A limited liability’s constitution is embodied in the memorandum and articles. This is a written document showing the objectives of the company. One reason for these documents is for the company to be governed in a manner that leads to the achievement of these objectives.
Stakeholders for an SME include the owner, employees, suppliers, and consumers. All these parties have different interests in the business. Good governance of a company means that one must manage the company in such a way that the interest of all stakeholders can be sufficiently satisfied.
Most times, corporate governance rules and codes of best practices are developed following scandals and setbacks. The failure of large companies (like Enron in the United Kingdom and Parmalat in Italy) has over time caused the need to create stricter rules for companies on the stock market. A wise SME owner/manager that seeks long-term growth has so much to gain from knowing and observing as many of these corporate governance best practices as possible.
The Code of Best Practice for Corporate Governance
The Nigerian Code of Corporate Governance 2018 consists of seven parts and twenty-eight principles, together with recommended practices for the implementation of each principle. The Code seeks to institutionalise corporate governance best practices in Nigerian companies. The seven parts of the code include Board of Directors ad Officers of the Board, Assurance, Relationship with Shareholder, Business Conduct with Ethics, Transparency and Sustainability.
While the code is essential for companies listed on the stock exchange, non-listed firms are encouraged to apply the Code to their business voluntarily. The principles and recommendations in the Code are flexible and easily adaptable to a small business.
The challenges of corporate governance are not peculiar to a country or region, but are worldwide. One should govern a company in the interest of the shareholders and then other stakeholders. For an SME owner to get the best out of his business, applying corporate governance principles will help improve the stability and sustainability of the company.
Send me a message in the contact form if you would like to know how best to apply corporate governance principles and the Code of Best Practice to your business.
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