Why Corporate Governance Matters

 The leadership and governance structure of a business can be compared to that of a country. Just like a nation relies on a committed and functioning government for growth, prosperity, and stability, so does a company. Problems tend to arise at the top of governance and gradually make their way down the hierarchy until they start poisoning the roots.

A successful government is not just about the people in office, but the framework that defines their roles, responsibilities, and powers. The same principle applies to business. Structure creates continuity. It gives meaning to leadership positions, establishes boundaries, and enables you to forecast outcomes, manage risk, and ensure long-term sustainability.

To many business owners, rules and regulations feel like a straitjacket that gets in the way of running the business. But without those rules, a company can quickly spiral into chaos. With no certainty or predictability, consistency will start to disappear, and with it, trust and confidence.

Governance structures often expose their weaknesses when the storm hits, and the storm always comes. It might arrive in the form of a disillusioned executive or junior employee, a long-time supplier who changes terms, a disgruntled shareholder, or even your biggest client.

Businesses don’t fail because of external threats. Rather, those threats expose internal weaknesses, often rooted in naivety or poor planning.

As an attorney, I believe in structure. Structure is not just paperwork. It is a carefully crafted combination of documents, principles, and concepts that define your organisational hierarchy. It identifies who must lead, who must follow, who must advise, and who must challenge.

While you may focus on getting the deal done, sound governance structures focus on helping that deal last and withstand the inevitable storms.

I urge all business owners to invest the time and effort with someone who understands business structures. You may not see the value immediately, but you’ll see it the moment the next storm arrives.

Take a moment for a quick corporate governance sanity check

Ask yourself:

• Have we signed up-to-date agreements between all shareholders?

• Is it clear who is responsible for which decisions, and who has authority over which areas?

• What happens if someone wants to exit the business, or if a dispute arises?

• Do we have a clear process for resolving internal conflict?

• Are our internal roles, decision rights, and escalation paths documented?

  
  

If you answered “no” or “I’m not sure” to any of these, it might be time to put governance higher on your priority list.

The basic corporate governance tools

You don’t have to reinvent the wheel to prioritise corporate governance. Just start with the basic tools. For most companies, the essentials include:

A shareholders’ agreement or partnership agreement:

This is the foundational contract between the owners of the business. It defines who owns what, how decisions are made, how profits are distributed, and what happens if someone wants to leave, sell their shares, or pass away. It also sets rules for resolving disputes. Without one, even a minor disagreement can become a business-threatening crisis.

A well-drafted Memorandum of Incorporation (MOI):

The MOI is a statutory document required by the Companies Act. It governs the relationship between the company and its shareholders, directors, and other stakeholders. The standard MOI you receive when registering a company with the Companies and Intellectual Property Commission is generic and won’t be adequate for most businesses with more than one shareholder.

A customised MOI can override many default rules in the Companies Act to better suit your business, such as adjusting voting thresholds, restricting share transfers, or clarifying board powers. It’s the company’s constitutional framework.

A delegation of authority policy:

This document sets out who is allowed to make which decisions, whether financial, operational, legal, or strategic. It brings clarity to the organisation, prevents power struggles, and ensures decisions are made at the appropriate level. For example, it may allow a manager to sign off on contracts up to R50,000, but require director approval for anything more. This protects against both overreach and bottlenecks. You don’t want to give someone free rein to make major financial decisions. However, it is also a waste of resources for a senior manager to run to the board for approval before minor decisions can be made and implemented.

Board or management committee charters:

These are internal governance documents that outline the roles, responsibilities, and procedures of your leadership bodies in an organisation. They help define the scope of authority, frequency of meetings, how resolutions are passed, and the checks and balances in the business. Charters promote accountability, encourage active participation, and limit confusion about who is responsible for what.

Succession and exit planning documents:

Planning for continuity is critical. These tools include buy-sell agreements, key-person insurance policies, and succession plans that deal with what happens if a key person exits, whether by choice, incapacity, or death. Without this, you risk leaving your business, your partners, and your family exposed during a crisis. Proper planning ensures that leadership transitions don’t become existential threats.

These aren’t just legal formalities. They are the foundations that make your business resilient, investable, and durable. Entrepreneurs often sacrifice major parts of their lives to make a business work. At the very least, ensure that your family gets something out of it when you are no longer around.

Good governance isn’t a barrier, it’s a springboard

Structure doesn’t kill creativity. It protects it. It frees you to innovate, scale, and grow with confidence. It creates the space for your business idea to thrive without becoming hostage to internal confusion or personal conflict.

So, take the time. Do the work. Put governance in place that grows with your vision, not against it. If you find the balance between growing your business and implementing sound corporate governance principles, you will see your business grow and prosper.