Clarke, Andrew (2007) Corporate governance and SMEs: the forgotten stakeholders? Australian Business Law Review, 35 (1). pp. 7-17. ISSN 0310-1053

Abstract

This article examines the proposition that SMEs are the forgotten stakeholders in the fair, efficient and effective management of Australian corporate governance. This argument is predicated on the basis that the "corporate governance market" is essentially and overwhelmingly aimed at large listed and other public companies of a size and stature beyond the usual remit of SMEs. In line with the broader issue referred to above, it is assumed that the rules, norms and best practice related to the contemporary Australian corporate governance project will automatically filter down to SMEs. This assumption ignores the technical and rapidly expanding nature of that project, characterised as it is by John Farrar's four-fold definition of corporate governance enveloping hard, soft and hard-soft or hybrid law. The difficulty for SMEs is that neither resources nor practical guidance are offered to their multi-tasking managers and directors charged with corporate governance compliance. It is only by means of default that the system of corporate governance takes into account the interests of SMEs. The CLERP reforms, for example, have affected SMEs disproportionately, as their key personnel are stretched to providing compliance and monitoring, in addition to maintaining the ongoing management of firms. It is argued that the current approach is both politically unfair and economically inefficient. Legislators need to re-imagine the contemporary nature and architecture of SMEs; in this way, corporate governance can be refigured so as to better reflect the particularities of, and challenges faced by, Australia's huge array of SMEs. This article is in five parts. First it briefly examines competing concepts of SMEs. It then considers three key matters that inform the architecture and operation of corporate governance in Australia: politics, resources, and so-called "trickle-down" effects. The final part contains suggestions for re-examining Australian corporate governance so as to make it more relevant to, and appropriate for, SMEs.

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