Corporate governance often conjures images of high-powered boardrooms and senior executives in large organisations. However, its importance transcends these realms. It is crucial to explore two vital perspectives of corporate governance, being, a) the necessity of it being understood and applied throughout all staff levels within an organisation, and b) the importance of small business owners and early-stage entrepreneurs embracing corporate governance. It is pivotal for stakeholders to change their mindsets in this regard. Corporate governance should not only be viewed as a top-level management consideration. It should be embraced at all organisational levels. Furthermore, corporate governance should not be considered as something that applies only to large-scale organisations, non-governmental organisations and state-owned entities. The societal actor in our community, running a small-to-medium enterprise (SME) must be fully aware of its existence and implications. A re chencheng!
Firstly, as regards corporate governance being understood at all organisational levels, the traditional perspective of it only being considered at top-level management and by boards of directors is evolving. Corporate governance should not be limited to the boardroom but rather institutionalised across all staff levels. This ‘democratisation’ of corporate governance (of course with set corporate limits and bounds) is a powerful idea that equips all employees with an understanding of its principles and practices. This congruence ensures that everyone within the organisation is working toward a common goal, upholding ethical standards and promoting accountability and transparency across the organogram.
With regard to alignment and accountability, when every employee, from the CEO to the newest recruit, understands the importance of corporate governance, it creates a shared vision and mission. This alignment ensures that everyone is rowing in the same direction, minimises the risk of diverging interests or unethical practices and supports a culture of collective responsibility. Corporate governance also ensures accountability. Each employee knows their role in maintaining ethical standards and good governance. Transparency is not merely a lofty ideal but a daily practice. When there is a breach of ethics or governance, employees understand the repercussions and can help rectify the situation.
Effective corporate governance significantly reduces risks and enhances organisational performance. From legal and financial compliance to operational and reputational risks, corporate governance plays a pivotal role in risk mitigation. Performance optimisation is an inherent outcome of strong governance practices. When employees at all levels understand and support ethical behaviour, it becomes an integral part of their daily work. Corporate governance can also foster employee engagement. When employees are aware of their roles in upholding ethical standards and good governance, they are more likely to feel motivated and proud to work for the organisation. Employees who understand the bigger picture and how their work contributes to the organisation’s success are more engaged and committed. They are more likely to take ownership of their work, inducing higher productivity, lower turnover rates, and ultimately, better business outcomes.
We now consider the benefits to the small business owner and entrepreneur who often finds him/herself competing against larger, more established counterparts. Such individuals are encouraged to adopt corporate governance principles. These principles can be tailored to suit businesses of all sizes. Early-stage entrepreneurs and SME owners should not overlook the immense benefits of adopting corporate governance. They face numerous challenges, and their long-term viability can be uncertain. Corporate governance provides a framework that can greatly enhance their long-term prospects. Governance frameworks help to build a robust foundation that withstands market fluctuations, regulatory changes, and competitive pressures. The establishment of a ‘mini-board’ or mastermind group can prove overly beneficial for such enterprises. Corporate governance fosters a culture of adaptability and resilience that is essential for long-term success. Investors and lenders often favour businesses with strong governance practices in place. SMEs that adopt corporate governance are more likely to attract investment and critical funding.
While small businesses may not face the same scale of risks as larger establishments, they are not immune to challenges. Whether it is legal compliance, financial oversight, or operational issues, a governance framework provides a systematic approach to risk management. By proactively identifying and addressing potential risks, small businesses can avoid costly pitfalls and protect their operations. SMEs thrive on trust and relationships. A commitment to corporate governance demonstrates an ethical approach to business, which can enhance reputation.
The beauty of corporate governance lies in its adaptability. It not only ensures ethical and sustainable practices but also paves the way for growth, access to capital, and long-term success. In our increasingly complex and competitive landscapes, corporate governance is the compass guiding organisations toward ethical, sustainable, and prosperous futures.
The views and opinions expressed in this article are those of the author, Dumisani F. Ntini – Governance and Strategy Practitioner. To understand Corporate Governance, visit www.governancegroup.org | info@governancegroup.org
