Basic Principles Of Good Corporate Governance Every Start Up Owner Should Know

Corporate Governance as a concept embodies processes and systems by which Companies are directed, controlled and held to account. It impacts on all aspects of an organisation, from communication to leadership and strategic decision-making, but it primarily involves the board of directors, how the board conducts itself and how it governs the company.

Its manifestation is through the following (sources):

  • Laws: Companies Act, among others, which always have a binding effect on Companies;
  • Codes of Good Practice: King Codes which are mostly non-binding unless adopted as binding by the Companies; and
  • Professional Ethics and Standards: which bind professionals that serve or act on behalf of Companies in varying capacities.

The amalgamation of the above is exhibited in Constitutional Documents of a Company and its internal policy guidelines.

Some of the key Constitutional Documents and policy documents considered in this regard are, amongst others:

  • Memorandum of Incorporation
  • Shareholders Agreements
  • Board Charters
  • Board Committees’ Terms of Reference
  • Human Resource Management Policies
  • Supply Chain Management Policies
  • Financial Policies
  • Strategic Plans

As such the general concept of corporate governance as exhibited in Constitutional Documents of a Company and its policy guidelines informs both legal obligations and ethical considerations.  Accordingly,  the legality of actions of a Company is, in most cases, determined by what is permissible within its corporate governance framework.

To this end Constitutional Documents of a Company and its policy guidelines primarily inform the Company’s commitment to both binding and otherwise compelling corporate governance principles.

In this regard, the starting point for and focus of any start-up or new Company should be the establishment or development of a sound corporate governance framework. Such a framework should entail the requisite Constitutional Documents and policies that the Company will conform to in order pursue good corporate governance.

However, it should be noted that a good corporate governance framework alone will not ensure good corporate governance, but rather serve as a sound platform upon which a Company can measure/benchmark its performance with regard to corporate governance.

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