What is Corporate Governance?

The concept of Corporate Governance is related to the rules, processes and standards used in the scope of the management of a company. According to the IBGC (Brazilian Institute of Corporate Governance) definition, “it is the system through which companies and other organizations are directed, monitored and stimulated, involving the relationships between partners, board of directors, executive board, supervisory and control agencies and other stakeholders.”

Even if commonly associated to publicly-traded companies, in which the ownership of shares is much more widespread and the Principal-Agent Theory is much more evident, a good governance adds value to each and every company, whatever the stage it is.

Footnote: Theory of North-Americans Jensen and Meckling in which they explore the trend of companies’ executives (“Agents”) pursuing their personal interests and not the interests of the company and its shareholders (the “Principals”).

What belongs to the partner X what belongs to the company

Unfortunately, it is not uncommon to have customers come to us with complex questions regarding undelivered related-party contracts (of accounting or instrumental nature). It is not rare to see startups where managing partners “borrow” money from the company or use corporate assets or corporate cards to pay for personal expenses.

This lack of distinction between what belongs to the legal entity and what belongs to the partner; what is individual interest and what is the best interest of the company and its partners as a whole are matters directly connected to corporate governance, not to mention the impact it has in the development of the company’s legal personality before third parties. Executing, through straightforward rules, the Transparency, Fairness and Accountability principles would be extremely positive to avoid situations like these and many others, adding value to the company, economic value and reliability and image.

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