Download (Start-Up) STAGE 2 (Active Growth)

GOVERNANCE PROGRESSION MATRIX FOR SMALL AND MEDIUM ENTERPRISES (SME)
ATTRIBUTES
A.
COMMITMENT
TO GOOD
GOVERNANCE
STAGE 1 (Start-Up)
STAGE 2 (Active Growth)
STAGE 3 (Organizational
Development)
STAGE 4 (Business Expansion)
Formalizing the Business
Professionalizing the
Business
Basic SME Governance
Sound SME Governance
Core functions needed (e.g.
accounting, legal,
administration, IT) have been
identified (in-house or
outsourced).
Core positions (e.g. finance,
legal, corporate
secretary/administration, HR,
IT) have been hired or
outsourced to qualified
professionals.
An enterprise’s executive has
been explicitly charged with
responsibility for improving SME
governance practices, basic
compliance, and organization of
AGMs.
Action plan (including explicit actions,
timing, and responsibility to improve
governance) has been adopted.
Organization chart with
reporting lines has been
established.
Terms of reference have been
developed for key positions.
Articles of association have
been adopted.
Business plan for at least three
years has been adopted.
Statement of basic business
principles has been adopted.
Basic company policies/bylaws
have been adopted.
B.
DECISION
MAKING AND
STRATEGIC
OVERSIGHT
Informal external advisers on
strategic issues have been
identified and are engaged
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from time to time.
Specific areas of needed
external expertise have been
identified.
External advisers on strategic
issues have been formally
engaged.
Top-level discussions are held
on strategy, financing, and
staffing.
Company secretary function is in
place.
Articles of association and
enterprise’s bylaws include key
governance provisions.
Core processes (accounting,
procurement, etc.) have been
documented.
A calendar of corporate
meetings and events has been
adopted.
Business-conduct principles
have been communicated to
staff.
Continuous and structured
outside advice is engaged (e.g.
through an advisory board, or
similar advisory resource).
Enterprise wide discussions
have been held on strategy,
financing, staffing.
Commitment to governance has been
communicated to staff and
stakeholders in the form of an
employee handbook or a code of
ethics.
A board of directors has been
constituted and meets periodically;
directors’ roles and responsibilities
have been documented and
communicated to all directors.
Board procedures have been
reviewed and documented to ensure
effective meetings and input from all
directors.
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Somejurisdictionsrequireaboardofdirectorsatthetimeofcompanyregistration.Ourexperienceshowsthatinmanycasessuchboardsarejustaformality.Forthismatrix,
theboardisnotexpectedtobesubstantiallyfunctionaluntilStage4.ForStages1–3,treatsuchboardsassubstantivelynonexistent(unlesstheyareindeedperforming).
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C.
CONTROL
ENVIRONMENT
AND
PROCESSES
Founder(s) make decisions in
individual consultations with
key executives.
Executive decisions are made
in collaboration with key
executives as a group.
Executive/management (or
similar) committee has clear
TOR and meets periodically.
Authority limits of key
personnel have been
communicated throughout the
enterprise.
Limited delegation of signing
authority has been formalized.
Contingency plan for CEO and
key persons has been
established.
Basic bookkeeping, cash flow
management, and tax
functions have been
established.
Sound bookkeeping is in place.
Awareness of total net worth
of the enterprise is separate
from that in the name of the
founder(s).
Key staffing priorities have
been identified.
Accounting policies and reports
have been established.
Basic business risks have been
identified.
Processes are in place for tax
payments, records, and filing.
HR policies are established to
attract, retain, and motivate staff.
Objectives, strategic planning,
budget, KPIs, and clear
accountabilities have been
articulated.
Effective internal control systems
have been established, and
independent external auditors report
on significant control deficiencies.
A professional, strong CFO has
been hired and empowered.
Appropriate systems have been
established to record and track sales
and accounts, with adequate
transparency to protect against
unauthorized and incorrect
transactions and to accurately
estimate accruals and revenue at any
given time.
A basic internal audit function is
in place, and internal auditor
reports to the founder or
executive committee.
Basic understanding of
regulatory requirements and
compliance is in place.
Use of secure IT is in place to
generate data and reports.
A basic system is in place to
record and track sales and
accounts.
Policies and procedures have
been established to monitor and
mitigate strategic and
operational risks.
Cash sources and bank
accounts are separate from
those of the founder(s).
Signatures over bank accounts
and control on cash
management, with thresholds
and delegation (single, joint, or
combination) and segregation
of duties are established.
Business units (HR, IT, etc.)
have been established and have
clear authority, reporting lines,
and guidelines.
Business and fiscal (tax)
registrations are separate
from those of the founder(s).
Succession-planning policy has been
established.
Profit-sharing arrangements
have been established, if
needed, to attract top talent.
Financial statements are audited
by an external auditor and
complying with the applicable
legislation.
Business units meet routinely to stay
abreast of progress against the
business plan, and to identify and
address corresponding risks with a
risk-management policy and strategic
plan.
A professional and independent
external auditor has been engaged to
conduct the audit.
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D.
TRANSPARENCY
AND
DISCLOSURE
Basic financial accounts are
prepared.
Monthly bank account
reconciliation is conducted and
disclosed to all founders.
Financial statements are
prepared in accordance with
national accounting standards,
and audited by a recognized
auditing firm.
The company’s financial reporting is
in accordance with the IFRS or US
GAAP. The audit opinion is an
unqualified opinion.
The same financial
information and data are used
for all business and
regulatory registrations,
reporting, and all other
purposes.
Founder(s), shareholders, and
directors periodically receive
consistent financial and
nonfinancial information
throughout the financial year.
The key contact person for
information sharing has been
identified.
Quarterly financial reports and
comprehensive performance reports
are provided to the board,
shareholders, and key executives.
Key decisions are formally
communicated to all staff.
Basic performance reports and
yearly audited financial
statements are presented to the
advisory board or similar
advisory resource.
E.
FOUNDERS
SHAREHOLDERS
FAMILY
The role and responsibilities
of the founder(s) have been
clearly established.
Shareholders are provided with
information (documentation) on
request and as specified by
legislation.
The public profile of the
enterprise has been developed
and is consistently used for
marketing and other business
purposes.
Web-based media present the
enterprise profile for public use.
An annual report (or equivalent
components) is published.
Key nonfinancial information
(products offered, shareholders,
etc.) is disclosed to the public.
The enterprise’s website includes key
financial and nonfinancial information,
including the audit opinion.
The difference between nonfamily and family issues is
acknowledged and understood.
The distinction between the roles
of the founder(s), family
members, and managers has
been clearly established.
Policies, mechanisms, and structures
to regulate decisions that might affect
family members’ employment,
dividends, and other benefits have
been established and communicated.
Awareness of family succession
planning has been established.
Clear career paths for non-family
executives have been
established.
The family succession plan has
been developed and adopted.
The basic understanding of
roles of all family members
has been established.
Annual shareholders’ meetings
are held to approve documents
prepared for regulatory
purposes and/or external
creditors.
Annual shareholders’ meetings
include discussions of key/major
decisions made, dividends, and
future plans.
In the period between the shareholder
meetings, all shareholders are kept
abreast of company policy, strategy,
and results.
The dispute-resolution mechanism for
shareholder-related disputes has
been established and articulated.
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