performance of the company with the board’s rewards.

“If you look at the happenings in the past, we could attribute the collapse of commercial banks to the behaviour of the executives. This had to do with cooperate governance issues. In other parts of the world, executive and board rewards in the banking sector are published”.

On the back of banks under-declaring executive compensation, he raised concerns about such acts exposing the credibility of banks.

Background

The Central Bank announced the creation of Consolidated Bank Ghana (CBG) to take over some struggling banks in the country in 2018.

These banks which run into liquidity challenges were Sovereign Bank, The Royal Bank, Beige Bank, Construction Bank and Unibank.

The operational licences of Heritage Bank and Premium Bank were also revoked by the Central Bank and their liabilities and selected assets also taken over by the CBG.

The Bank of Ghana also revoked the licences of 386 insolvent microfinance and microcredit companies.

These included 192 microfinance companies which had their licenses revoked. In a release, the bank said these institutions had engaged in several banking infractions which included breach of section 123 (1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).