The Many Roles of Boards of SMEs

Corporate governance theory has primarily focused on the board's role as a monitor of management. This approach is based on the ownership structures of listed companies with a dispersed ownership, and is aimed at solving the agency problem. However it can be questioned whether ‘one size of board role fits all', and whether companies with differing ownership and management structures need boards to play differing roles. For example, small and medium-sized enterprises (SMEs) are often owner-managed or family firms. This reduces the need for monitoring, but their ownership and management structures often lead to other challenges where a board could play an important role. If one size does not fit all, this raises the question of whether there is a need for a more differentiated approach to corporate governance both at national and EU levels. This in turn raises the question of whether this should be reflected in a more nuanced legislative approach to the duties and responsibilities of boards and perhaps different corporate governance codes depending on the size and type of company. In this contribution, the focus is on the role of the boards of SMEs, with the main focus on owner-managed SMEs. The contribution will, mainly on the basis of some new Danish studies of owner-managed businesses, examine: (1) which SME board roles are perceived to be most important by owner-managers; (2) whether the board enhances the good governance of SMEs; and (3) whether owner-managers regard the board as an important resource in practice. There will then be some remarks on regulatory considerations