With recent, very public governance failures at businesses such as BHS, Carillion and other well known brands, it is clear that business leaders need to do more in terms of living up to their responsibilities, following best practice, etc.
Good corporate governance is a must for SME’s as well as large listed companies. Corporate governance refers to a set of internal policies, rules, and procedures that a company follows on a regular basis in order to ensure that it operates in a fair, equitable, and appropriate manner for the benefit of the company, its management and its stakeholders. Those stakeholders include your staff, customers, investors, suppliers and the wider community.
Most business owners and managers are familiar with the regulatory and compliance requirements of being in business. However that is just the beginning of good corporate governance. The next step is to make sure that your business creates and delivers its strategy. That strategy should be designed to maximise the opportunities and minimise risk for the benefit of the firm and its stakeholders. You then need to build that into your company and its culture.
Good corporate governance is not about making the “right” decisions. Instead it’s all about ensuring that there is a good decision-making process in place and making sure that the process is followed. Having a robust decision making methodology in your firm can help you to change direction efficiently in order to drive the business forward when opportunities arise.
In large businesses, the management board will probably have a team that is charged with ensuring the firm adheres to the principles of good governance. However smaller business can put a simple governance structure in place. This could be achieved by having a trusted advisor (such as your accountant) or a non-executive director (NED) on the board. Good governance helps you and your business to manage risk.
It’s easy to get distracted by growth opportunities, business development and so forth. Good corporate governance practices ensure the business stays on top of statutory reporting, annual returns, renewing insurance policies and licenses, etc. Your trusted advisor should hold you accountable and focused on meeting your legal and statutory requirements whilst also helping you see the bigger picture.
Finally, implementing good corporate governance practices encourages the management team to review and update the firm’s strategy on a regular basis in order to maintain and/or improve the performance of the company. From time to time, this may include bringing in external experts to assist with strategic decision-making.