subject: Corporate Governance Imperative For Smes [print this page] Rise in incidence of corporate debacles and scams in India such as the Satyam fiasco and the recent case of embezzlement by a Wipro insider only brings out the need for India Inc, including the SME sector, to have strong corporate governance policies in place. Strengthening the organisational structure as well as re-examining the administrative strategies has become imperative for Indian SMEs to avert corporate frauds in future.
Need for implementation of stringent corporate practices
Adhering to regulatory guidelines is of prime importance for SMEs to make their investors and stakeholders hold positive perceptions about the conduct of the companys business. Executing good corporate practices will also help small-scale companies to achieve sustainable growth and establish responsibility and accountability.
Better corporate governance practices are needed to maintain transparency and ensure fairness in the system. It helps in enhancing the organisational performance, said Debasis Dutt, director of Smiling Abode, a small-sized property promoter in Kolkata.
However, despite being aware of the benefits of adopting stringent corporate governance practices, a large number of SMEs in India still fail to comply with the regulatory norms required to strengthen their framework.
Although small companies realise the significance of good corporate governance practices, most fail to execute it properly, thereby failing to achieve the organisational goals by implementing appropriate and effective methods, said Nand Kumar Laddha, an independent chartered accountant in Kolkata.
To improve the quality of governance, SMEs must reflect on methods that they deploy in their administration and accordingly undertake measures that will help them build up a robust monitoring framework. Ensuring conformity with risk management policies will also help small companies to deter possible frauds, thereby gain credibility and earn goodwill in the market. Implementing healthy accounting and trading practices will also help small businesses to function smoothly.
