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Corporate governance, or the idea of establishing a series of guidelines for how a business ought to operate, is absolutely necessary for publicly-traded companies in the mortgage industry. When you're accountable to the public, you much have some sort of a compliance management system. But, if you are an independent mortgage banker, you can get away with not bothering with it. The question is, should you develop some sort of corporate governance anyway even if you don't have to?
By nature, entrepreneurs enjoy freedom and avoid any kind of governance if they can. Why would we impose rules on ourselves if we don't have to? The benefit of being an entrepreneur is having the flexibility that larger organizations don't have. We can be nimble and make more rapid decisions, because we don't have the bureaucracy that comes with corporate governance. The fewer people we have to answer to, the quicker we can make decisions.
The problem, of course, is that a quick decision isn't always a good decision. The benefit of voluntarily developing a system of corporate governance is that it ensures that you'll make sound decisions. It provides checks and balances that prevent decisions whose consequences could become catastrophic. When you have a self-appointed board and system of guidelines, it provides collaboration that will help you move in the right direction. As the old saying goes, none of us is as smart as all of us. Implementing a system of corporate governance, even for independent mortgage bankers, can be absolutely vital for providing a foundation for solid decision-making.
David Lykken, a 43-year veteran of the mortgage industry, is president of Transformational Mortgage Solutions (TMS), a management consulting firm that provides transformative business strategies to owners and “C-Level” executives via consulting, executive coaching and various communications strategies. He is a frequent guest on FOX Business News and hosts his own weekly podcast called “Lykken On Lending” heard Monday’s at 1:00 p.m. ET at LykkenOnLending.com. David’s phone number is (512) 759-0999 and his e-mail is [email protected].