MD.

Rezwanul Hasan Rana

Roll-7-054
Impact of Size
Chapter # 5
Group - 02
Introduction
The Five Stages of Growth
Corporate Governance and
the smaller company
Conclusion
Good Corporate Governance is very important to a
company that is growing, because at this point of time the
interest of the owners and the managers start to separate in
the company.

Here we begin by identifying and summarizing the five

stages of growth for an organization from a small
private company to a global corporation.
 Company SHAREHOLDERS

Small Private Company Private

Small/ Medium sized Mainly Private

Enterprises
Medium sized Listed Mixed
Company
Large Public Company Mainly Institutional

Global Corporation Entirely owned by large and

small institutions
 Company MANAGEMENT

Small Private Company Owner

Small/ Medium sized Owner

Enterprises
Medium sized Listed Professional Managers
Company
Large Public Company Professional Managers

Global Corporation Highly skilled and

internationally
experienced
professional managers
 Company INFORMATION
AVAILABILITY
Small Private Company Limited

Small/ Medium sized Relatively Limited, Accessible to

Enterprises shareholders & directors
Medium sized Listed As per Regulations of the
Company country of operation.
Large Public Company As per Regulations of the
country operation.

Global Corporation As per regulations of the

countries in which the company
operates its business.
 Company AGENCY CONFLICT
Small Private Company Non existence(Owner-manager
Same)
Small/ Medium sized Very little ( Interest of some
Enterprises minority owners may hamper).
Medium sized Listed Considerable amount (The interest
Company of the owner and the manger is
some way apart)
Large Public Company Considerable amount ( needs
strong monitoring by the owners
to maintain their interest)
Global Corporation High amount (needs top class
executive directors with clear brief
to represent all parties interests)
 Company CORPORATE GOVERNANCE
INCLUDES
Small Private Company Professional management with the
ability to handle growth.
Small/ Medium sized Non executive directors with
Enterprises specially defined roles to keep the
growth straight forward.
Medium sized Listed Minimum of three non executive
Company directors with special briefs
Large Public Company Top class non executive directors
to protect all interests.

Global Corporation Internationally experienced non

executive directors with set
objectives, monitoring and
reporting system.
Fatema Akhter
Roll No:7-095
 Corporate governance and the small
company

We will expand the goal element so as better to reflect

the development of the company, particularly
regarding the change in the approach to corporate
governance as the company grows, and to show how
the issue relates to smaller companies
 This is done for two reasons-
(A) Good business management:
(B) Good relation with shareholders
 Corporate governance and the small private
company

Nameless Ltd is a recently established business. It has

two main directors who own most of the shares and a
small stake belonging to a third director, who is acting
as book-keeper and a part time secretary to ease
administration problems.

Initially Nameless is trying to ensure the survival of the

business ,earn enough profits to provide a living for the
directors and their families and generate a surplus for
expansion.
 The five elements of good corporate governance in
relation to the company’s role at this stage are-

1)Fulfill the long-term strategic goal of the owners:

At this stage the owners are also the managers, so the

problem of conflicts of interest between managements
and shareholders are not present. At present the main
need is for good management capable of handling
growth.
 (A) Good business management:

The directors’ main concerns are-

1. Marketing/image
2. Production/operation efficiency/comparative
performance
3. Financial structure
4. Personnel /Organization (Division of duties;
Leadership)
 (B) Good relation with shareholders:

A company needs to establish special mechanisms to

deal properly with the interests of shareholders. The
responsibility of and the behavior of teach director
towards his co-shareholder represents this dimension.
Mohammad Sohel
Roll-7-071
 2.Consider and care about the employees, past,present
and future

This has limited significance as the number of

employees are very few at this Stage of the company.
 3. Take account of the needs of the
environment and the local community

The environment is not an important part

of the director’s considerations at present,
and their actions will not affect the
community to any great extent.
 4. Work to maintain excellent relations
with both customers and suppliers

 Customers : Attracting the customers

How to keep the existing customers and how to build a

relationship with them; how to attract new ones etc.
 Suppliers:

Getting credit from important suppliers

and building a reputation for reliability.
 5. Maintain proper compliance
with all applicable legal and regulatory equipments

The directors need to remember the requirements of Inland

Revenue, Custom & Excise and the importance of record-
keeping to future peace of mind.

As the company grows, the current auditing arrangement may

be insufficient and need to appoint capable auditors.
 Growth

 Nameless Ltd. Grows quickly and acquires a small company

in its sector. So, the expanded board needs to:

1. Strive to achieve the business objectives:

 Turnover for the combined business:set targets

 Profit growth

 Sort out the amalgamation process

2. Tighten up the board procedures and reporting :

Regular monthly meeting with a strict agenda

Board papers prepared and circulated

Regular monthly management accounts

Proper budgets
Md. Atikur Rahman
Roll-7-257
Small/medium-sized companies (SMEs)

Nameless works limited is now growing into a sizable

business,with a turnover of some 35 million pounds; it
employs about 500 people and has a board of six
consisting of the original three.
 Corporate governance and the SME

Corporate governance has become a significant factor to

Nameless Works.

The directors should conduct some sort of corporate

governance audit to make sure that all the issues are given
due consideration.
 1. Fulfill the long-term strategic goal of the
owners

A. Good business management:

The board needs to instill all the systems

and procedures to run the business effectively.
 The key tasks are to:

Formulate a properly developed strategy covering the next

three years to achieve.
Turn this into a business plan with

clear programs for:

-Market development
-Product range development

-Organizational development and human resource planning

-Information system to monitor and control progress

-An appropriate financial structure to support the plans

Create a financial plan and budgets to support these targets:

Board meetings should be increasingly professional with the
agenda and papers circulated in advance and there should
be explanations of all the significant budget/actual variance.
 B. Good relations with shareholders

 There are two levels of consideration here:

1. Relations between the founder directors, who

represent the majority and the other executive directors,
who also have stakes.

2.Relation between the board/company and outside

shareholders.
 The outside shareholders need to be handled
carefully and kept on-side, that means in particular:

Regular consultation, it can and should be done in

person.

Complete information, especially regarding possible

investments/acquisitions.

Making shareholders full aware of the risks as well as

the opportunities involved with new ventures.
2. Consider and care for the interests of
employees past, present and future
An experienced personnel manager should be
appointed with the brief to set out programs like:

A three year resource plan, indicating skill needs

Job descriptions, grading and remuneration scales

Recruitment procedures

Training and development requirements

Health and life assurance and pension arrangements

Internal communications.
Nusrat Nargis
Roll#7-109
Take account of needs of the environment
and the local community

Work to maintain excellent relation with

a. Customers

b. Suppliers
Maintain proper compliance with all applicable
legal and regulatory requirements

REVIEW