Good corporate governance for SMEs
Good corporate governance is the way a company is directed and controlled. It is about clear roles between owners, board and management, sound oversight of finances and risk, and systematic follow-up on the decisions that get made. Here is what it means in practice for an owner-managed SME — and where to start.
What is good corporate governance?
Good governance is not bureaucracy but a working tool: the framework that makes sure the right decisions are made on the right basis — and then followed up. At its core are three separate roles. The owners set direction and boundaries. The board sets strategy, appoints and supervises executive management, oversees finances and risk, and ensures the company meets its obligations. Management runs day-to-day operations.
The Danish Recommendations on Corporate Governance are issued by the Committee on Corporate Governance under the Danish Business Authority. They are formally aimed at listed companies, which must report on their governance under a "comply or explain" principle. But the principles themselves are not reserved for listed companies — they scale down to any company with an ownership group and a management that has to answer for its decisions.
The five themes of good corporate governance
The recommendations group good governance into five themes. Here is what they look like, translated into SME reality:
1. Interaction with owners and stakeholders
Owners — and others with a stake in the company — need relevant, timely insight. In an SME that means a steady rhythm where the ownership group gets an honest picture of how things are going, not just the good news. Clear communication prevents surprises and builds the trust that makes it possible to take hard decisions quickly.
2. The board's duties and responsibilities
The board must look after the interests of the company and its owners with due care. It sets the overall strategy, appoints and supervises management, and holds management accountable for follow-up — it does not run the day-to-day business itself. In practice, the board's most important job is to ask the hard questions before problems grow.
3. The board's composition, organisation and evaluation
The board is a collective with a shared responsibility. Its composition must enable it to handle strategic, managerial and control tasks — meaning the right competencies and enough independence for real challenge. The recommendations stress ongoing evaluation of the board's own work. That is often the first thing skipped in an SME, and the one with the biggest upside.
4. Management remuneration
Remuneration — including board fees — should support long-term value creation and be reasonable. For an SME it is less about complex incentive schemes and more about making fees transparent and proportional to the responsibility and time the role demands.
5. Risk management
Effective risk management reduces strategic and commercial risk, supports compliance, and raises the quality of the basis for decisions. An SME does not need a whole risk apparatus — but it does need its most significant risks to be identified, discussed and followed up systematically, so they don't first surface once they have become crises.
Good governance in an ApS vs. an A/S
A private limited company (ApS) is not legally required to have a board and can be run by executive management alone. A public limited company (A/S) must have a board or a supervisory body. Good governance is therefore not about having a specific body, but about having the right oversight and challenge for the phase the company is in.
Many owner-managers start with an advisory board, which advises without formal authority, and move to a formal board as they pursue growth, external capital or a generational handover. The point is not to copy the listed-company model, but to choose a lighter, regular practice that fits the company's size — and stick to it.
How to strengthen your governance
Good governance starts with an honest stocktake. Four questions quickly reveal where you stand:
- Are the roles between owners, board and management clearly defined?
- Does the board get a basis for decisions that is complete, credible and actionable — not just the good numbers?
- Are the most significant risks identified and discussed systematically?
- Is there follow-up on decisions between meetings?
BoardReady's Governance Check scores your company's governance maturity across six dimensions in a few minutes and shows where the biggest gains are. It is free to take.
Take the Governance CheckFrequently asked questions
Do the recommendations apply to my SME?
Formally they are aimed at listed companies, so your unlisted SME is not required to follow them. But the principles — clear roles, real oversight, regular evaluation — are just as valuable in an owner-managed company. Aim for a lighter but steady practice rather than full listed-company machinery.
Do we need a board to have good governance?
Not necessarily. An ApS can be run by management alone; an A/S must have a board or a supervisory body. Good governance is about the right oversight and challenge for the company's phase — an advisory board can be a good first step.
Where do we start?
Take stock against the four questions above, or take the Governance Check for a quick, structured view of where your governance is strong and where it is weak.