This useful report was first published in November 2010 and is available from the IOD’s website. The UK Corporate Governance Code is primarily aimed at listed rather than unlisted enterprises. However, many unlisted enterprises are owned and controlled by single individuals or families and for these SMEs, good corporate governance is about establishing a framework of company processes and attitudes that add value to the business, help build its reputation and ensure its long-term continuity and success.
An effective governance framework defines roles, responsibilities and an agreed distribution of power amongst shareholders, the board, management and other stakeholders. With SMEs especially, it is important to recognise that the company is not an extension of the personal property of the owner.
The principles of good governance are presented, taking into account the degree of openness, size, complexity and level of maturity of individual SMEs. The report points out that, since governance frameworks must evolve over the life cycle of a business, a dynamic approach towards governance is essential.
Furthermore, the report suggests that a key step in the development of unlisted company governance is the decision to invite external directors onto the board. Its effect on boardroom behaviour and culture should not be underestimated.