Promoting good Governance
How to get the right balance
As your company develops and the range of stake holders expands, it is important to get the right balance between the interests of different groups while still maintaining the focus and agility that enable emerging companies to compete and succeed. This section explores some of these issues in greater depth.
Taking a company from founder centric to a self governing organisation in practical and pragmatic steps.
How to manage company board meetings such that they are effective and productive.
The legal relationship between the different stakeholders is set out in the company documents and in the respective voting rights.
What is Corporate Governance?
A short guide to the key issues and practical steps forwards
Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. In UK law limited companies are a separate legal entity and as such must have their own systems to manage the interaction between the interested parties. These systems set out how the board of directors manages the interaction between each other, shareholders, management and the operations of the company. Directors are elected by shareholders or appointed by other board members and they represent the shareholders, the ultimate owners of the company in managing the company. Directors have a legal requirement to act in the interests of the company but often represent differing shareholder groups and this is one of the many conflicts of interest that have to be managed by the board. The company documents, the Articles and Subscription Agreement, provide a written set of rules to which all of the interested parties subscribe and should be well understood by all parties.
Good corporate governance creates a transparent set of rules and controls in which shareholders, directors and offices have aligned incentives. Start-up companies have to manage this process as they grow from a single founder shareholder and director to more complex structures. The process of raising external funds from individuals, incubators and venture capital funds will in its self, bring a more complex and diverse shareholder structure. This complexity can appear in the company documents, shareholder structure and board composition. Company boards can quickly acquire a life of their own if not carefully managed. They should reflect the interests of the company and major shareholders and not specific personal or vested interests. Companies should aim to keep the process simple and transparent and as a general rule, small boards are more functional.
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