Role of corporate governance in the private sector

I spent part of my weekend reading an autobiography by Narendra Raval. What a striking personality! His Book GURU: A Long walk to success talks about his personal journey to success which, quite admittedly, is as humbling as it is inspirational.

But most importantly, towards the tail end of the book, he delves deeper into the growth of his company, Steel Centre Limited; a simple-little-unknown company once situated in Gikomba Market, occupying a 5,000 square foot room that went on to become a globally recognised business empire with outlets across East and Central Africa.

One would venture to ask, how can an individual maintain and operate such a private multi-billion shilling business empire, taking into account its size, resources, maturity, culture and level of complexity, whereas his competitors in the market are facing dire financial constrains?

What’s striking about Guru’s group of companies is that they have been consistently, albeit strategically, expanding and diversifying to other sectors, whilst still making handsome profits.

This in my opinion is attributed to observance of a good corporate governance structure. I once wrote, in relation to governance, that most companies fail either because of poor corporate governance structures or because of laxity from the regulators in ensuring that these code of corporate governance are strictly adhered to.

Whether it’s a kitchen-table start-up, family-controlled business or a publicly listed company, there has to be a well-functioning governance structure aiming to reach the company’s financial and expansion goals, using the best resources available on the market- in full accordance with the principles of accountability and appropriate checks-and-balances.

Governance is such a broad term with no specific or globally recognised definition, yet it encompasses many aspects relevant to running of a business. It defines the rights and responsibilities of the various stakeholders in the business, and determines how decisions will be made when establishing checks and balances.

A key and central part of corporate governance is the role of the board and the established audit committees. Though not expressly mentioned in the book, you can tell that these are his core business principles; principles that have seen him expand and sail through all sorts of economic turbulence.

A privately owned company is only as successful as its management team (Board of Directors). If a board shares values and principles such as honesty, transparency and financial accountability to all its stakeholders, such a team is only bound to propel the company to exponential heights.

It’s a commonplace fact that the code of corporate governance both locally and globally, are strongly focused on publicly listed companies, where shareholders are often distant from executives running the company, thereby neglecting the private sector.

Thus, the reason why the UK through the Financial Reporting Council published a consultation on corporate governance principles for large private companies known as the “Wates Corporate Principles”, where large private companies are encouraged to follow and adopt on an “apply and explain” basis.

BASTON WOODLAND, Advocate of the High Court of Kenya.