ACCA: A flexible corporate governance framework can boost efficiency and performance for small businesses

29 June 2015

In accordance with the new ACCA´s report, a one-size-fits-all approach to corporate governance for SMEs will not work because their needs are vastly different to that of bigger corporations.

The report, Governance for all: the implementation challenge for SMEs, establishes that while in larger organisations corporate governance is primarily tasked with ensuring that management acts as shareholders’ agents, for SMEs it is mainly about improving business performance and managing risk.

Reacting to the report, Rosanna Choi, Chair of the Global Forum for SMEs, said: 

'SMEs need to realise the potential benefits of implementing corporate governance within their businesses. But equally, governments, advisors and other stakeholders need to realise the challenge for SMEs is that established corporate governance frameworks have been developed with large, listed companies primarily in mind. Such frameworks and codes may not reflect the realities of running a small business. 

'Governance issues are nevertheless of critical concern to small businesses, where owners may often be its managers as well, or where company ownership may be shared across family members. Sometimes the line between business and personal interest can be blurred. Corporate governance should establish clear roles and responsibilities for each individual and as such is relevant to businesses of all sizes.'

The key findings of the report include:

• There should be clear reporting lines and clarity about how decisions are made and risks controlled, and about other matters that need to be brought to the board’s (or committee’s) attention for review or approval.
• The framework should promote understanding of roles and responsibilities and limits of each person’s job, as well as show the board the balance of an organisation such as risk and reward.
• Any incentives for staff need to be supportive of board strategies.
• There needs to be clear communication by board to management and staff about issues such as strategic goals and expected behaviour.
• Appropriate internal controls should be established, related to key risks.
• Boards need to have good visibility of management actions and decision making, which includes the provision of high quality information on business performance and risk management.

Full report

Full press release

© ACCA - Association of Chartered Certified Accountants