Exploring the Influence of Corporate Governance on Organizational Culture in SMEs: A Comprehensive Review

Abstract

The success of small and medium enterprises (SMEs) hinges on establishing a robust corporate governance structure and fostering a positive organizational culture. A strong organizational culture can enhance performance, motivation, satisfaction, and corporate image. However, SMEs often require assistance in establishing an organizational culture, mainly due to limited resources and the relatively straightforward nature of their structural design. By implementing corporate governance principles such as transparency, accountability, responsibility, independence, and fairness, SMEs can create a work environment that is not only transparent and accountable but also responsive and fair. This study examines SMEs' most influential corporate governance principles, specifically those that positively impact performance and sustainability. These principles have the potential to foster a positive work environment, thus fortifying their organizational culture. Transparency is achieved through financial recording activities and payroll transparency, while effective communication among stakeholders and alignment with employee interests support the implementation of corporate governance. An exemplary organizational culture can elevate employee performance, sustain customer relationships, foster employee loyalty, and bolster trust and the company's reputation. Challenges in adopting corporate governance principles in SMEs include family relationships and relaxed regulations.