Governance has traditionally been seen as a big-end-of-town activity, yet it is widely recognised that every organisation — small, medium, large, public or private — can enhance performance, boost value and achieved sustained growth through good governance practices. It is also recognised that risk management is central to governance. Against that background, Chartered Secretaries Australia (CSA) has developed the survey below to try to accurately gauge to what degree mid-sized enterprises have embraced sound governance practices, as well as to identify difficulties they may be encountering in doing so.

1. Do you believe that governance is important for mid-size enterprises?

Yes 100%
No

Comment

Yes, for ALL businesses.
Good governance is important to every organisation that is serious in its approach to business. I am the director of a small not-for-profit and governance issues have occupied a lot of our early meetings to ensure we have a sound operating basis for future expansion.
Governance is important for all companies. Risk management is of key importance for all size organisations. Provides a structure to assess the "big picture" activities of the company.
I believe governance is essential for all sizes of enterprise — it’s the degree to which it is applied which is related to scale, in my view.
Essential for shareholders to have confidence that the company is being managed honestly, fairly and in the interests of shareholders.
Governance is essential for the profitable running of all organisations — the issue is determining the right level of governance and the right structure.

2. Do you believe that good governance improves the financial performance of an organisation?

Yes 84%
No 16%

Comment

Not necessarily, as costs need to be factored into good governance which a lot of companies haven’t done yet.
Most often, not directly identifiable, BUT if it means the business survives, to prosper later, the answer is obvious.
Not on its own, but certainly in terms of providing/assisting an organisation with the means to an end within a valuable framework.
By bringing all aspects of the business under scrutiny, financial performance is often improved by reducing waste or excess.
If risks are managed, potential damage to bottom line is reduced. Governance also provides opportunity to assess "big picture" for a business and enables key decision-making which can have a positive financial impact to be made.
Not by itself alone — for example, a large company can have good governance but still make a big accounting financial error — but good governance inclusive of a good risk management system will contribute to better financial performance and control.
Governance enhances ownership of responsibility by showing that all aspects of the enterprise will be subject to peer or superior review and this focus will help to improve financial performance.
Yes and no. A company may not take as many risks in decision making with a strong corporate governance culture in place, which may have a positive and negative impact on the financial performance.
Absolutely.

3. Do you believe that sound governance practices enhance a mid-market enterprise’s ability to raise capital?

Yes 100%
No

Comment

Sound governance practices add value at the equity end of a business.
Yes certainly — gives the funders some confidence.
Anything that improves the capital market’s confidence in the enterprise will help it with capital raising. Governance is a key confidence builder.
Institutions and investors assess management before deciding to invest. Good governance demonstrates good management.
Essential if capital to be raised from public. Not enough sources of capital for mid-size entities anyway, so must demonstrate proper behaviour.
Without doubt. An investor is more likely to invest when they can see elements of disciplined behaviour.
Just as stockholders need to have faith in the management ethics of the company, so do lenders.
Increases profitability and reduces the risk profile of the organisation.

4. In your experience, have sound governance practices decreased insurance premiums for mid-market enterprises?

Yes 42%
No 58%

Comment

Not as yet.
Yes, direct experience of a sound risk management program — premiums substantially reduced.
It would help firms involved in audit or other investigation areas or advisory work with their PI insurance, but I am not aware of it having an impact in general insurance.
Insurance underwriters’ assessment of risk in a business is reduced if good governance practices are employed.
Yes, by implementation of sound risk management — not aware of a proactive approach by insurers.
No, but they should if a proper risk management plan is implemented and actively managed.
No direct experience but expect it would.
I have not experienced this benefit.
Insurance premiums tend to be market related in totality and then influenced by the individual claims history experience of that company and its insurer.
Cannot comment, but I believe that it would.
One would expect this to be the case — I have no direct evidence of this.
Sound governance will include risk management which impacts insurance premiums.

5. In addition to insurance cover designed to protect your business against most possible scenarios, does your policy have separate and adequate cover for directors and officers?

Yes 79%
No 21%

Comment

Yes, necessary!
Our company has a separate D&O cover including employment practices.
Just in case!
Consider this as essential.

6. Do you believe that there is a compelling case to widen the business judgement rule to protect directors and officers in mid-size enterprises from personal liability?

Yes 61%
No 39%

Comment

There is some concern as to the decision tree and ofiicers also need to be protected.
Present situation seems OK.
As long as no fraudulent activity is involved, directors should be able to rely on their exercise of a "reasonable" level of business judgement.
Partly yes/no. There must remain a pressure to conduct oneself properly and with due diligence so if a widening had the effect to reduce that pressure then, no, I don’t think it will be of value.
Yes, if they can show elements of good corporate governance.

7. Do you believe that the concept of limited liability has been eroded as personal legal liability for directors and officers has increased?

Yes 63%
No 37%

Comment

Companies were originally formed as shifting the liability, this has all but been eroded over time through case and statute laws.
Our firm actively resists having any partners involved in directorships as a result of the possibility of personal liability being incurred.
Directors appear to be at increasing risk of prosecution in the event of business failure.
Directors and officers should not be able to hide behind the law to cover their actions that are either illegal or reflect poor performance.
Yes, corporate veil does not really exist any more.
In order for personal legal liability to exist then generally there has to be a wrongdoing in some shape or form by the directors and officers. Whilst the amount of legislation has increased generally, provided the directors acted in good faith and did their homework and have a sound governance structure, they should be protected.

8. Do you believe that the current levels of personal legal liability for directors and officers inhibits entrepreneurship in your organisation?

Yes 42%
No 58%

Comment

We still need the entrepreneurs, they are shifting to markets that are freer in the capacity to accept risk as an investment.
No, but directors are cautious in their decision making, often requesting a legal opinion before taking action.
Just makes you more careful and do your homework better.
Entrepreneurs must orchestrate some detailed personal financial structures to help minimise their personal liability.
Yes, but also inhibits wild risky decision-making as well.

9. Is your organisation able to attract and retain experienced and capable non-executive directors with the skills you need at a price you can afford?

Yes 61%
No 11%
Not applicable 28%

Comment

It is very difficult to respond to directors that are experienced. Those that are do not want the risk and are knowledgeable in this area. All we get these days are either risk-takers or those that are unaware.
Not applicable — family company with no immediate calling to source non-executive directors.
Our only outside directorships are with not-for-profits where our services are donated.
Our company's constitution provides for the election of directors by members/shareholders of our organisation from within their own ranks. Experience at times is gained on the job. Attracting directors is probably more a function of their time availability than their assessment of the risk involved in the role.
This area is where the impact of increased personal liability hits — hence few willingly take on the role as the money doesn’t cover the risk.
The scope is ultimately defined by the company constitution.

10. Do you believe that excessive penalties have discouraged suitably qualified people from accepting a position on your organisation’s board?

Yes 21%
No 63%
Not applicable 16%

Comment

But if we had outside directors in our organisation I am sure it would be hard to get anyone to do it in the present system unless there was a substantial reward involved.
I have not seen any evidence of this as yet.
To a limited extent — where people do accept, they seek to ensure the governance is improved to reduce their risk exposure.
No, but have heard of situations where individuals have avoided directorships as they considered the liabilities too onerous.
The smart operators can afford to say that the risk is not worth their effort.