Corporate

CorporateGovernance:
governance

Coporate Gov in StartUps & Small and Medium

Companies
Corporate
CorporateGovernance:
governance
For many years, it has always been thought that talking about good corporate governance is only
applicable to large companies, corporations and economic groups. Which is a mistake, since good
corporate governance applies to all types of companies, whether private, public or mixed capital.
Consequently, good corporate governance also applies to startups and SMEs.

REMEMBER THAT 70% OF ALL COMPANIES, WORLDWIDE, ARE MADE UP OF STARTUPS AND SMES.
In that sense, we want to recall some definitions on corporate governance:

"Corporate governance is the structure and processes for the proper direction and control of companies, which
contribute to the generation of value and sustainable development, improving the performance of the business and
its access to sources of capital" (International Finance Corporation - IFC).

"Corporate governance, are the rules and procedures for making decisions in corporate affairs, and promoting
corporate justice, transparency and accountability" (J. Wolfensohn, President, World Bank).
Corporate
CorporateGovernance:
governance
Its general objective is to define rules, procedures and controls within a framework of transparency, ethics and
corporate responsibility, which ensure the sustainability and continuity of business in the long term. Its importance
lies in the generation of trust, credibility, ethical transparency and strengthening of business relationships,
guaranteeing a good reputation in the market.

Good corporate governance in startups and SMEs is characterized by generating greater reliability to potential
investors and financial institutions, consequently it also allows greater possibilities of access to funds and
opportunities, opening the doors to greater sources of financing, for example internationalization.
Today, startups and SMEs must be born with good corporate governance as part of their organizational culture and
strategy. It is very common for startups and SMEs when they are incorporated, to first worry about selling and
generating returns. Without realizing that it begins to grow in a disorderly way generating inefficiencies in the
business, reaching losses for not having conceived and adopted good corporate governance in its first years of
incorporation.
Corporate
CorporateGovernance:
governance
As already mentioned above, good corporate governance defines the rights and responsibilities of founders,
shareholders and boards of directors (boards); it also generates order and discipline for startups and SMEs.
Startups and SMEs with good corporate governance will generate greater value than one that does not. Investors
and stakeholders value more those startups and SMEs that have good corporate governance mechanisms.

One of the biggest risks of the boards of directors (boards) of startups and SMEs in the first moments, is that they
look more like a group of friends than a professional team. That is why, the importance of its members being
independent professionals and specialists in their subject, is what generally adds more value to startups and
SMEs.

The negative consequences of poor corporate governance end up costing more fines, convictions, imprisonment,
bad reputation for improper actions, and can even end with the disappearance of the startup and / or SMEs.
Corporate
CorporateGovernance:
governance
The following will mention the main consequences of bad governance or its absence in startups and SMEs:
1. Inadequate decision-making.
2. Unusual behaviors that generate economic damage to the company.
3. Recruitment of personnel without due diligence.
4. Inadequate segregation of duties.
5. Accumulated losses in recent years.
6. Loss of confidential information and dissemination to third parties.
7. Constant rework.
8. Lack of timely and clear financial information.
9. Complaints from customers and suppliers.
10. Penalties and Fines.
11. Temporary Suspension and Closure of Premises.
12. Prison of High Officials.
13. Loss of Image and Reputation due to improper actions.
14. Bankruptcy or Closure of the startup and / or SME.
Corporate
CorporateGovernance:
governance
It is important that a startup and SMEs have good corporate governance so that they can identify the risks that affect the
business and after this, evaluate them constantly and in an integrated way providing sustainability to the organization.
Undoubtedly, good corporate governance has a positive impact on the evolution and sustainability of the startup and / or
SME, and its effect can be quantified, generating savings and importance to the business.
In conclusion:
1. Startups and / or SMEs with good corporate governance will have better control systems, quality financial information,
have fewer errors, makeup and accounting fraud.
2. Startups and /or SMEs with weak or irregularly conceived corporate governance generate possible short-term benefits,
exposing the business to greater risks in the medium and long term.
3. Startups and/or SMEs with robust corporate governance are less susceptible to their strategic and profitability objectives
being influenced by external factors (pandemic, economic crisis); have a lower cost of debt and capital for several
reasons, including reliability of information, better control systems and risk prevention and management