Corporate governance is the set of rules and procedures by which a company is governed, and it is laid down and enforced by the board of directors. Corporate governance helps balance the interests of all the major stakeholders in the business, such as investors, staff, vendors, and customers. Many investors are usually skeptical about investing in tech startup businesses due to lack of good corporate governance.
Corporate corruption and scandals are not new. The fall of the Medici in the fifteenth century, Volkswagen’s false emissions claims in the 2010s are good examples of early corporate corruption and scandals. Rogue directors, lopsided controls and corporate implosion are prevalent in the business world. Another recent example is the turmoil Twitter is facing since after its takeover by Elon Musk, who has become the sole director of the social media company.
Africa’s tech ecosystem is not left out in this. In recent times, several allegations of miscount have been levelled against some African tech founders bothering on sexual and non-sexual misconduct. Risevest CEO was asked to resign on grounds of both sexual and non-sexual allegations. Other Africa’s startups that have been enmeshed in corporate corruption and scandals are Healthlane and Kloud Commerce.
Healthlane was run solely by its founders. When a company has no board of directors to oversee its affairs, the founders could spend company funds as they wished.
These few cases give credence to the importance of good corporate governance in technology industry especially the emerging technologies.
But the rise of ESG, the expectations and responsibilities placed on directors, and the ease with which corporate shortcomings can be exposed by company insiders and others on digital media are — or should be — focusing the minds of corporate decision-makers like never before.
Given these pressures and the competition in tech industry, corporate governance is increasingly becoming important part of corporate strategies. Employing good corporate governance helps in reduction of the risk of non-compliance with statutory and regulatory obligations as well as helps a company discourage or counter charges or assumptions that it’s not progressive or open-minded. Sound corporate governance policies and practices can lead to corporate diversity, green credentials, fair supply chains and other outcomes which investors look out for.