| | FEBRUARY 20258OPINIONIN MYLast year, fashion start-up Zilingo came to everyone's attention for the wrong reasons ­ its Chief Executive Officer Ankiti Bose was fired as CEO after allegations of financial irregularities surfaced. While this news shocked many, it was not surprising given that similar incidents have occurred in the past. For instance, Theranos' founder, Elizabeth Holmes, who was poised to be the next `Steve Jobs', was sentenced to more than 11 years in prison, after it was discovered that her claims about blood-testing technology were false. As these incidents came full circle, it became clear that all of these misfortunes could have been averted if good corporate governance practices had been implemented. Corporate governance is defined as a system of rules, practices, and processes by which a firm is directed and controlled. To do so, it is crucial to balance the interests of the various stakeholders in a company.Velocity Ventures has created a white paper and a corporate governance playbook (Infographic) that outlines the importance of corporate governance, with actionable steps that startups can take to implement good corporate governance practices. Why is Corporate Governance Important? For many founders, in their journey to become the next Apple, Netflix, or Amazon and attain unicorn status, their main priorities would include fundraising, achieving product-market fit, ensuring that their product/service is scalable, etc. This puts corporate governance at the lower end of their priorities. It does not imply that corporate governance is unimportant, though. This is due to the following reasons:1. Good Corporate Governance Practices Provide Startups with a Competitive Edge As opposed to thinking that good corporate governance practices is an inconvenient process that is an impediment to growth, founders should understand that corporate governance is a strategic tool that, when done right, and in an appropriate manner, gives them an edge over their competitors. With the rise of sustainability frameworks such as ESG (environmental, social, governance), there is a greater expectation for firms to be socially responsible. 2. Corporate Governance is a Strategic Tool that Delivers Value to Both Startups and InvestorsCommunication is a vital component of good corporate governance and it will help to boost overall investor confidence. This will in turn facilitate fundraising, particularly when corporate goals are aligned with the interests of the board, management, shareholders, and other stakeholders. In a company with a good corporate governance framework, it should have aspects that: · Cover every aspect of management · Provide clear action plans · Entrench internal controls · Improve performance measurement and corporate disclosure · Improves risk management framework · Ensures regulatory complianceThe outcome of good corporate governance is for companies to be profitable and be a good corporate citizen. Corporate citizenship refers to a set of activities or responsibilities of an organization that helps them make a positive contribution to society. Thus, implementing good corporate governance practices means protecting the interests of all stakeholders such as shareholders, employees, customers, vendors, and communities. Stakeholders are defined as parties that have an interest in a company and they can both affect or be affected by the actions taken forth by the business. The typical stakeholders include investors, employees, customers, suppliers, communities, and governments. Sir Adrian Cadbury, the producer of Cadbury Report, a code of best practice which served as a basis of reform of corporate governance globally, once said `Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance HOW PROPER GOVERNANCE CAN AVERT STARTUP FAILURESBy Bennett Lee, Partner, Velocity VenturesBennett Lee
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