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Why Private Companies Need Board Governance

Finding the most effective solutions for the organization of management is a matter of concern for all companies, regardless of their form of organization and board. In recent times experts believe that the principles of corporate governance practiced by many well-known companies with shareholder capital should be applied in the work of private companies as well. There are both admirers and opponents of this position. We invite you to learn more about the specifics of implementing corporate governance in the work of private companies in order to form your own opinion about this form of governance.

 

What management challenges do private companies face?

Private companies may encounter a number of problems in the organization of management. Among them the most typical are:

  • Lack of flexibility in management decisions;
  • Lack of sustainability in times of crisis;
  • Lack of an integrated corporate culture;
  • Lack of correspondence between the management and the company’s development.
  • Lack of a unified strategy for company management and development.

In addition, private companies are not as open to change as companies that apply corporate governance in their work. Therefore, many managers of private companies are looking for new ways to eliminate such problems by all available means.

 

Why do private companies need a board of directors?

Of course, private companies use many of the forms of governance organization that are common to companies with a variety of capital. But at the highest level, corporate governance is generally not practiced, giving way to sole management by the owner or several owners.

However, the board of directors has a number of advantages, which will be useful for private companies. Among them, the following are worth noting:

  1. A board of directors facilitates more effective decision-making. Collegial management can help in finding and making the most useful decisions for the company, because multilateral analysis is more effective than unilateral analysis.
  2. It promotes more thoughtful planning. The involvement of the board of directors in management provides an opportunity to develop a more detailed strategy for the development of the company and to implement it in the work of the company through planning at all levels of work.
  3. The board of directors is able to ensure the stability of the company. Private companies, like public companies, are subject to the same risks that can undermine their market position. Collegial management helps respond more quickly to unforeseen situations and find effective solutions to them.

Of course, these advantages cannot illustrate all the possibilities of board governance. But they are worth thinking about for anyone who wants to modernize their company.

If your goal is to modernize your company in general and the organization of management in particular, it is worth considering adapting board governance to the work of a private company. The fundamentals of corporate governance also contribute to:

  • The formation of a new corporate culture;
  • Openness of the company to changes and innovations;
  • The stability of the company in times of transition and crisis;
  • Expansion of the company in all possible directions.

Management through the board of directors also provides an opportunity to introduce new principles of work, among which are openness, accountability and transparency. So you can strengthen your company and make it more open to innovation.