Owners of small businesses typically choose not to appoint a Board and feel that non-executive directors (NEDs) will hold them back. Research has shown that it may well be the case.
This is yet another unsurprising research report. The work was carried out by Colin Coulson-Thomas, professor of direction and leadership at the University of Lincoln. He found that only a minority of small and medium-sized businesses had working boards and the few that had NEDs had usually appointed relatives.
Instead, the study published by the Association of Chartered Certified Accountants (ACCA) found that entrepreneurs prefer to make important decisions themselves.
Those that thought additional directors could be beneficial and provide valuable insight saw cost as a major constraint, and most saw boards and NEDs as the domain of larger companies.
However, according to ACCA, the study shows that many entrepreneurs are being short-sighted by failing to consider the strategic value that additional directors could bring.
Coulson-Thomas, the report’s author, commented, “In the absence of independently minded NEDs, whose duty is to the company rather than particular individuals, many found it difficult to step up from discussion of short-term operational issues to provide strategic direction.”
According to ACCA, smaller businesses are missing out on the experience and objectivity that effective boards can offer.
Paul Moxey, ACCA head of corporate governance and risk management, said, “We need to address the reasons entrepreneurs are shying away from using other directors as they can provide a cost-effective way of developing these businesses beyond the often limited horizons of the founders.
“Whether it is the perceived cost of new directors, or a fear of ‘losing control’ that is driving the reluctance of entrepreneurs to employ boards, the end result is that their businesses and ultimately UK plc suffers.”
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