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Corporate Governance and Small Businesses

Let's start with some review of what types of companies primarily drive the US economy.   We know that there are about 16,000 publicly traded companies represented on the NASDAQ, NYSE and the AMEX.  The key economic driver in the US is the 27 million small businesses.  The Small Business Administration 2008 Presidential Report on The Small Business Economy clearly communicated "the economy generated 1.1 million net new jobs in 2007. In the first quarter of 2007, 74 percent of the net new jobs were in small firms with fewer than 500 employees and 22 percent were in firms with fewer than 20 employees."

A simple definition of Corporate Governance for the small business:  

Corporate governance simply refers to the set of internal policies, rules, and procedures that a company follows on a regular basis to ensure that it operates in a fair, equitable, and appropriate manner for the benefit of the company, its management and its shareholders. A corporation usually has a board of directors and a senior "C" level management team. Most small businesses do not have these organizational entities clearly defined and functional.
How does Corporate Governance apply to small businesses? 


All businesses should look at their organizational structure and continually assess what will allow the company to perform in an optimal way.  The simplest way to implement this is to have an advisory board.  The advisory board is non-paid individuals that have business or industry specific backgrounds that can contribute ideas or mentor management.

Will the government impose its will and definition of Corporate Governance from the public markets into the small business environment?

This imposition of government from the public market companies to privately held companies is making its way through the halls of congress.  One idea being tagged onto present legislation is to extend Sarbanes-Oxley down to privately held companies.

As a final note, every company, no matter what size it is, will see the positive effects of implementing the principles of corporate governance.  The facts remain that there are 27 million plus small businesses in the US who are the job creators and the drivers of the economy.

Tom Niewulis, Jr. is passionate about small business. He works with small businesses to develop management teams in implementing organizational strategic vision decisively by using good judgment and initiative to lead and develop organizational teams.