Government must halt the practice of appointing Chief Executive Officers (CEO) of State-Owned Enterprises (SOEs) and allow the boards of such organisations to conduct proper searches for qualified individuals, the Institute of Directors has said.

President of the Institute, Rockson Dogbegah, in a statement said the practice where governments, through the President, appoint CEOs of SOEs before the board of directors are constituted is wrong and inappropriate.

“The institute wishes to state strongly and categorically, in no uncertain terms, that this practice conflicts with good corporate governance. Such practices are inimical to the successful management and operation of such enterprises.

Appointing the CEO and imposing him/her on the board is bad corporate governance practice.

“This is in reference particularly to Article 190 (1b) of the Constitution of Ghana, which excludes corporations/agencies set up by government as commercial entities, and which are not to be regarded as public service organisations. Such entities, which are expected to make profit for government, must be run with little or no interference from government,” he said.

The institute also condemned as inappropriate the subtle but cunning attempts to correct the wrong by appointing CEOs in acting capacities before appointing the board to confirm their appointment.

“These practices, which are common with SOEs, only make the CEO accountable to the president and not the board. This practice accounts for the many collisions between boards and CEOs of SOEs.

“Sadly, because of the inappropriate and patronage-mode of the appointments, anytime there is conflict between the board and the CEO –real or imagined– the boards are dissolved. This amounts to tacitly endorsing the CEO as more powerful than the boards,” he said.

Recently, the CEO of the Ghana National Petroleum Corporation (GNPC), Dr. K.K. Sarpong, had a misunderstanding with the Chairman of the company’s board, Freddie Blay, on the hiring of a Procurement Manager.

A directive issued by the Board Chair for the manager to be employed seems to have angered the CEO, who has questioned why the order was given in his absence and without his consent. In a leaked letter Mr. Blay is chastised for overstepping his bounds by ordering the Chief Finance Officer to recruit a Procurement Manager.

It can be recalled that the president appointed the CEO of GNPC in an acting capacity before constitution of the board, which went on to confirm the CEO.

Mr. Dogbegah therefore advised that the board of an SOE must first be duly and properly constituted and allowed a free hand to recruit the CEO. “The position of CEO for SOEs must be advertised, and recruitment should be done through an open and competitive process,” he said.

He added that the CEO must be answerable to the board – not the president of the republic; and the board and CEO must have clear terms of reference and measurable targets. “The board can only be dissolved in line with corporate governance practices and laid-down procedures. CEOs of SOEs can have their appointment terminated based on poor performance, misconduct and in line with the terms and conditions of his/her contract,” he said.

The institute, Mr. Dogbegah added, believes that adhering to best practices will open a new chapter in the lives of SOEs, and turn them into enterprises truly delivering on their mandates to the public and other stakeholders.