Corporate governance and its contribution to risk and crisis management in small companies.

Abstract

Small companies are regarded by policymakers and society alike as being important sources of wealth creation, employment generation and innovation. Yet, many small companies fail to grow or simply grow to then fail. One potential way of explaining the high rate of failure is through the absence of meaningful appropriate, and relevant corporate governance. The few studies undertaken on corporate governance in small companies and its constituent sub-sets of risk and crisis management typically focus on one of those elements rather than, as this study does, adopting a more holistic and combined perspective. This thesis aims to contribute to knowledge through an exploration of the way in which corporate governance can assist in improving the management of risk and crises in small business. To explore this phenomenon, four small companies feature in a multiple case study using a qualitative and inductive approach with an exploratory questionnaire and interview-based research as the principal sources of data. According to owner-managers’ and directors of small companies, corporate governance is acknowledged as a matter of importance but is, in practice, of peripheral concern with operational imperatives dictating the conversation. External influences and compliance requirements are drivers of fuzzy governance procedures although concerning risk, previous incidents are found to be an influencing factor related to policy, processes and practices. However, the key determinant relating to the functioning of corporate governance, risk and crisis management is that of the attitudes, values and beliefs of the owner- manager. The findings suggest that the appreciation of corporate governance, risk and crisis management is weak and that the actors involved tend to have disparate levels of understanding of both the issues involved and the consequent implications of failure at policy level for both themselves and the company.