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Governance refers to "all processes of governing, whether undertaken by a government, market or network, whether over a family, tribe, formal or informal organization or territory and whether through laws, norms, power or language." It relates to processes and decisions that seek to define actions, grant power and verify performance.
In general terms, governance occurs in three broad ways:
To distinguish the term governance from government: "governance" is the concrete activity that reproduces a formal or informal organization. If the organization is a formal one, governance is primarily about what the relevant "governing body" does. If the organization is an informal one, such as a market, governance is primarily about the rules and norms that guide the relevant activity. Whether the organization is a geopolitical entity (nation-state), a corporate entity (business entity), a socio-political entity (chiefdom, tribe, family, etc.), or an informal one, its governance is the way the rules and actions are produced, sustained, and regulated.
Like government, the word governance derives, ultimately, from the Greek verb κυβερνάω [kubernáo] (meaning to steer, the metaphorical sense first being attested in Plato). In above-described sense, however, the term governance was re-minted as recently as the 1990s by economists and political scientists, and disseminated by institutions such as the UN, IMF and World Bank. Its use in English can be traced to Charles Plummer’s 'The Governance of England' (published in 1885 as a translation from the original 13th century Latin of john Fortescue’s 'The Difference between an Absolute and a Limited Monarchy'). This usage of governance to refer to the arrangements of governing became orthodox including in Sidney Low’s seminal text of the same title in 1904 and among later British constitutional historians.
Governance is a very general concept that can refer to all manner of organizations. Equally, this generality means that governance is often defined more narrowly to refer to a particular 'level' of governance associated with a type of organization (including public governance, global governance, non-profit governance, corporate governance, and project governance), a particular 'field' of governance associated with a type of activity or outcome (including environmental governance, internet governance, and information technology governance), or a particular 'model' of governance, often derived as an empirical or normative theory (including regulatory governance, participatory governance, multilevel governance, metagovernance, and collaborative governance). Governance can be used not only to describe these diverse topics but also to define normative or practical agendas for them. Normative concepts of fair governance or good governance are common among public, voluntary, and private sector organizations.
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In its most abstract sense, governance is a theoretical concept referring to the actions and processes by which stable practices and organizations arise and persist. These actions and processes may operate in formal and informal organizations of any size; and they may function for any purpose, good or evil, for profit or not. Conceiving of governance in this way, one can apply the concept to states, to corporations, to non-profits, to NGOs, to partnerships and other associations, to project teams, and to any number of humans engaged in some purposeful activity.
Most theories of governance as process arose out of neoclassical economics. These theories build deductive models, based on the assumptions of modern economics, to show how rational actors may come to establish and sustain formal organizations, including firms and states, and informal organizations, such as networks and practices for governing the commons. Many of these theories draw on transaction cost economics
It is useful to note the distinction between the concepts of governance and politics. Politics involves processes by which a group of people (perhaps with divergent opinions or interests) reach collective decisions generally regarded as binding on the group, and enforced as common policy. Governance, on the other hand, conveys the administrative and process-oriented elements of governing rather than its antagonistic ones. Such an argument continues to assume the possibility of the traditional separation between "politics" and "administration". Contemporary governance practice and theory sometimes questions this distinction, premising that both "governance" and "politics" involve aspects of power.
Private governance occurs when non-governmental entities, including private organizations, dispute resolution organizations, or other third party groups, make rules and/or standards which have a binding effect on the "quality of life and opportunities of the larger public." Simply put, private—not public—entities are making public policy. The term "public policy" should not be exclusively associated with policy that is made by government. Public policy may be created by either the private sector or the public sector. If one wishes to refer only to public policy that is made by government, the best term to use is "governmental policy," which eliminates the ambiguity regarding the agent of the policy making.
Global governance is defined[by whom?] as "the complex of formal and informal institutions, mechanisms, relationships, and processes between and among states, markets, citizens and organizations, both inter- and non-governmental, through which collective interests on the global plane are articulated, right and obligations are established, and differences are mediated". In contrast to the traditional meaning of "governance", some authors like James Rosenau have used the term "global governance" to denote the regulation of interdependent relations in the absence of an overarching political authority. The best example of this is the international system or relationships between independent states. The term, however, can apply wherever a group of free equals needs to form a regular relationship.
Non-profit governance focuses primarily on the fiduciary responsibility that a board of trustees (sometimes called directors—the terms are interchangeable) has with respect to the exercise of authority over the explicit public trust that is understood to exist between the mission of an organization and those whom the organization serves.
Corporate organizations often use the word governance to describe both:
Corporate governance consists of the set of processes, customs, policies, laws and institutions affecting the way people direct, administer or control a corporation. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the corporate goals. The principal players include the shareholders, management, and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large.
The first documented use of the word "corporate governance" is by Richard Eells (1960, pg. 108) to denote "the structure and functioning of the corporate polity". The "corporate government" concept itself is older and was already used in finance textbooks at the beginning of the 20th century (Becht, Bolton, Röell 2004).
The term governance as used in industry (especially in the information technology (IT) sector) describes the processes that need to exist for a successful project.
