For new startups struggling for funding, staffing, and product-market fit, best practices of corporate governance tend to be far down the priority list. Often, the concept of corporate governance is misunderstood. Most entrepreneurs believe that corporate governance is a complex process to implement. However, the governance practices foster a strong culture built on high standards of accountability, transparency, integrity, responsibility, and fairness. In this article at Forbes, Betsy Atkins explains the reasons why startups are increasingly prioritizing corporate governance.
Why is Corporate Governance Critical?
Manages Complex Decision-Making
Emerging companies are as complex as large multinational firms. Founders of startups are often the CEOs, shareholders, and manage the boards too. Additionally, many investors also oversee their investment, shareholding structure, and composition of the board. As startups grow, the interplay between these levels demands active management. The responsibilities, authority levels, and time of decision-making require detailing. “Corporate governance is the framework that allows a company to thrive by balancing and addressing the vested interests of various stakeholders, including shareholders, employees, and customers,” says Atkins.
Promotes Investor Confidence
Witnessing a well-laid-out approach to accountability and responsibility between the board members and shareholders, gives investors confidence in the structure of a startup. Corporate governance practices ensure commitment to sustainable growth and build a foundational layer for a vibrant enterprise.
Ways to Implement Corporate Governance
A startup’s corporate governance practice must organically evolve as the startup grows and evolves—the size of the company and expectations of various stakeholders. Startups have different business requirements, a different set of stakeholders, and varying legal compliances. Therefore, every startup requires different corporate governance standards.
The specifics of corporate governance will be unique to each company and its growth over time. However, the key to a successful startup is board members’ willingness to devote time to founders, help them keep up with the constantly changing business environment, and avoid pitfalls. To read the original article, click on https://www.forbes.com/sites/betsyatkins/2021/04/12/why-startups-are-increasingly-prioritizing-corporate-governance-as-their-businesses-scale/?sh=e4df8115900a.