The importance of a good board of directors for SMEs

FOR many non-listed small and medium enterprises (SMEs) in Singapore, putting in place a board of directors is often seen as a statutory requirement. Most SMEs do not separate the board from owner-management, especially those that are majority-owned by their founders who operate and manage the business.

Given that there is no separation between the owner and management in these SMEs, and the fact that many employ their own family members, some argue there is no need for such firms to have independent or non-executive directors (NEDs) on their boards. Further, these SMEs are not accountable to the public, so the separation of roles between the owner-manager and the board is viewed as unimportant.

Understanding the board's role