“Mervin King makes it very clear thatcorporate governance applies to all organisations, irrespective of size,” saysTerry Booysen, executive director of CGF Research Institute, referring to theKing II Report on Corporate Governance. His point about size is particularlyrelevant to SMB owners, most of whom believe governance is an issue pertainingonly to directors of listed companies.In this respect they couldn’t be morewrong. But SMBs face multiple challenges when it comes to implementingcorporate governance principles within their organisations. On the one hand,there’s the challenge of budgetary constraints when it comes to training staffabout corporate governance. Because, as Booysen is quick to indicate, corporategovernance is not just an issue for directors and managers, it needs to belived out in the behaviour of all employees of an organisation. SMB ownersstruggle to find the time and funds to make this happen.
Then there’s the problem of lack ofunderstanding. Cecilia Jofré, executive director and partner in CGF,elaborates: “The topic of corporate governance is complex; it is as broad as itis deep – companies need to strike a balance between their economic and socialgoals and between their individual and communal goals. In realising this challenge, they require asound understanding of the topic and its related implications fornon-compliance.”It’s this understanding that is so oftenmissing, both in the corporate and SMB sector. This is where the CGF team comesin. The organisation conducts umbrella research on the topic of corporategovernance, aggregating both local and international best-of-breed governanceprinciples and practices, and making this information available to business inan easy-to-understand and relevant format.So if the information about corporategovernance is out there, why do so many organisations choose not to make use ofit? “Unfortunately I think many see corporate governance as a big whip,”Booysen says. “But companies must not see it as an over-regulated disciplinethat thwarts their business operation, because that is bad governance initself. Instead, they should look at corporate governance as an enabling toolthat allows them to differentiate their services.”
Corporate governance can provide SMBs witha competitive advantage. As Booysen indicates, “No one is an island inbusiness.” SMB owners wanting to conduct business with other, perhaps biggerorganisations, will need to ensure that their own businesses are run accordingto the principles of good corporate governance and business ethics. Doing sowill make them the business partner of choice for larger organisations, whosesupplier relationships are governed by the principles of fair and ethicalprocurement.The corporate governance space has changeddrastically in the past 10 years. As Booysen says, “There is far greaterscrutiny at all levels. Stakeholder activism is greatly encouraged and this hasplayed a significant role in highlighting the various areas and measures ofgovernance.” As a result of these factors, greater public pressure is beingplaced on organisations to take responsibility for their own good governance,and to be careful not to inadvertently support businesses that don’t themselvespractice good corporate governance.So what’s an SMB to do? As a basicrequirement, understand the fiduciary responsibilities that you hold as adirector. Then, depending on what industry area you play in, there areapplicable laws, charters and codes that will drive your behaviour. It’s a goodidea for SMBs to follow the behaviour of recognised good corporate citizens.“Latch on to good corporate citizens in the top end of business and try toemulate their behaviour in ways that are relevant to your business,” Booysensays, listing Absa and Harmony as just two cases in point. “On a broader level,look at the JSE’s Socially Responsible Investment index (SRI) for a guide onwhat principles to follow,” he adds.
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