Corporate governance : an holistic model for SMEs

• Autorzy: Kenny Crossan , Thomas Henschel
• Języki publikacji: EN

Abstrakty

EN

The term corporate governance is now firmly part of modern business terminology and is widely used by commentators, businessmen and academics. However the exact meaning of corporate governance is still open to much debate, where on one hand some see it as a proxy for shareholder power, others see it as just a set of basic legal guidelines that large public limited companies have to follow, although not always in a manner that suggests that they actually believe in the value of such rules. However these definitions are not necessarily appropriate when we discuss corporate governance in relation to small and medium sized firms (SMEs). Indeed the idea of governance in SMEs remains an area that has not been widely researched. Many owners of SMEs may question the relevance of corporate governance to their business. However this to some extent is more to do with the language used rather than the underlying ideas of good governance, which can benefit all firms. This is due to the focus on 'corporate' and not governance within much of the debate in this area; there is no doubt that if we see governance as a holistic concept that is interested in fairness, responsibility, transparency and accountability then the relevance of SMEs becomes apparent. The aim from this review of the governance literature is to demonstrate how we can move from the wider concept of corporate governance to the more narrow focus of governance that is relevant to SMEs, and to demonstrate how this idea of governance can be of practical value to the average decision makers within SMEs. Corporate governance has to be thought of in much broader terms than merely accountability and transparency. SMEs need strong support with the systematic implementation of corporate governance processes since generally they lack the necessary resources and the management knowledge to establish an effective corporate governance system. During this paper we explain how business planning, risk management, performance measurement and management behaviour form the basic building blocks for a governance system that is of practical benefit and use for SMEs. These four key features can be used to build up a heterogeneous governance system that should be useful to the firm in question and allow for better decision making and planning. The findings from this review of the literature indicate that a corporate governance system is a necessity for SMEs, not only because it is required by law or by the Basel II regulations, but because it is in the interest of the SMEs. The reason is that such enterprises have a high potential to become insolvent and the most frequent causes of insolvency are management errors and weaknesses in the company structure. This is especially true during the first seven years following the establishment of the company. However the likelihood of failure should be reduced if appropriate governance systems are put into practice. The implementation of a well functioning, holistic governance model should allow the decision makers in SMEs to plan more effectively and manage their business in a manner that is more likely to secure the long term future of the firm. (original abstract)

The term corporate governance is now firmly part of modern business terminology and is widely used by commentators, businessmen and academics. However the exact meaning of corporate governance is still open to much debate, where on one hand some see it as a proxy for shareholder power, others see it as just a set of basic legal guidelines that large public limited companies have to follow, although not always in a manner that suggests that they actually believe in the value of such rules. However these definitions are not necessarily appropriate when we discuss corporate governance in relation to small and medium sized firms (SMEs). Indeed the idea of governance in SMEs remains an area that has not been widely researched. Many owners of SMEs may question the relevance of corporate governance to their business. However this to some extent is more to do with the language used rather than the underlying ideas of good governance, which can benefit all firms. This is due to the focus on 'corporate' and not governance within much of the debate in this area; there is no doubt that if we see governance as a holistic concept that is interested in fairness, responsibility, transparency and accountability then the relevance of SMEs becomes apparent. The aim from this review of the governance literature is to demonstrate how we can move from the wider concept of corporate governance to the more narrow focus of governance that is relevant to SMEs, and to demonstrate how this idea of governance can be of practical value to the average decision makers within SMEs. Corporate governance has to be thought of in much broader terms than merely accountability and transparency. SMEs need strong support with the systematic implementation of corporate governance processes since generally they lack the necessary resources and the management knowledge to establish an effective corporate governance system. During this paper we explain how business planning, risk management, performance measurement and management behaviour form the basic building blocks for a governance system that is of practical benefit and use for SMEs. These four key features can be used to build up a heterogeneous governance system that should be useful to the firm in question and allow for better decision making and planning. The findings from this review of the literature indicate that a corporate governance system is a necessity for SMEs, not only because it is required by law or by the Basel II regulations, but because it is in the interest of the SMEs. The reason is that such enterprises have a high potential to become insolvent and the most frequent causes of insolvency are management errors and weaknesses in the company structure. This is especially true during the first seven years following the establishment of the company. However the likelihood of failure should be reduced if appropriate governance systems are put into practice. The implementation of a well functioning, holistic governance model should allow the decision makers in SMEs to plan more effectively and manage their business in a manner that is more likely to secure the long term future of the firm. (abstrakt oryginalny)

Słowa kluczowe

EN

Corporate governance; Small business; Good governance

PL

Ład korporacyjny; Małe i średnie przedsiębiorstwa; Dobre rządzenie

• Czasopismo: Journal of Management and Financial Sciences
• Rocznik: 2012
• Tom: 5
• Numer: nr 8
• Strony: 54--75

Twórcy

autor

Kenny Crossan

• Edinburgh Napier University

autor

Thomas Henschel

• Edinburgh Napier University

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