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Corporate Governance Mistakes to Avoid

Corporate Governance Mistakes to Avoid

It may be tempting to soar high and forget about processes because of all the ideas and adrenaline of running the business, but this kind of disposition isn't effective or useful at all. In this article, we share with you corporate governance mistakes you'd be wise to avoid.

Businesses need structure or what most refer to as corporate governance in order to succeed. Corporate governance by definition means "the system of rules, practices, and processes by which a company is directed and controlled."

Basically, its primary objective is to balance the interest of a company's shareholders, management, customers, suppliers, financiers, and staff. Corporate governance encompasses most, if not all, of business management.

It may be tempting to soar high and forget about processes because of all the ideas and adrenaline of running the business, but this kind of disposition isn't effective or useful at all. In this article, we share with you corporate governance mistakes you'd be wise to avoid.

  1. No clear reporting lines

While promoting equally amongst your staff members can be a good thing, unclear reporting lines could spell disaster. Without formal reporting lines, job descriptions, and performance appraisals, controlling business processes and systems can be a challenge.

  1. Weak communications

Good communication between management and staff is the key for any business to thrive in the market. Brilliant CEOs and management ensure that communication doesn't break down. Whether he's in the office or not, a bottleneck of concerns shouldn't pile up. Good communication also guarantees that the business is functioning properly.

  1. Tedious meetings

Board meetings should serve as an avenue for resolutions—not for long and indecisive discussions. Work on having efficient and engaging meetings that tackle more about conflicts and complex issues than providing context about those issues.

Board members should arrive ready and up to speed so you don't waste too much time providing background information and walkthroughs.

  1. Not honest enough

Some CEOs fail to be upfront with their board members. They tend to "spin" the board and present them flowery facts while saving the negative data for last.

Barry Schuler, managing director for DFJ Growth and former chairman & CEO of America Online says, "It's almost as if you hope the board will be so intoxicated by all the great new ideas that they won't notice you will be out of cash two quarters sooner than you projected. Trust me, they will."

Schuler's advice: don't waste precious meeting time thinking you need to impress the directors by leading with the positives. Essentially, just give the board your utmost thoughts about the business rather than buttering them up.

  1. Failing to establish adequate structure

Since corporate governance is all about business processes, practices, and policies, structure and the lack thereof can be a problem. Every board should have their own playbook, which is a set of guidelines that clearly defines the role and responsibility of the directors.

One of the biggest mistakes entrepreneurs can make today is thinking a board of advisors or directors will just slow the company's growth. Even start-ups and SMEs can greatly benefit from having a structured form of leadership. It helps put things into perspective and ensure different points of views are considered when tackling certain problems.

 

As the industry is ever changing, adapting and learning is round-the-clock. It's a must to survive.

Shuba Kathikeyan heads APEX Global, the learning solutions arm of ECC International (ECCI). She has over 10 years of experience in the areas of project management, business analysis, software development and IT service management. She carries several international certifications in the areas of ITIL, Business Analysis, Project Management, Microsoft Technology and Learning Management amongst others. Shuba has a passion for process improvement, training and new product development.