The opening to change

"Openness to change, to innovation and to creativity requires, of course, to listen to diverse opinions."

Corporate governance is an increasingly important issue for large corporations and “PYMES” alike. It is not only to promote the institutionalization of companies to ensure the permanence of the business but to have agencies (such as the board of directors) to help make more effective decisions: objective, collegiate, built on collaboration from different points of view. A smarter decision-making process becomes crucial today when the market and the economy evolve at rates never before seen. To talk about corporate governance under this perspective, we spoke with an expert, Mr. José Miguel Zozayacorrea-Kuri, and this was what he shared with us.

When talking about mergers and acquisitions, it is usually assumed that foreign companies enter the country only to appropriate brands, taking control of national companies. What opinion do you have regarding this aversion?

It is a phobia depending on who buys, and that happens because of the fear that is faced with foreign investment. However, we must also analyze under what circumstances these operations were conceived: in many of these mergers and acquisitions, the boards of directors, or the owners of these national companies, obtained a place in the world councils of the conglomerates with which they made the transaction. Also, as a consequence, the distribution and market channels of Mexican products expanded. Our businessmen not only worried about indirect foreign investment, or indirect Mexican investment, but about the creation of more businesses and more industry. The capital of acquisitions did not stay in their pockets; Quite the opposite: they sought to increase their participation in the market to generate more employment opportunities and more significant investment for our country.

What are the opportunities and advantages of Mexico in this issue?

The relationship that Mexico has with other countries with higher economic strength (such as our neighbor to the north) means that mergers and acquisitions cannot be compared with those of their companies. However, that does not obey the convictions or the aversion of any of the parties, but the economic reality of each country. Mexico can enter other markets - and it does - but not under the same circumstances as other nations, for natural reasons. However, it should also be noted that, in recent years, Mexican investment in the United States (EU) has increased -in mergers or acquisitions, directly-. Even, some entrepreneurs decided to move to the US, for transactions that opened the doors to new businesses in this country, and there are also some leaders who prefer to continue their operations from Mexico and to invest in companies in other countries.

Corporate governance: the foundation of durable PyMEs

In Mexico, approximately 95 percent of the companies are “PYMES” and family businesses. Many of them die during the first year, precisely because there are no mechanisms to ensure their permanence over time. One of these mechanisms consists of good corporate governance practices.

What would you say are the typical mistakes in corporate finance that PyMES make? What are the wrong paradigms that should be fought?

They have formed an inadequate conception of corporate governance: the PYMES perceive it as something complicated and expensive because, under its implementation, it is more difficult to understand the economic outcome of the company, because it enjoys more subjectivity. However, you can get there. Some formulas demonstrate that, with the implementation of the principles of corporate governance, many operating costs can be reduced, more assertiveness can be generated in decision-making and more business projects can be completed. You have to understand it and understand it because it's such a vast range of opportunities, which you can make a suit to suit you. Many owners of micro, small and medium enterprises believe that corporate governance is complicated because they do not know it well. However, if given the opportunity, they would learn that corporate governance is not only for large conglomerates but also for them since it offers excellent benefits: it reduces bureaucratic burdens; makes processes more efficient and transparent; there are more control and accountability; etc. Even the implementation of a good corporate governance scheme could be more complicated for a large company, which is listed on the Stock Exchange, than for a “mipyme”.

What would be the main difference between companies that have implemented corporate governance principles and those that have not?

A director who would like to sell his business or buy another company, but does not have a corporate governance system, will face more complexities in the merger or acquisition process because the process will involve more time and negotiation. On the other hand, if the principles of corporate governance are correctly implemented, managers will gain greater certainty concerning what is being acquired, enhancing the acquisition or merger process, and the company will have the benefits that the three levels of audit (legal, financial and fiscal) require.

What do you think is what causes this misconception towards corporate governance?

The ignorance. Leaders believe that they will lose control in decision-making; However, by incorporating people specialized in their field to the board, it becomes much more proactive, because the discussions will be more abundant, and because the result of the decisions they adopt will be made with greater assertiveness.

Anticipating the 'fastballs' that the market launches

The dynamics of the market and the economy change constantly and are difficult to anticipate. Given this scenario, businesses must stay prepared, in expectation. Zozayacorrea-Kuri warns that both PYMES and large companies must learn to be vigilant.

What type of company reacts better to change, PyMEs or large corporations?

The bigger the monster is, the more complicated it will be to manage. Perhaps, a company formed by only 30 employees can change and react more quickly to the market, but monsters can also vary, and although its process is slower -because it passes through different corporate governance bodies-, its managers will be more assertive in making each decision.

What advice would you recommend for an entrepreneur to anticipate the changes?

You can achieve with a set of factors and people. First, the economic factor must be taken into account it will be necessary to make a certain degree of investment-; Second, we need to be very integrated with our industry sector, to measure what changes are coming - if you do not perceive them yourself, who else will do it? -; third, forming an analysis group dedicated to detecting these changes, and deciding which ones to face and which ones do not - sometimes, there are some changes that are not so favorable; fourth, know how to delegate-you cannot do everything by yourself; and fifth, innovation and creativity - for these two, competent human resources and good talent are needed.

-

In his experience participating in various management councils and other bodies, José Miguel Zozayacorrea-Kuri knows that discussion and consensus are fundamental to make right decisions: "I have always liked to act and decide collegiately because risks are reduced and potential errors, and also opens the door to continuous learning", he says. "Openness to change, to innovation and creativity requires, of course, listening to diverse opinions. You have to have an open mind, leaving aside the egos and the skills. "