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Even if you score poorly on the other pillars, being at an advanced stage with respect to commitment is an excellent foundation for fixing other shortcomings. Investors will view this in a good light and it can even come at a premium. If you are at Stage 3 and 4 for most of your pillars, not only are you creating value for your stakeholders, you are also reducing risk for investors.
Moving to an advanced stage of commitment to corporate governance practices is worth the time and investment since you have navigated through the more difficult actions. Still, you can do a cost – benefit analysis to determine how and when you want to move to Stage 4 which will put you at the top of your game and most likely make position you as a sector leader.
You appear to be one stage beyond the basic foundational blocks of demonstrating commitment to corporate governance. Implementing a few additional practices will position you to move from developing to developed commitment with little “investment” from you. Nevertheless, external investors should value where you are on the commitment spectrum.
You appear to have the basic foundational blocks of demonstrating commitment to corporate governance. As they say, leadership starts at the top. Implementing a few additional practices will position you for a more productive dialogue with investors. But any serious investors will note the gaps and will want to put a plan in place for you to develop further. You should find out what plans your investor has for you. Even if you are not looking to raise capital, you create value by moving to Stage 2 – Developing towards good corporate governance practices.
Commitment is the starting point of good corporate governance. You are at the beginning of your corporate governance adoption. If you are a start-up, that is good news - you have a clean slate and can begin to implement good practices. If you have been in operation for some time, then you may have some work to change the perceptions that your stakeholders may have about your commitment to corporate governance.
At this advanced stage of oversight, your Board appears well positioned and organized to help the company assess risk and take action on risk-mitigating activities. Input on strategy is a key role. If anything, you are fine-tuning how your board works together. It is important not to rest on your laurels. New risks emerge in every sector. New opportunities appear on the horizon. An effective board will be wide awake to those and provide oversight and guidance.
From an oversight perspective, your practices appear to be developed. You have done much of the hard work already so you will find progression along this pillar to be an attractive option. In fact, the next step in progression will put you at the top of your game.
From an oversight perspective, you appear to have more than the basic foundational requirements in place. In fact, you could be investor ready. Attracting investors is often an excellent motivation to pursue better corporate governance. A few more enhancements and you could be a Developed level of board oversight practices. As a strategic objective, consider when it makes sense to make these enhancements.
From an oversight perspective, you appear to have the basic foundational corporate governance practices in place. Attracting investors is often an excellent motivation to pursue better corporate governance. In your corporate governance journey, you will want to start expanding the group that formally contributes to the strategy and decision making.
If you have no Board or a very new Board, this is good news. You have a clean slate to start to adopt good practice in this regard. There are textbook steps to take. The key is to adopt practices that align with your company’s development but that also encourage you to take some good decisions early. If you have been in operations for some time, then you will have some work to change perceptions. As you evolve toward best practice, you should be aiming to have regular formal board meetings and succession planning.
You appear to demonstrate practices at the highest level with respect to your control environment. The control environment reflects more than just enterprise risk management, internal audit, financial audit and other tools to control the flow of resources -- it is the reflection of actual commitment to corporate governance by company leadership. As it has to do with how resources flow to and from the company, it is the ultimate form of commitment. Many also view this as the company leadership’s attitude to corporate governance. The systems you have in place should be well positioned to help you manage a host of potential risks, including environment and social risk.
Continue to ensure that your Board has enough information to provide effective oversight.
The control environment reflects more than just enterprise risk management, internal audit, financial audit and other tools to control the flow of resources -- it is the reflection of actual commitment to corporate governance by company leadership. As it has to do with how resources flow to and from the company, it is the ultimate form of commitment. Many also view this as the company leadership’s attitude to corporate governance.
You appear to be at a developed stage of your control environment and process. As a next step, you can choose to refine your control system further whereby the Board will take a more active role in oversight.
