Private Companies
From our experience four major attributes influence governance of private enterprises:
Business is personal. In Private Enterprise, the weight of financial success or failure is borne by a limited number of owners, whose financial circumstances are often impacted directly by the cash flow and tax implications of the business.
Leaders have broad responsibilities. Regardless of the size of the business, leaders in private enterprises often cover a very broad set of responsibilities.
Accountability is private. By its very nature, a private enterprise is accountable to a known group of owners. Accountability is every bit as stringent as it would be for a public shareholder group, but in a private enterprise there may be more opportunity for vetting action steps and results directly with the ownership. The dynamic of private accountability doesn’t change the underlying feeling of deep responsibility to an important group of stakeholders with whom the leaders likely have close personal relationships, but it can provide an opportunity to influence a longer-term view for driving growth and managing risks.
Transition is inevitable. Private enterprises face the issue of sustainability, including succession and/or transition. No matter what form the transition takes, it needs to be planned and accounted for over time, including the establishment of long-term goals and strategies, and contingency plans to pursue them.
All business owners and investors, of course, expect to succeed. The challenge, however, is to achieve success. Regardless of whether you define success as faster growth, better returns, sustainability, owner wealth, or future ownership transition, achieving it requires you to plan and execute effectively, and identify ways to increase business profits and manage risks.
In this section, we discuss the following topics, taking into account a private enterprise's specific characteristics: