Moore governance for SME

Written on the 7 October 2009

THE Gold Coast’s burgeoning SME sector will need to ensure corporate governance is kept in check as the economy starts to click up a gear.

According to the Australian Institute of Company Directors (AICD), the main difference between SMEs and larger public companies is the lack of distinction between owners and managers. In SMEs it’s usually the same people due to the small size and lack of complexity in the operation.

Institute state manager Richard Moore, says many SMEs have an informal approach to governance which could prove risky.

“Reporting and disclosure requirements for SMEs are lower than those for listed companies, yet there is still a considerable regulatory burden surrounding the daily operations of a small business,” says Moore.

“The needs of a company will change as it moves into new stages of development. A start up company’s needs are quite different to mature company needs. As a company grows, a stricter governance framework will be needed.”

Moore says a common oversight for many SMEs during the growth of the business is the benefit to be gained by establishing an advisory board of directors to assist and drive the business forward.

“The importance of having an advisory board may also be ‘overlooked’ due to the fear by entrepreneurs, family business owners, owner-operators etc of having the presence of independent directors at the company,” he says.

“The concern that with an advisory board will come as a loss of control over the business is a misconception. Independence can and should be maintained as the role of the directors is the oversight of management of the company. They must ensure that the company does everything that it is obliged to do by law and that the decisions they make are in the best interests of the company and shareholders.”

Moore says advisory boards help to access capital, especially in these times, for many investors are reluctant to put funds into companies with poor governance structures.


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