Convergence of Corporate Governance Systems: A Critical Review

Abstract

The apparent convergence of international systems of corporate governance has become important to developing countries. It is gradually being accepted that formal convergence is taking place at ownership and board structure levels. Corporate behaviour seems to be converging at functional levels. The convergence at these levels is powerfully being driven by internationalisation of equity markets, regulatory mechanisms, and international investors1 desire for corporate governance systems which are best fit for corporate efficiency, and shareholders' wealth and corporate value maximisation. In 2001, participants at the West Africa Regional Conference on Corporate Governance recommended, among other things, that "there is the need to customize international corporate governance principles to suit the challenges of the African sub-region" so as to attract foreign direct investment. This paper reviews this recommendation by examining the historical evolutions of the two traditional corporate governance systems, and the factors driving towards convergence. In addition the present state of corporate governance practice in Ghana is examined. It is argued that, the existing regulatory mechanisms should be reviewed and strengthened to adequately respond to global corporate governance practices (law and enforcement). It would be prudent to promote and allow market forces to evolve to best practice rather than customization.