Application of Corporate Governance Principles for the Sustainability and Competitiveness of Small and Medium Scale Enterprises: A Literature Review

Abstract

Literatures on the globe revealed that corporate governance practices and SMEs definition vary across nations based on the framework and cultural situation of countries under consideration. Besides, this difference can also be a result of different perspectives of policy-makers, researchers, practitioners, or theorists. Obviously, corporate governance is common for large and listed companies due to separation of ownership and control considering agency problem. On the other hand, issues of corporate governance for SMEs are possibly the most debated ones due to duality of ownership and control. However, the debates are not on the merits regarding need of corporate governance for the sector, rather on what are the appropriate governance norms and how to implement the same. Based on path of existed literature, SMEs can take the legal form of sole proprietorship, partnership or company. Pinning faith on this concept, it’s advisable to set legal framework for the sustainability of SMEs. Accordingly, the purpose of this review was to put forward appropriate corporate governance principles applied to SMEs in general for their sustainability and competitiveness. Methodologically, this study is qualitative approach in nature employing secondary data in which document analysis of relevant empirical literature of published journal articles and review of different corporate governance theories were used to formulate the discussions. Hence, the author reviewed empirical literatures and corporate governance theories including fundamental and ethical theories to suggest applicable norms of good corporate governance for SMEs. Consequently, the review revealed that corporate social responsibility, compliance with rules and regulations, risk management, fairness and accountability, dispute resolution, Transparency and full disclosure of information ,Internal control, and Internal audit should be applied and used as framework of governance by SMEs  in general for their sustainability and competitiveness.

Keywords: CG Principles, CG Theories, Competitiveness, Ownership & Control, SMEs, and Sustainability