Corporate Governance, Insights

A Guide to Adopting Corporate Governance for Startups

Corporate governance is a system that an organization puts in place to ensure its efficiency and sustainability. This system includes the rules, principles, ethics, and measures required to ensure compliance with regulatory and standard practice. Most jurisdictions have established standard corporate governance practices for public companies, emanating from an understanding of the need for a public organization to meet its responsibilities to the government, investors, employees, and the general public. However, corporate governance takes a backseat for startups, as, as they prioritize needs such as securing funding, product development, achieving market fit and attaining profitability.

While startups may operate without significant regulatory scrutiny, the importance of corporate governance cannot be over-emphasized. This article examines the reasons for the slow adoption of corporate governance by startups, underscores its importance, and makes recommendation for corporate governance implementation at different startups stage.
Adoption of Corporate Governance in Startups.

Unlike public companies, startups are not obligated to adopt corporate governance standards. While this gives startups the liberty to develop and adopt corporate governance systems that best suit their size and operations, corporate governance often does not make it to the priority list of startups. There are also concerns that implementing corporate governance practices may slow down decision-making processes, hamper innovation and growth, diminish founders’ autonomy, increase overhead costs, and introduce administrative and operational complexities….

 

 

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