Outstanding Performance, Higher Profits, Expanded Market Reach and the like FAILS to protect a company which has put good governance & ethics at the back burner.
Only the culture of strict adherence to good compliance can keep a company ahead on sustainable basis, bring in larger profits.
Corporates should act like honey bee which suck the nectar of the flower without effecting its fragrance and produce honey for the well –being of society.
SAN FRANCISCO, CA. Governance is everywhere. I am slated to deliver a talk related to Ownership and Succession today to the students, faculty members and business owners at the Community College of San Francisco Ocean Campus (CCSF).
This will be another interesting exchange of ideas with business owners and the academia similar to the one I did exactly a year ago when the University of San Francisco College of Business (USF) core faculty invited me to lecture on a topic as diverse as the ASEAN Integration and Its impact on the US Economy.
Next month, I will resume my family business initiatives in Africa organized by the World Bank/IFC Group and then proceed to Southwest Asia to run another governance campaign in collaboration with the country’s stock exchange.
If I get “unlucky”, I will end up doing another North American engagement before or after the year ends. It will be winter so advisory work can get really challenging.
Just as I thought my business coaching engagements will taper off as the year is almost at the tail end, in comes invitations to actively promote governance and succession in emerging economies like Kenya, Ethiopia, Rwanda in Africa and India, Sri Lanka and Bangladesh in South Asia.
Governance is a Top Lending Metric
There is no doubt that creditors, lenders, VC’s and financial institutions are clearly biased towards businesses that are devoted to best practices or whose business and operating model revolve around corporate governance.
The Asian and Global financial crisis in 1997 and 2008 revealed severe shortcomings in corporate governance. Quoting an OECD report, “when most needed, existing standards failed to provide the checks and balances that companies need in order to cultivate sound business practices.”
Right after the 2008 debacle, the OECD and several global institutions launched an ambitious action plan to develop a set of recommendations for improvements in priority areas such as remuneration, risk management, board practices and the exercise of shareholder rights.
The changes happening now is a result of the global wave of governance standards put in place especially in the most vulnerable sector, the start-up businesses and family-owned enterprises.
Hopefully, the collaborative and active intervention efforts will encourage founders of businesses to step up to the plate not just in their profit strategies but in establishing a structure where sound business practices can become the norm.
It is a fact that one of the major hurdles for business owners is the issue of transitioning from an owner mindset (where there is weak governance structures and systems) to the new model of stewardship management (where governance is written and there is compliance of best practices).
Why Creditors/Banks Prefer Businesses that Espouse Governance?
The answers point to a very important ingredient in lending money… the ability to use the fund for the right purpose and the responsibility to pay the creditor-bank on time.
Corporate governance structure builds a strong family foundation and banks are naturally receptive in lending capital to a stable enterprise especially if they see a family constitution in place that captures the following:
- Vision-driven and values-based that prepares the family and the business for the future
- Aligning the family’s relationship with the business by way of meritocracy
- Defining the family member’s rights and responsibilities
- Ownership alignment covering the next gen leaders are well-documented
- Effective plan for ownership including key family leadership role and succession
- A Communication platform to minimize conflict and misunderstanding for active and non-active owners
- The creation of Family Council to manage Family and personal issues