CORPORATE GOVERNANCE

 

 

1.     Is it really necessary for my SME to practice good Corporate Governance?

 

Certainly. Corporate Governance is generally considered only to apply to large organisations where they have to manage investor relationships. In reality it affects all of the operations of a business and its relations with all of its stakeholders, which is a much more wide-ranging concern than is sometimes appreciated.

 

2.     Who are the stakeholders of my business?

 

A stakeholder is anyone that is affected by the activities of a business. They may be internal stakeholders, such as the managers, workers and owners, or external stakeholders, such as customers, suppliers, lenders and even the local community.

 

3.     What are the principles of good Corporate Governance?

 

Good Corporate Governance is focused on four key principles. These are transparency, accountability, responsibility and fairness. These are important but we are more concerned with what Corporate Governance actually is, which is the creation of a balance between the economic and social goals of the organisation including such aspects as the efficient use of resources, accountability in the use of its power, and the behaviour of the organisation in its social environment.

 

4.     What do you mean by transparency?

 

Simply put, transparency means clear, unhindered honesty in the way you do business. This is usually achieved by making available all of the information your stakeholders need for collaboration, cooperation and collective decision making. The purpose of transparency is to demonstrate that your organisation is truly the kind of business that it wants people to think it is.

 

5.     Why are we meant to be accountable and how do we do it?

 

Being accountable starts with the recognition that your organisation is part of a wider societal network and has responsibilities to all of that network. How you demonstrate your accountability to the whole community will vary from organisation to organisation but the idea is to show that resources are used to good effect and that you are operating in line with community standards of fairness and morality.

 

6.     My competitors are located around the world. Are they obliged to practice good Corporate Governance too?

 

There are three recognised models of Governance. The one we are most familiar with is the Anglo-Saxon model, which is focused on rules and adjudication thus making it an inherently expensive model to follow. The other two are the Latin model and the Ottoman model. Both are fundamentally different in their approach from the Anglo-Saxon model. The Latin model is less codified and founded on the concept of family and community and tends to operate informally on the basis of an obligation to others. The Ottoman model is completely different operating as a form of patronage where the benefits are shared in an equitable manner.

 

7.     Will my firm benefit from practicing good Corporate Governance?

 

Practicing good Corporate Governance will address all of the main issues that underpin creating and maintaining sustainable value. It is a long-term project where the benefits are directly related to your organisation’s sustainability and success.

 

8.     Is Corporate Governance a legal necessity?

 

Corporate behaviour, which is an essential element of Corporate Governance, must be ethical, responsible and legal. This equates to being socially responsible although there is no legal obligation to this.