Jacques Robichon is a Certified Management Accountant (CMA) with COO and CEO experience across Canada and Internationally. He is recognized for strong leadership and strategic planning in the areas of sales, finance and operations. Jacques is available for Interim Leadership and Senior Advisory roles as part of the Accomplished Executives team at Boardroom Metrics.
What is the correct amount of “Corporate Governance” for private companies?
Having spent the majority of my career in corporate centric environments, my experience has been shaped by working in very structured bureaucratic organizations with established governance protocols. In many cases these corporate frameworks are driven by the need to ensure the shareholders of public companies have the required visibility and consistency of information.
What happens when shareholder disclosure requirements are not the driver in establishing a basic governance structure within a private company?
Over the past year, I have had the opportunity of working with four private companies; a European based telecom start-up, a Canadian retail company, a Canadian high tech company and a North American automotive specialty company. Three of these companies are established, going concerns with many years of profitable operations. The Telecom start-up was launched 24 months ago and has been successful in getting an initial foothold in its target market.
All of them have similar corporate structures; they are private companies with a limited number of shareholders, who are also the founders. In all cases, these shareholders are still actively involved in the day to day operations of the business. They are the decision makers. No formal budget process or governance committee/board of directors exists. No regular key business indicators are tracked. In most cases strategic decisions are based on the principle shareholders’ intuition, “gut feelings” or past experiences. Financial reporting is limited to government tax requirements and/or reports and statements needed by financial institutions with which they have commitments.
When I was first exposed to these companies, I was struck by how few validation processes were in place. Based on my past corporate experience, I was looking for the “cover sheet” that would have all the necessary budget authorizations, procedural cross-checks and appropriate “sign-offs”! In most cases none of these processes existed, yet all of these companies are operating successfully.
Does this mean that basic governance procedure and processes are not necessary? No, what it does mean is that these companies have been successfully managed under the watchful and caring eyes of their founding shareholders. These individuals have nurtured these companies from their first sale to multi-million dollar operations. The challenge becomes when the founders arrive at a crossroads in the organization’s development where either the company is now too big to be handled by a select few or the founders want to reduce their workloads.
An effective organizational structure aligned with efficient processes and procedures will provide private companies with the needed governance. If these processes and procedures are viewed as an encumbrance to the daily operations, then they have not been properly implemented. The ideal structure needs to create a balance between solid governance and the ability for the organization to maintain its entrepreneurial leadership through flexibility and agility.
Boardroom Metrics works with private company business owners to help them build their private businesses into valuable assets. A disturbingly high number of Canadian private businesses provide a great lifestyle for their owners but do not transfer successfully at exit.
Boardroom Metrics works with owners and Boards in organizations of all types to implement strong, effective corporate governance.