Key questions this article answers:
There are many issues facing startups, and they must prioritise what to tackle. Should corporate governance be among these issues?
How do startups' unique characteristics make it difficult to adhere to sound corporate governance practices, and what can be done?
I recently started watching ‘Super Pumped’—the story of the founding and growth of Uber. The Tv series shows how Travis Kalanick, Uber’s co-founder and CEO, mobilised a team of people to disrupt the consumer mobility industry.
It also shows the practices he employed to achieve this and how he ran Uber. I am mid-way through the show, but I can tell you how it ends. Uber got mired in scandals, had to make several million-dollar settlements to aggrieved parties, was sued by an investor, and the Board eventually asked Travis Kalanick to step down.
Uber’s case is a cautionary tale that stresses the importance of corporate governance in startups. It is even more relevant today for the African ecosystem. Last year, we were privy to several ‘breaking stories’ that exposed the goings-on at African startups, some of which resemble the issues for which Uber and its CEO were dragged*. So in today’s piece, we will examine why corporate governance matters and why African startups should care.
The thing called governance
As a concept, corporate governance is as elusive as it is essential. For an issue so vital to private and public commercial entities that are the engine of our modern capitalist economy, no one seems to agree on what it is.
You will find several definitions and explanations for what it is and is not. For today’s discussion, I will rely on the one from the Chartered Governance Institute of UK & Ireland (CGI). This definition emphasises that corporate governance is about how companies or business entities make decisions concerning their business operations and processes and the impacts on its stakeholders, i.e. shareholders, employees, customers, suppliers and community.
This is a robust definition as it expands corporate governance