SME Governance and Business Ethics In SME Businesses

SME Governance and Business Ethics In SME Businesses.

Many business owners may think that Corporate Governance and Business Ethics only have relevance for larger businesses. However, in my view, small businesses should look to the same principles to regulate how they operate and follow proven processes and practices that demonstrate how they meet with the highest standards in social, regulatory and market environments. So what is Corporate Governance and where does it come from?

Corporate governance can be defined as "a system of law and sound approaches by which corporations or companies are directed and controlled, focusing on the internal and external corporate structures, with the intention of monitoring the actions of management and directors and thereby, mitigating risks which may stem from the misdeeds of corporate officers.”

Origins of Corporate Governance

Corporate Governance standards have evolved over the past 25 years in the light of abuse and fraud within corporate businesses across the world. Key principles of effective Corporate Governance have become defined following the publication of The Cadbury Report in the United Kingdom in 1992, The Principles of Corporate Governance from the OECD in 1999, 2004 and 2015, and the Sarbanes-Oxley Act of 2002 in the United States.

Relevance of Corporate Governance for Small and Medium Businesses

Corporate Governance is particularly interested in financial matters within a business. We all have to do personal annual returns for our earnings and we are obliged to pay the required amount of taxes, based on current laws and tax codes. Businesses are no different. They must file financial statements that are prepared in accordance with accepted accounting standards, and they must declare their tax liabilities and discharge them in full. The financial records and reports of the business must also be truthful, accurate and verifiable. There are no shortcuts.

There is a right way and a wrong way to run a business. Some business owners or executives look for all the shortcuts and may accidently or deliberately break the established rules, particularly in relation to taxation or financial reporting. However, trying to find loopholes and shortcuts is not worth the effort, particularly when you need to remember all the twists and turns you might take on your ill-advised journey.

In my view, it is easier to do the right things from the outset rather than seeking shortcuts. The problem is that shortcuts will frequently only offer short-term benefits and most transgressors eventually get caught and suffer the full rigors of the law. Constantly looking over your shoulder and enduring sleepless nights will prove that these tactics are just not worth it.

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