Importance of Corporate Governance for Smes
Importance of Corporate Governance for SMEs
By Hany Abou-El-Fotouh
Today corporate governance principles are considered a key element to the success of any organization and a prescription for improving performance. Simply it is the name of the game for companies that are directed by a board of directors in order to safeguard the interest of shareholders as well as other stakeholders.
There are several definitions for corporate governance. However, the most appropriate definition which is more relevant to small and medium size enterprises (SMEs) describes corporate governance as "a set of rules, regulations and structures which aim to achieve optimum performance by implementing appropriate effective methods in order to achieve the corporate objectives". In other words, corporate governance refers to internal disciplines or systems which govern the relationships among 'key players' or entities that are instrumental in the performance of the organization. Moreover, it supports the organization's sustainability on the long term and establishes responsibility and accountability.
The guidelines of corporate governance aim to achieve greater transparency, fairness and hold executive management of the organization accountable to shareholders. In doing so, corporate governance plays a pivotal role in protecting shareholders and, in the meantime, duly consider the interest of the organization at large without prejudice to employees' rights. Whilst executive management should have reasonable level of power to run the business, corporate governance ensures that such powers are set to practical dimensions in order to minimize misuse of authority to serve objectives not necessarily in the best interest of the shareholders. Therefore, it provides a framework for maximizing profits , promoting investment opportunities and eventually creating more jobs.
In general, corporate governance highlights two major principles:
A. Oversight and control over the
By Hany Abou-El-Fotouh
Today corporate governance principles are considered a key element to the success of any organization and a prescription for improving performance. Simply it is the name of the game for companies that are directed by a board of directors in order to safeguard the interest of shareholders as well as other stakeholders.
There are several definitions for corporate governance. However, the most appropriate definition which is more relevant to small and medium size enterprises (SMEs) describes corporate governance as "a set of rules, regulations and structures which aim to achieve optimum performance by implementing appropriate effective methods in order to achieve the corporate objectives". In other words, corporate governance refers to internal disciplines or systems which govern the relationships among 'key players' or entities that are instrumental in the performance of the organization. Moreover, it supports the organization's sustainability on the long term and establishes responsibility and accountability.
The guidelines of corporate governance aim to achieve greater transparency, fairness and hold executive management of the organization accountable to shareholders. In doing so, corporate governance plays a pivotal role in protecting shareholders and, in the meantime, duly consider the interest of the organization at large without prejudice to employees' rights. Whilst executive management should have reasonable level of power to run the business, corporate governance ensures that such powers are set to practical dimensions in order to minimize misuse of authority to serve objectives not necessarily in the best interest of the shareholders. Therefore, it provides a framework for maximizing profits , promoting investment opportunities and eventually creating more jobs.
In general, corporate governance highlights two major principles:
A. Oversight and control over the