On of the greatest challenges facing owners and directors of privately owned companies I come across as I work with private companies is their lack of understanding when it comes the risks and consequences of not paying attention to corporate governance. I heard at an AICD seminar that there are over eight hundred pieces of legislation that can impact on owners and directors in carrying out their duties as companies officers.
One of the most important lesson I learnt in business over the years was how little attention I paid to governance when I owned my own beverage company in the 1970′s and 80′s. In fact I had no idea. In today’s regulatory environment the risk is too great not to have have a focus on governance in your business. Now, as I sit on a NFP health care board and a couple of larger private companies boards, I have made it a continuous learning goal to gain a higher level of governance understanding and add governance as a key skill at board level.
Many private company owners see governance as just more red tape and I often hear people say “we never had to worry about this in the past, why now ?’ The answer lies in the fact that , as directors, the Act says you must carry out your fiduciary duty of care to the organisation.
A challenge is how to create a culture of governance in a private or family business without killing the culture that made it successful in the first place. That’s difficult in a family company when you have a diversity of ages and skills.
I recently saw a definition of Governance described as;
‘…the process by which companies are directed and controlled in accordance with the corporations Act 2001′
It cuts across such issues as accountability, stewardship, leadership, strategic direction financial, human resources and risk management. There are minimum requirements and standards in relation to your responsibilities and duties as defined by the Act.
Finally, remember that the Act applies to senior officers as well as directors.
If you don’t have a focus on governance in your company you need to do something about it as ignorance is no excuse.