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What is the path to developing good Corporate Governance?

Marco Villas Boas – Senior Partner at DMS PARTNERS

We know that an entrepreneur's expectations are not always the same as those of the company's managers.

This conflict always exists, even if the entrepreneur and the manager are the same person wearing two hats - in the case of a micro-enterprise or a startup.

And there are other limitations: each company - no matter what the size, corporate status, sector - has its own characteristics, whether due to its origin (family or not), capital structure (with a defined controller or not), size or maturity in the development of its practices, processes and structures (PPEs).

Each company also has some form of direction and management, perceived or not, intentional or not, and can develop them à la carte, through a set of P PEs to mitigate limitations: Corporate Governance, which organizes solutions for these questions.

Desiring evolution through improvement of PPEs related to Corporate Governance is the first and essential movement to resolve limitations and conflicts.

After becoming aware that there is a path for improvement, it is up to the shareholders (owner, partners, quota holders, or their representative - when there is one - the board of directors), to explain and command, as a strategic decision, the evolution of governance.

For small or incipient companies, a good start is the separation between the business family and the company: they are different structures, with different purposes. And also the separation between the company's pocket and the owner's pocket.

Another initial measure is the separation between the figures of the owner/partners and the managers. The owner directs, guides the company, monitors and evaluates; managers plan, execute and report. Even if the person occupying these positions is the same, the decisions are of different scope, with specific rites, negotiations, decisions and implications.

There are no miraculous shortcuts, but we go step by step, with a specific path for each company, always considering the origin, maturity, risks and strategy of the company, obtaining evolutionary results. And, importantly, celebrating each stage of evolution.

In the next post, we will address a practical case of evolution from incipient governance to a dynamic model more aligned with the current scenario.

Count on the advice of DMS’ team of Corporate Governance experts Partners.

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