Corporate governance is the last thing on the mind of a start up
franchisor, and in many ways is irrelevant at the outset. If you
are the owner, director, financier and key employee you don't
need too many policies. However it is important that as the
business grows and new stakeholders are involved appropriate
corporate governance rules are established. Otherwise those
stakeholders will not have the necessary confidence to properly
partner with you on your journey, or the stakeholder relationship
will end in tears if the entrepreneur behaves
"entrepreneurially" one time too many.
We have developed sophisticated corporate governance for
clients, and assisted in the transition from private business to
corporation. However the underlying principles are relatively
simple, and mostly common sense:
there needs to be an empowered board separate from the founder,
and with the skills and experience to properly discharge their
legal and business duties as directors;
the board needs to ensure there is a senior management team in
place with the requisite skills and experience. Having a founder as
CEO with unilateral decision making power is no longer
all stakeholder interests need to be protected. This is
particularly relevant if these are shareholders other than the
founder, as they have rights that directors must protect;
there must be effective risk management systems in place;
record keeping and financial reporting must be strong.
The earlier franchisors begin thinking about these issues, the
more likely they are to successfully progress from a corporate
extension of the founder with all the founders inherent
vulnerabilities to a successful corporation that has corporate
value and assured longevity.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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