It could be worse: how Corporate governance creates a better economic environment
By Larey van der Westhuizen, Managing Director: Statucor
Corporate governance can sometimes feel like a major burden for companies, but the reality is that the corporate landscape would be incredibly unproductive and risky without it.
By actively embracing and integrating all the elements that comprise good corporate governance, companies can add value to their perceived worth and sustainability, as well as make themselves more marketable in an increasingly competitive operational and trading environment.
But for corporate governance to tangibly benefit corporate entities, it needs to be endorsed and adopted as a culture, not merely a box-ticking and compliance exercise. It must be a “want to do” rather than a “have to do.”
To fully comprehend the need for robust corporate governance, it is worthwhile to consider what could and probably would happen without it.
Access to capital would be extremely difficult, business failures would be more frequent, ethics would deteriorate and corruption would flourish, sustainability would be compromised and decision-making would be highly questionable. While there could be some short term successes, long term growth and success would be extremely difficult to plan and achieve.
Without sound corporate governance structures in place, companies of all sizes are exposed to increased risks, both for the juristic entity and stakeholders such as shareholders, executives, employees, customers and service providers.
History has shown on numerous occasions that when things go bad for a company, the extent of adherence to good corporate governance comes into play. Weak corporate governance levels almost always result in the situation getting worse.
Trust, consistency and sustainability are vital hallmarks for any business, as is investor and lender confidence. Having been “burnt” in the past, banks want to see evidence of good corporate governance before they will provide funding – so there is a very real prospect that poorly run companies will have sharply constrained access to operating capital.
While there are many frameworks in place to ensure certain standards of corporate governance – such as the Companies Act, JSE requirements for listed companies, and international best practice guidelines – it makes good business sense for individual companies to find corporate governance models that work best for them. There is no one size fits all solution.
A successful corporate governance model is one that is easy to implement, becomes a daily routine and involves proper vetting procedures that complement a company’s core operations and activities.
The bottom line is that good corporate governance does not have to be a burden as long as it is carefully structured, managed and monitored. It also adds meaningfully to the competitiveness of companies and creates a more robust economic environment.
Statucor is a BDO associate company, that provides company secretarial services, ensuring that clients comply with the relevant legislative requirements that are required for the day-to-day running of a business. By providing a full company secretarial service to directors, they ensure that all Companies Act obligations are met on an ongoing basis, freeing your management team to focus on driving business forward. Statucor’s competitive advantage lies in their unique relationships with clients, as well as their commitment to superior and personalised service.
Ogilvy Public Relations
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On behalf of:
BDO South Africa
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