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Step 12 – Corporate Governance


Step 12 – Corporate Governance

By , October 20, 2023

In this article, we’re discussing corporate governance – a term that’s often misconstrued, particularly by small to medium-sized business owners. While the level of formality may vary for smaller businesses, the principles of structure and discipline that corporate governance brings are crucial, regardless of your business size.

In the early stages, your family-owned or small business might manifest corporate governance in informal dinner discussions involving business matters. However, as your business grows, so does the necessity for a more structured approach. Let’s delve into how you can implement an effective corporate governance system, tailored to your business’s unique needs and size.

Foundations of Corporate Governance

In the infancy of your business, consider establishing an advisory board comprising trusted advisors – a step that many small businesses take. This advisory board should convene regularly to discuss critical business matters, much like a board meeting in a larger corporation. The key is to focus on gaining insights, strategic planning, and effective decision-making.

Structured Reporting

Reports are the backbone of effective corporate governance. These reports should cover various aspects of your business, including financials, HR, sales, and marketing. By reviewing these reports before meetings, both you and your team can make the right decisions that align with your overall business strategy. Remember, it’s about strategic insights, not micromanagement.

Strategic Focus and Discipline

Corporate governance should shift your focus from day-to-day operations to a strategic overview of your business. It’s about identifying weaknesses, optimizing performance, and aligning actions with your long-term business goals. This strategic shift is pivotal to successful corporate governance.

Assembling the Right Advisory Board or Directors

As your business grows, consider incorporating independent directors with diverse expertise. These individuals, external to the day-to-day operations, provide a fresh perspective, challenge decisions, and mentor your team. They bring structure, strategy, and an invaluable reduction in business risks.

Decision Rights Manual: Defining Authority

Implement a decision rights manual to outline who holds decision-making authority at various levels within your business. This simple yet effective tool ensures that decisions align with expertise and responsibility levels, mitigating costly errors and promoting agility in decision-making.

Enhancing Value and Reducing Risk

By integrating structure and discipline through corporate governance, you inherently reduce risks and increase the value of your business. Potential buyers or investors find businesses with robust corporate governance systems more attractive due to their decreased risk profile and well-defined operational strategies.

Corporate governance isn’t just for large corporations – it’s a strategic tool that can significantly impact SMEs. Through the implementation of structured reporting, strategic focus, and the right advisory board or directors, you’re laying a strong foundation for the future of your business.

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Craig West

Craig West

Executive Chairman | Succession Plus

Craig West is a strategic accountant with over 20 years of experience advising business owners. His background as a CPA in public practice has provided invaluable experience in the key issues of concern to business owners.

In March 2014, Craig was appointed Executive Chairman of the SME Association of Australia, Australia’s largest small business organisation representing over 300,000 business owners.

In October 2014, he was awarded the Exit Planner of the Year at the Exit Planning Institute Annual Conference in Texas, USA, due to his innovative development of an exit planning process to help business owners maximise business value and achieve a successful exit.

Craig’s proprietary structure - a Peak Performance Trust - has won the Australia-wide award for the Employee Share Ownership Plan of the year twice in four years.

In November 2018, Craig launched SME Experts in partnership with Mark Bouris’ Mentored on Podcast One and quickly grew the monthly podcast audience to over 26,500 downloads; in October 2019, he released a new podcast focused on medium-sized businesses - Mid-Market Matters.

In July 2021, Craig joined the NSW Committee for STEP (Society of Trust & Estate Practitioners) – focusing on advising families across generations.

Craig has also launched a SaaS platform, Capitaliz (which captures the 21-step process), to assist other advisers internationally deliver advisory services at scale.

In November 2021, Craig was appointed Executive Chairman of NSW Leaders, a business mentoring group for leading NSW businesses.

In July 2022, Craig West received the award of Doctor of Business Administration for his research thesis titled “Examination of the key factors driving business exit options in Australian Small and Medium Enterprises.”

Craig is passionate about encouraging business owners to think strategically, maximise the value of their business and achieve a successful exit.

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