The control environment reflects more than just enterprise risk management, internal audit, financial audit and other tools to control the flow of resources -- it is the reflection of actual commitment to corporate governance by company leadership. As it has to do with how resources flow to and from the company, it is the ultimate form of commitment. Many also view this as the company leadership’s attitude to corporate governance. When the development of the control function suits the company’s maturity, then you can optimize risk management. As you are at Stage 2 – Developing – you should be considering moving to the next level where KPIs and accountability become important. As you mature, you will benefit from establishing your own internal audit system and a CFO function if you do not have one already.
The control environment reflects more than just enterprise risk management, internal audit, financial audit and other tools to control the flow of resources -- it is the reflection of actual commitment to corporate governance by company leadership. As it has to do with how resources flow to and from the company, it is the ultimate form of commitment. Many also view this as the company leadership’s attitude to corporate governance. When the development of the control function suits the company’s maturity, then you can optimize risk management. As you are at Stage 1 – the basic level – you should be considering moving to the next level where you will exhibit more advanced planning and ensure that key business risks have been identified.
The control environment reflects more than just enterprise risk management, internal audit, financial audit and other tools to control the flow of resources -- it is the reflection of actual commitment to corporate governance by company leadership. As it has to do with how resources flow to and from the company, it is the ultimate form of commitment. Many also view this as the company leadership’s attitude to corporate governance. When the development of the control function suits the company’s maturity, then you can optimize risk management. Since you are at the beginning of this journey, there is a great opportunity to put these functions in place in a strategic rather than haphazard function.
Along with commitment, transparency and its close cousin disclosure are a cornerstone of corporate governance. Most importantly, they signal credibility and can give stakeholders a sense of comfort or discomfort depending on the level of accessibility and clarity of your information. You appear to demonstrate practices at the highest level of competency with respect to your transparency and disclosure. Boards can get complacent even at this level and miss important information. If you want them to serve the company’s interests well, think of ways to keep them proactively engaged.
Along with commitment, transparency and its close cousin disclosure are a cornerstone of corporate governance. Most importantly, they signal credibility and can give stakeholders a sense of comfort or discomfort depending on the level of accessibility and clarity of your information. Based on your responses, you appear to be at a developed stage of demonstrating transparency and disclosure.
Best practice requires a number of key upgrades, particularly with respect to your financial statements, for example preparing them in accordance with International Financial Reporting Standards (IFRS) and having them audited with International Standards on Auditing (ISA). Well done if you have already achieved this. This can be a heavy lift for SMEs but once you get into the rhythm of this you can maintain this if you have the process and procedures in place.
Don’t forget to use your external reports to disclose information on Environmental, Social and Governance (ESG) information and practices.
Along with commitment, transparency and its close cousin disclosure are a cornerstone of corporate governance. Most importantly, they signal credibility and can give stakeholders a sense of comfort or discomfort depending on the level of accessibility and clarity of your information. Based on your responses, you are likely ready to engage with investors from a position of strength.
Consider evolving even further towards best practice. Ensuring that your financial statements are prepared and audited in accordance with the standards published by your national accounting body can be heavy ask for an SME but worth the investment as you pursue best practice corporate governance. If you haven’t already, include your staff in your disclosure of key decisions – communicate, communicate, communicate. And don’t forget your other stakeholders. Thoughtfully solicit feedback to ensure that we you are communicating is well understood.
Along with commitment, transparency and its close cousin disclosure are a cornerstone of corporate governance. Most importantly, they signal credibility and can give stakeholders a sense of comfort or discomfort depending on the level of accessibility and clarity of your information. You appear to be are at basic level of the competency with lots of room for growth.
To develop further, ensure that shareholders are in regular receipt of financial and non financial information that they can easily make sense of. A developed public profile will ensure that you can easily be found and reached online. Next, your goal should be to maintain compliance with the local law on disclosure.
