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Guest post by: Journal of Development Entrepreneurship Become an Author

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(Journal of Developmental Entrepreneurship, Oct 2002 by Kiggundu, Moses N)

Very few studies of entrepreneurship concern themselves with corporate governance. This is particularly true in Africa where by far the majority of entrepreneurial firms are very small and operate in the informal sector. Since the 1980s, Africa has undertaken political and economic reforms such as liberalization, privatization, and democratization. These have given rise to a new breed of entrepreneurs, either taking over privatized state enterprises or establishing sizable firms operating in the formal sector; all in need of good corporate governance.

Limited available evidence suggests that these African nouveaux riche, like the directors of state-owned enterprises (SOEs) before them, still need to understand the basic principles of corporate governance. They need to understand the differences in the respective roles and responsibilities of the corporate boards of directors, senior management, and the need for the separation of power and responsibilities between the two. Some board members often interfere with the day-to-day running of the corporation and senior managers are known to keep sensitive information away from board members for fear of selling it to the highest bidder (Kiggundu, 2001;1989). Few firms have functioning corporate boards and of those that do, even fewer function strategically.

Questions of corporate strategic management, accountability, transparency, responsibility to minority shareholders, social responsibility, and compliance with incorporation regulations such as disclosure rules remain problematic among the emerging African entrepreneurial class. The World Bank has recognized this need, and among other things, establishing a web site (www.gcgf.org), dedicated to improving corporate governance by fostering entrepreneurial accountability, transparency, responsibility, and fairness. In October 2001, the World Bank Group approved $2.8 billion for SMEs. The money will be used in direct and indirect financing, training and support for improved business environment and corporate governance (World Bank Press Review, October 22, 2001). Table 1 lists the five dimensions of the entrepreneurial firm: organization form, capital resources, corporate governance, and technical assistance.

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