PwC: Private companies see business benefits in formal corporate governance

By Rob Starr, Content Manager, Big4.com

According to PwC US’s latest Private Company Trendsetter Barometer survey,  a large majority of private companies (80%) are adopting specific corporate governance practices to help them successfully navigate an increasingly complex and volatile business landscape.

Ken Esch, a partner in PwC’s Private Company Services practice comments:

“While formal corporate governance is mandatory for public companies, it isn’t a regulatory requirement for most private businesses,” he says. “Rather, private companies are embracing corporate governance primarily because it makes good business sense as they look to increase value for their stakeholders and keep pace with new business realities. Another key distinction is that, unlike their public counterparts, private companies have the freedom and flexibility to incorporate corporate governance as they see fit.”

Corporate governance at those companies takes the form of official policies promoting oversight and accountability in a variety of areas, including financial reporting, corporate strategy, and risk management. Nearly all (89%) of private companies that embrace corporate governance appear to do so voluntarily.

Seventy-one percent of Trendsetter companies have a formal board of directors. Seventy-three percent of those boards meet quarterly or more frequently, suggesting that having a board is more than just a formality for private companies.Nearly three-quarters (74%) of Trendsetter companies have a formal set of internal controls in place to reduce risk (including risk of fraud) and promote efficiency across a variety of areas in their business.