Geoffroy Roux de Bézieux, CEO, OMEA Telecom/Virgin Mobile, founder of ISAI internet entrepreneur investment fund, and ESSEC alumnus, takes a look at entrepreneurship and the impact of governance and stakeholders in leadership decisions and the image smaller companies may inherit from large corporations
Small businesses should think big on governance by Geoffrey Roux de Bézieux, edited by Tom Gamble.
Entrepreneurs should think of their business as a small solo business, which means looking at the cash flow every day. On the other hand and in parallel, in terms of corporate governance, entrepreneurs need to treat their company as if it is a large multinational.
When entrepreneurs start a company, their funds often come from friends and family, and little thought is given to corporate governance, with a tendency for a ‘deal-with-that-later’ approach. It is indeed right for an entrepreneur to focus primarily on growing the business and entrepreneurs typically have big dreams: they want to grow fast, raise capital and become a big company.
Therefore, to ready the company for subsequent growth, to raise equity from external shareholders and to be transparent to investors, CEOs need to put basic principles of governance in place early on. Entrepreneurs are also often stubborn, have big egos, are fiercely independent and are not over-keen on setting up processes (such as financial controls) or involving others in important decisions (such as their own compensation). However, it must be repeated that the reason for entrepreneurs to care about good corporate governance is that it readies their company for the next steps of growth, including raising capital.
But watch out for bad vibes
The economic crisis of 2009 demonstrated that the gap between the public and business leaders widened. Since that time criticism of business has generally remained sharp. The public tends to believe that business leaders are self-interested, preferring to act in their own names and interest rather than those of all stakeholders or of the public.
While these opinions are based primarily on the perception of those big corporations involved in scandals, companies of all sizes are tarnished. This makes the job of an entrepreneur, CEO of a fledgling company, even more difficult.
Small Businesses: Set down the rules of the game
A result is that the public calls for ever more regulation and politicians have (rightly) accommodated this demand. However, alternatives to prevent and avoid regulation are proactive self-regulation and good corporate governance: if more companies behave properly, public attitudes will eventually change.
Yet there are two major challenges to overcome in reaching this: firstly, that even one incident of misconduct reported by the sensationalist media will hurt any progress that is made and secondly, it is difficult to obtain alignment within the business community, which is not so much a fellowship as an “assembly of different interests.”
Inversely, good corporate governance by big corporations will help corporations of all sizes, demonstrating to the general public that business is, or should be, here to serve the common good.
Students at the 6 member business schools were polled on the following question (click to enlarge):
Food for thought, up for discussion
- Should Governance of the media and the political sphere be an issue to approach?
- To what extent could/should sound governance principles (dealing with conflicts of interest, etc.) be adapted to other (political, etc.) spheres?
- Learn more about Geoffroy Roux de Bézieux
- Read a related article: Women directors in family firms
- What is social entrepreneurship?
- Governance, ethics and compliance at The Institute of Business Ethics website
Learn more about the Council on Business & Society
The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.
Member schools are all “Triple Crown” accredited AACSB, EQUIS and AMBA and leaders in their respective countries.
- ESSEC Business School, France-Singapore-Morocco
- FGV-EAESP, Brazil
- School of Management Fudan University, China
- IE Business School, Spain
- Keio Business School, Japan
- Stellenbosch Business School, South Africa
- Trinity Business School, Trinity College Dublin, Ireland
- Warwick Business School, United Kingdom.