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The role of corporate governance in survival of MSMEs during uncertain climes

The rise of the Asian Tigers and the cub tigers countries can be traced to massive exports and rapid industrialization. The Four Asian Tigers (Hong Kong, Singapore, South Korea and Taiwan) have consistently maintained high levels of economic growth since the 1960s, and have collectively joined the ranks of the world’s wealthiest nations. At the heart of the emergence of the tigers and the cub economies are medium and small-scale enterprises (MSMEs)in their countries that supported the big conglomerates with critically cheap local inputs and parts for the massive exportation that led to the great wealth for their countries. Aside from their central role in supporting the big companies in their different countries, the medium and small-scale businesses embarked on exportation which led to good business reward for them. Many unknown brands from cottage businesses from these countries flooded the world markets with products and this propelled many of them into the consciousness of the global market. Popular ones include Hyundai-Kia, Samsung, Subaru, Daewoo and so on. Hong Kong and Singapore are among the most prominent worldwide financial centres today, while South Korea and Taiwan are essential hubs for the global manufacturing of automobile and electronic components, as well as information technology. These countries got there through diligent savings, public investment, exporting, labour market competition, and government interventions. These were economic development strategies the four Asian tigers used during the period 1981 to 2005. Fast forward this discussion home to Nigeria where our MSMEs have helped the Nigerian economy in many ways by providing jobs, new products and services. These types of businesses have improved the standard of living in the urban and rural areas and has helped in the better use of social infrastructures and resources. Discussants at the Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN) 2020 annual lectures which focused on the MSMEs and Corporate Governance in Nigeria recognized inadequate marketing research, weak planning, fierce competition from the big corporations, inadequate managerial skills, lack of sufficient funds, lack of workable business models and mismanagement as some of the reasons small business don’t do well in Nigeria. Mr. Ayeni Adekunle, founder and CEO Black House Media (BHM), giving a personal account of how his organization got to a place of prominence in the very competitive information and marketing communication industry in Nigeria explained how from the inception of his company his wife who is a human capital development specialist insisted on corporate governance and due process in all of the young company’s activities. Ayeni said as a news room persona he listened to those that knows the ropes and he learnt fast on the job while accommodating critical evaluation of his operations from his advisors. Said he: “we engaged the services of the accounting firm Deloitte when we were small and struggling. Their guidance made all the difference at the end of the day.” While many start up may not be able to afford consulting firm it would make sense for the business to adopt corporate mentors to provide guidance where they are not able to have the luxury of a formal board of directors. MSMEs owners should have in place systems that would ensure the business out live them. MSMEs should not carry the habit of personal extravagance into business. Ayeni gave the example of a top IMC business CEO that could sign off a billion-naira cheque without recourse and over sight by any board member or director. While as a company owner you can do what you like with your business you may be unknowingly weakening it without knowing and the consequence is usually heavy financial bleeding that would lead to its collapse. He therefore surmised that failure to keep complete, accurate records,may drift the business into trouble without realizing it. Adhering to the fundamentals of corporate governance cannot be replaced with the whims and caprices of the owner(s) he said. He gave his ‘hip pocket notes’ for survival of MSMEs as follows: * Get the right people on the board for objective guidance and ensure there is a convergence of views and values of people invited. * Plan your overhead meticulously and put mechanism in place to save the company from financial indiscipline. * Don’t hire with sentiments … hire people that you can fire. * Don’t focus too much on the competition, concentrate on your own value delivery. * Understand the financial requirements of the business and don’t forget to touch base with the Five Forces of business competitiveness and relevance by Professor Michael Porter Speaking earlier at the same event Professor Chris Ogbechie of the Lagos Business School, and Mr. Bode Ayeku, president of ICSAN, noted that 90% of businesses globally are MSMEs and are pivotal to the development of global economies. However, they noted that lack of innovation, organization and sustainable practices have seen them die as quickly as they were born. They said a very clear vision and financial discipline is needed for their survival. Kindly share your thoughts and suggestions for moving MSMEs in the country to the next level. Michael Umogun / Deputy Director (Operations) Institute for Chartered Secretaries and Administrators of Nigeria. mumogun@icsan.com / 08023117969