Is Corporate Governance only for large companies?

Marco Villas-Boas - Senior Partner DMS Partners

Content also available in audio. Press play:

Is Corporate Governance only for large companies?

Corporate Governance, when dealing with and organizing business relationships, such as those between partners (or shareholders) and managers, is present, even without us realizing it, in all companies and organizations, regardless of size, origin (family or not) and corporate structure.

And what does Corporate Governance do?

One might think that Corporate Governance deals with the installation and rites of a Board of Directors. Depending on the size and needs of the company, this may be part of the scope. But Governance starts much earlier, and goes far beyond that.

Governance is concerned, first, with understanding and organizing the power and rights relations within the company, since the partners are those who took an organizational risk by investing capital to set up the business, hence their responsibility in defining the company's values and strategy.

This is followed by the responsibility of managers who, when operating the business, must ensure the execution of the company's strategic lines and report the results of these actions.

It is also important to manage risks, ensure compliance with regulations and ensure separation between the company and the business family, among other measures.

Governance, then, recommends, implements and routinizes practices, processes, rituals, structures and responsibilities, to the extent and in accordance with the origin, complexity and maturity of the company, to achieve the objective of corporate longevity.

What do you gain from a Corporate Governance plan? What are the benefits?

It doesn't matter the age or stage of evolution of the company: Corporate Governance starts from where the company is, and proposes a consistent evolutionary path, adapted to each situation, which goes as far as the business characteristics allow for progress, with a focus on the company's longevity.

Among the gains, we can point out:

- Strategic clarity (who defines the North, who and how makes it happen)

- Clarity in the direction and execution of the company's management

- Qualification in the relationship between all stakeholders (shareholders/quota holders and managers, and internal and external interested parties)

- Greater credibility with the market, including financial agents, with lower rates for raising funds (reduction in the cost of capital)

- Better risk and threat management

- Better performance in terms of legal and regulatory compliance in general

- Less conflict between partners/shareholders or between them and managers

- Greater appreciation of the organization

How to decide whether a company should evolve in Corporate Governance?

As every company has Corporate Governance practices, even if they are incipient, it is recommended to examine the practices related to the topic and, if you notice any

gap, ponder over.

DMS has a qualified and experienced team ready to recommend and guide the path according to the needs of each company.