Memo to Wickham & Co

Subject: BEN plc’s Non-Compliance with Corporate Governance Code for Listed Companies 2020

1. Why BEN does not meet the Corporate Governance Code for Listed Companies 2020
The Corporate Governance Code for Listed Companies 2020 in Ghana requires robust governance structures to ensure accountability, transparency, and protection of shareholder interests. BEN plc fails to comply with the Code in the following ways:

• Combined CEO and Chairman Roles: Mr. Smith serves as both CEO and board chairman, violating the Code’s requirement for separation of these roles to ensure independent oversight and avoid concentration of power.
• Lack of Board Independence: The board comprises five executive and only two non-executive directors, falling short of the Code’s requirement for a balanced board with sufficient independent non-executive directors to challenge management effectively.
• No Formal Performance Evaluation: The absence of formal targets or reviews for board policies and performance contravenes the Code’s mandate for regular board evaluations to ensure effectiveness and accountability.
  • Improper Remuneration Practices: Board salaries set by Mr. Smith based on his personal assessment, rather than objective performance criteria, breach the Code’s requirement for a transparent and independent remuneration process, typically overseen by a remuneration committee.
  • Weak Internal Controls: Relying on the senior accountant for monitoring internal controls, with an assumption that external auditors perform detailed reviews, indicates a lack of robust internal control systems. The absence of an internal audit function further violates the Code’s expectation for listed companies to have an internal audit function to ensure effective risk management and control.

  2. Why non-compliance with the Code may cause a problem for BEN
  Non-compliance with the Corporate Governance Code poses significant risks for BEN, including:

  • Reputational Damage: Failure to adhere to governance standards may erode investor and stakeholder confidence, potentially leading to a decline in share price or difficulty attracting investment.
  • Regulatory Scrutiny: The Ghana Stock Exchange or other regulators may impose sanctions, fines, or delisting for non-compliance, disrupting BEN’s operations and market status.
  • Increased Risk of Fraud or Mismanagement: Weak internal controls and lack of independent oversight increase the risk of financial misstatements, fraud, or mismanagement, which could lead to legal or financial consequences.
  • Shareholder Activism: Shareholders may demand changes or take legal action if they perceive governance failures, leading to disputes or loss of trust.
  • Operational Inefficiency: Without proper board evaluations and independent oversight, strategic decisions may be ineffective, hampering BEN’s ability to achieve long-term objectives.

  3. Recommendations to implement the Code
  To align with the Corporate Governance Code for Listed Companies 2020, BEN should implement the following changes:

  • Separate CEO and Chairman Roles: Appoint an independent non-executive director as board chairman to ensure objective oversight and reduce conflicts of interest.
  • Rebalance the Board: Increase the number of independent non-executive directors to at least half the board, ensuring diverse expertise and independence to challenge management decisions.
  • Establish Board Evaluation Processes: Introduce formal performance targets and annual reviews for the board and its committees, using independent facilitators if necessary, to enhance accountability and effectiveness.
  • Form a Remuneration Committee: Create a committee of independent non-executive directors to set and review board salaries based on clear, performance-based criteria, ensuring transparency and fairness.
  • Strengthen Internal Controls: Establish an internal audit function reporting to an audit committee to monitor and evaluate internal controls, reducing reliance on external auditors for control reviews.
  • Set Up an Audit Committee: Form an audit committee comprising independent non-executive directors to oversee financial reporting, internal controls, and external audit processes, as required by the Code.
  • Enhance Disclosure: Improve transparency in financial statements and governance reports, clearly outlining compliance with the Code and any deviations, to rebuild stakeholder trust.

  Implementing these changes will help BEN comply with the Code, mitigate risks, and enhance its governance framework, ultimately supporting long-term sustainability and stakeholder confidence.

  Signed,
  [Your Name]
  Audit Manager, Wickham & Co