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ACCA Strategic Professional · Strategic Business Leader · Governance scope and approaches

Tessan Ltd is a family-owned private company with no external shareholders. A manager says corporate governance is irrelevant because there is no stock exchange listing. Which response is most appropriate?

Governance is relevant to every organisation, not just listed companies. Private firms still need sound direction, control and accountability to stakeholders such as lenders, employees and regulators, although listing adds formal code requirements.

  1. AGovernance is relevant to all organisations, including private ones, as direction, control and accountability to stakeholders such as lenders and employees still matterCorrect
  2. BGovernance applies only to companies listed on a stock exchange
  3. CGovernance applies only to public sector bodies
  4. DGovernance is relevant only when a company is making a loss

Explanation

The scope of governance is not limited to listed companies. Private firms still need effective direction, control, risk management and accountability to stakeholders such as banks, employees and regulators. Listing adds mandatory code requirements but does not create the need for governance.

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