Corporate Governance and Private Businesses

April 26, 2012 by  Filed under: Management 

When it comes to discussing the issue of corporate governance, they tend to address the subject of publicly traded companies rather than private businesses. The Sarbanes-Oxley Act in has created a small shift in this regard, ever since its implementation in 2002.

Though it hasn’t been properly addressed, there have been more regulations focused on enforcing comparable regulations on their public counterparts as they begin to emerge. Questions are being raised as to the overall benefit of the effectiveness that these rules may produce; this would be due to the complexity of the surrounding issue. Another issue that is being raised is who should ultimately have an advantage from these rules and to what end should they be geared to?

Implementing such regulations would likely be the most beneficial, given that the primary objective of these rules is to guide company behavior, thus ultimately protecting shareholder interests, even though these companies are not publicly traded, they do have stakeholders, of one kind or another, who have little to no say in company dealings who would benefit from this.

Compliance regulations are generally seen as a nuisance usually by larger companies. The general consensus on such regulations is that they are an encumbrance to the proper corporate governance practices than a benefit. The concern pertains to the problem that similar regulations will create among smaller companies. Though these regulations may impede a company in certain regards, they would undoubtedly set a defining standard for these companies to meet and this would be aspired towards better business practices which would instantaneously protect stakeholder interests. This is the question that remains to be addressed as to whether or not these regulations should in fact be in place.

Regulations, or no regulations, good governance, risk and compliance behavior start within the organization, with the only defining matter being who it is in the end that penalizes any breaches that occur. However, whether or not such regulations are recognized to facilitate these issues perhaps the best governance policies can possibly be imposed on any organization are the ones that they execute themselves? The need for regulations to facilitate these companies will become obsolete if enough private businesses were to demonstrate a commitment towards good corporate compliance practices. In order for them to do this they would have to put in the time and effort necessary to satisfy the officials in this regard.

The beneficial freedom of not being scrutinized and regulated in their day to day activities should be more than motivational to spend the time and money required to implement a comprehensive compliance program. Unless companies take a stand to handle the issue on their own, it will not be long before government organizations will be turning their targets on private businesses as well, it will be reasonable to assume that these companies will have to move to more transparent business practices with the current push for better compliance. In the current economy only time will be able to tell if the government regulations will look to make private business practices more transparent.

Corporate Compliance Insights is a knowledge-sharing forum designed to educate and encourage informed interaction within the corporate compliance, governance and risk community. Additionally CCI offers an events calendar, professional company directory, leadership library and compliance jobs board. Visit

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