Along with commitment, transparency and its close cousin disclosure are a cornerstone of corporate governance. Most importantly, they signal credibility and can give stakeholders a sense of comfort or discomfort depending on the level of accessibility and clarity of your information. You are at the beginning of your journey to strong transparency and disclosure. As the next step, you want to be sure that you are using the same financial information for all purposes. This can understandably be a tough transition for SMEs who may have to deal with a punitive tax regime.
Ultimately, ownership is about control. The ownership pillar of corporate governance contemplates the key question of “who does what?”. The 3 Rs – rights, roles and responsibilities – of the people involved in the business become more important as the business matures. From your responses, you appear to be at an advanced stage of this pillar. This means that you have policies that back up key practices around resolving shareholder issues, dividend policies and best practice around shareholders meeting.
Ultimately, ownership is about control. The ownership pillar of corporate governance contemplates the key question of “who does what?”. The 3 Rs – rights, roles and responsibilities – of the people involved in the business become more important as the business matures. At this stage, based on your responses, you are demonstrating that you are putting a significant amount of effort into your shareholders meetings. Investors will take a lot of comfort from what you are doing in this stage. The next step in your evolution will take you to the top of your game. There are a number of important policies that indicate that a company has reached ‘best in class.’ These include a formal dividend policy, policies to regulate the role of family members and a disclosure policy so shareholders are kept informed. Treatment of minority shareholders is key and therefore so is a policy to govern this.
Ultimately, ownership is about control. The ownership pillar of corporate governance contemplates the key question of “who does what?”. The 3 Rs – rights, roles and responsibilities – of the people involved in the business become more important as the business matures. At this stage, based on your responses, you should be in a good shape to have constructive investor conversations. The next step in your evolution will take you from developing to developed. Stage 3 requires several additional enhancements. If haven’t already, consider capturing and sharing AGM discussions, ensuring that shareholder meetings allow for inclusive participation and establishing shareholder rights and obligations.
Ultimately, ownership is about control. The ownership pillar of corporate governance contemplates the key question of “who does what?”. The 3 Rs – rights, roles and responsibilities – of the people involved in the business become more important as the business matures. At this stage, you appear to have the basic elements of ownership in place. Having even a rudimentary shareholders agreement demonstrates progress.
The next step in your evolution will make you more attractive to investors. For example, Stage 2 requires equitable treatment of shareholders and introducing dividend policies amongst others. Having regular shareholders meeting is also an important sign.
Ultimately, ownership is about control. The ownership pillar of corporate governance contemplates the key question of “who does what?”. The 3 Rs – rights, roles and responsibilities – of the people involved in the business become more important as the business matures. Since you are at the beginning of your journey on this dimension, you can decide the path you want to take.
Managing conflicts of interest, protecting the rights of minority shareholders, having a clear plan for succession will serve the company’s interest in the long run, even if the founders find it difficult in the short run. But please be prepared - putting these in place will probably be the most challenging conversations you will have with co-founders, family members, early investors, etc.
esg africa corporate governance
rapid assessment
Baraka Cement
Thank you for your interest in taking the ESG Africa Corporate Governance Rapid Assessment.
This Rapid Assessment is targeted at early-stage companies and SMEs. It is designed to give you a snapshot view of the strength of your company's corporate governance practices and policies. The questions in the Rapid Assessment draw from the methodology of the Corporate Governance Progression Matrix for SMEs developed by the International Finance Corporation (IFC). You can find a wealth of free publicly available corporate governance resources (including details of IFC's Corporate Governance Methodology and its related tools) on IFC's Corporate Governance website.
The findings in the Rapid Assessment should be interpreted as a quick reference check, rather than as a definitive observation informed, for example, by document review. For an in-depth thorough assessment and review, we suggest that you should contact ESG Africa directly or engage another corporate governance specialist.
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In today’s complex world, companies cannot be business-resilient without embedding environmental, social and governance (ESG) impacts and opportunities into their core risk management and business strategies. Furthermore, investors globally are taking a harder stance on companies’ abilities to manage ESG risks and measure outcomes. However, it is equally apparent that most companies find understanding and implementing international ESG standards.
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