Corporate governance for mid-sized businesses

Corporate governance is often associated with large corporations, boards of directors and complex procedures. But in reality, management systems become necessary as early as ₽100–500M in revenue. As a company grows, the founder can no longer control everything alone. Structure, processes and transparency are needed. That is corporate governance.

The paradox is that mid-sized businesses need corporate governance more than large companies do. Large corporations have buffers: scale, diversification, reputation. Mid-sized businesses have none. One big mistake, and everything can collapse.

Why mid-sized businesses need corporate governance

Let's look at what happens when a company grows but its management stays at the startup level.

Problem 1: All the knowledge lives in the founder's head

When a company is small (up to 50 people), the founder knows everything: every client, every deal, every process. But once the company gets larger (100–200 people), that becomes impossible. The founder turns into a bottleneck. Decisions slow down. People wait for the founder to set direction. The company can't function without them.

Board structure for a mid-sized business

A small board of 3–5 people:

CEO (chair of the board in most cases, or not, depending on the structure)

Independent director 1 — typically with a background in finance, investment or strategy

Independent director 2 — with a background in operations, sales or the industry

Owner/investor (if there are major shareholders)

This is not a large board of 10+ people; it's a small, hard-working group.

What does the board do?

Quarterly meetings. Once a quarter, for 2–3 hours, the board convenes to discuss strategy, results and issues.

Strategy review. "Is our strategy right? Does it need to change?"

Financial oversight. "How are we doing on profit, cash, growth?" The director with a finance background analyzes the numbers.

People decisions. Should we hire a CFO? Should we replace the COO? The board helps think it through.

Risk management. "What are our risks? What could go wrong?" An outside perspective often spots risks the founder misses.

Investment and external relations. If funding is needed, the board can help with contacts and strategy.

Choosing independent directors

This is the most important part. The wrong choice of directors will undermine the whole idea.

Common mistakes in the selection:

A relative or close friend of the founder. They often won't tell the truth, to avoid damaging the relationship.

Someone who is too busy. If a director is overcommitted and can't devote attention, it's a waste of time.

Someone who works for a competitor. That's a clear conflict of interest.

Someone without relevant experience. If a director takes on something beyond their competence, they won't be able to help you well.

No relevant experience. If it's simply a wealthy person who wants to "sit on a board," that's useless. They need experience in operations, finance or your industry.

The wrong motivation. If someone wants to be a director purely for the status, it doesn't work. They should genuinely want to help and see potential in the company.

Corporate procedures: how to avoid making major decisions on impulse

Procedures are boring but essential. They protect the company and the owner.

Strategy approval

Once a year, ideally at the start of the year, the company approves its strategy for the year ahead. Where are we going? Which new markets? Which products? Which investments?

The procedure: the CEO presents a draft to the board, gathers feedback, refines it, and then it's approved at a board meeting. After that, the strategy rolls out across the company.

Quarterly results

Each quarter the CEO presents the financial results, KPI performance, what went well and what didn't. The board gives feedback.

Major spending

If the company wants to spend serious money (buy equipment, open a new office, hire a large team), it must be approved by the board. The company can set a threshold (for example, any expense above ₽10M).

Senior leadership decisions

Hiring or firing someone at the top-management level (director, vice president) should be discussed and approved by the board.

Structural changes

If the company's core structure changes (for example, creating a new department or reorganizing), it should be approved.

Investor relations

If the company has investors, the relationship with them is managed through the board.

Why mid-sized businesses need these procedures

Corporate governance is often seen as "bureaucracy for large companies." But for a mid-sized business it is, first and foremost, protection. From bad decisions the founder might make in the heat of emotion. From conflicts with investors and partners. And from the loss of knowledge when the founder suddenly leaves or is out of action.

If your revenue is above ₽200M, it's already a necessity. Without a management system, you'll lose money on bad decisions faster than you earn it.

How to implement corporate governance

Choose independent directors (months 1–2)

Find 1–2 people who can genuinely help. Agree on the terms of engagement.

Create a board charter (month 2)

Write a simple document: how often the board meets, which decisions it makes, how it votes, what the procedures are.

Hold the first meeting (month 3)

Get together for 3 hours and discuss the current state, the strategy, the main risks. The key is to prepare well.

Introduce procedures gradually (months 4–6)

Don't do everything at once. Start with one procedure (for example, budget approval), then add more.

Settle into a regular rhythm (once a quarter)

Meet every quarter. This builds rhythm and discipline.

The results of good corporate governance

Better strategic decisions (because several smart people are thinking, not just one founder).

Better risk control (because other people see risks the founder misses).

Stronger investor appeal (because investors can see a management system in place).

Better readiness for a sale (because a buyer wants to see a system, not a company dependent on one person).

Better relationships with the team (because people can see that the right decisions are being made).

If this sounds like your situation — see how we do this as a service: preparing a company for a deal.