The European Confederation of Directors' Associations (ecoDA) has recently published a report titled "Corporate Governance Guidance and Principles for Unlisted Companies in Europe." This paper (click here) addresses the corporate governance needs of unlisted companies.
In unlisted companies, where various roles, responsibilities and powers of key stakeholders are perhaps less clearly defined than they are for listed companies, a good corporate governance framework can help define the roles of the board, management and other shareholders and underscore the limitations in power of each.
In the approach towards good governance for unlisted companies, ecoDA put forward a set of principles to be followed*, which include:
- The size and composition of the board should reflect the scale and complexity of the company's activities and should meet regularly to discharge its duties, and be supplied in a timely manner with appropriate information.
- The board is responsible for risk oversight and should maintain a sound system of internal control to safeguard shareholders' investment and the company's assets.
- Family-controlled companies should establish family governance mechanisms that promote coordination and mutual understanding amongst family members, as well as organise the relationship between family governance and corporate governance.
- There should be a clear division of responsibilities at the head of the company between the running of the board and the running of the company’s business.
- The board should present a balanced and understandable assessment of the company's position and prospects for external stakeholders and establish a suitable programme of stakeholder engagement.
(*ecoDA "Corporate Governance Guidance and Principles for Unlisted Companies in Europe" First Edition, March 2010, pages 8 -9).
The implementation of a credible framework is not easy and may involve some fundamental changes in the way you operate.