Governance is all that supports the work of a company. This includes all checks and balances, the systems that are put in place to ensure that the business is meeting its objectives and avoids trouble and any other tasks that are focused on ‘big broad’ issues like making long-term plans or managing risk. You’ve probably been doing governance tasks since you began your business, regardless of whether you realize it or not. As your business expands the demands for governance will also increase. Governance can be a part of any structure that you decide to use, from sole proprietorship to a full board of directors. It is crucial to to think about your governance plan carefully, and take into consideration how different options could work for you in terms of your growth plans.
As a business grows its governance becomes more complicated and requires greater attention and resources. For instance, if your company has become a publicly-listed company with thousands of shareholders, several share classes, and a variety of lenders, you will need to create robust processes to ensure that shareholders are engaged. You will also require directors with the right abilities and knowledge.
A good governance system allows a business to operate in the best interest of its clients, increase their performance and create greater stability, productivity, and trust. It also makes the company more attractive to high-quality investors and lowers the cost of capital. It also increases transparency and allows quick response to any crises or controversies.