IT governance primarily deals with connections between business focus and IT management. The goal of clear governance is to assure the investment in IT generate business value and mitigate the risks that are associated with IT projects.
Regulatory governance reflects the emergence of decentered and mutually adaptive policy regimes which rests on regulation rather than service provision or taxing and spending. The term captures the tendency of policy regimes to deal with complexity with delegated system of rules. It is likely to appear in arenas and nations which are more complex, more global, more contested and more liberally democratic. The term builds upon and extends the terms of the regulatory state on the one hand and governance on the other. While the term regulatory state marginalize non-state actors (NGOs and Business) in the domestic and global level, the term governance marginalize regulation as a constitutive instrument of governance. The term regulatory governance therefore allow us to understand governance beyond the state and governance via regulation.
Participatory governance focuses on deepening democratic engagement through the participation of citizens in the processes of governance with the state. The idea is that citizens should play a more direct roles in public decision-making or at least engage more deeply with political issues. Government officials should also be responsive to this kind of engagement. In practice, participatory governance can supplement the roles of citizens as voters or as watchdogs through more direct forms of involvement.
"Metagovernance" is widely defined as the "governing of governing". It represents the established ethical principles, or 'norms', that shape and steer the entire governing process. It is important to note that there are no clearly defined settings within which metagoverning takes place, or particular persons who are responsible for it. While some[who?] believe metagoverning to be the role of the state which is assumed to want to steer actors in a particular direction, it can "potentially be exercised by any resourceful actor" who wishes to influence the governing process. Examples of this include the publishing of codes of conduct at the highest level of international government, and media focus on specific issues at the socio-cultural level. Despite their different sources, both seek to establish values in such a way that they become accepted 'norms'. The fact that 'norms' can be established at any level and can then be used to shape the governance process as whole, means metagovernance is part of the both the input and the output of the governing system.
When discussing governance in particular organisations, the quality of governance within the organisation is often compared to a standard of good governance. In the case of a business or of a non-profit organization, for example, good governance relates to consistent management, cohesive policies, guidance, processes and decision-rights for a given area of responsibility, and proper oversight and accountability.
A fair governance implies that mechanisms function in a way that allows the executives (the "agents") to respect the rights and interests of the stakeholders (the "principals"), in a spirit of democracy.
Good governance is an indeterminate term used in international development literature to describe various normative accounts of how public institutions ought to conduct public affairs and manage public resources. These normative accounts are often justified on the grounds that they are thought to be conducive to economic ends, such as the eradication of poverty and successful economic development. Unsurprisingly different organizations have defined governance and good governance differently to promote different normative ends.
The World Bank defines governance as:
the manner in which power is exercised in the management of a country's economic and social resources for development.
The Worldwide Governance Indicators project of the World Bank defines governance as:
the traditions and institutions by which authority in a country is exercised.
This considers the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies and the respect of citizens and the state of the institutions that govern economic and social interactions among them.
An alternate definition sees governance as:
According to the United Nations Development Programme's Regional Project on Local Governance for Latin America:
Governance has been defined as the rules of the political system to solve conflicts between actors and adopt decision (legality). It has also been used to describe the "proper functioning of institutions and their acceptance by the public" (legitimacy). And it has been used to invoke the efficacy of government and the achievement of consensus by democratic means (participation).
According to the Governance Analytical Framework (GAF), governance can be defined in broader terms. It refers to the "processes of interactions and decision-making among the actors involved in a collective problem, that lead to the creation, reinforcement or reproduction of social norms and institutions". Governance processes are found in any society, and they can be analyzed from a non-normative perspective, the GAF.
The proposed method is based on five analytical tools: problems, actors, social norms, processes and nodal points. The GAF was developed in the context of the research programme NCCR North-South, and on the basis of a critique of existing approaches to governance.
Over the last decade,[when?] several efforts have been conducted in the research and international development community in order to assess and measure the quality of governance of countries all around the world.
Measuring governance is inherently a controversial and political exercise. A distinction is therefore made between external assessments, peer assessments and self-assessments. Examples of external assessments are donor assessments or comparative indices produced by international non-governmental organisations. An example of a peer assessment is the African Peer Review Mechanism. Examples of self-assessments are country-led assessments that can be led by government, civil society, researchers and/or other stakeholders at the national level.
One of these efforts to create an internationally comparable measure of governance and an example of an external assessment is the Worldwide Governance Indicators project, developed by members of the World Bank and the World Bank Institute. The project reports aggregate and individual indicators for more than 200 countries for six dimensions of governance: voice and accountability, political stability and lack of violence, government effectiveness, regulatory quality, rule of law, control of corruption. To complement the macro-level cross-country Worldwide Governance Indicators, the World Bank Institute developed the World Bank Governance Surveys, which are country-level governance assessment tools that operate at the micro or sub-national level and use information gathered from a country’s own citizens, business people and public sector workers to diagnose governance vulnerabilities and suggest concrete approaches for fighting corruption.
A new World Governance Index (WGI) has been developed and is open for improvement through public participation. The following domains, in the form of indicators and composite indexes, were selected to achieve the development of the WGI: Peace and Security, Rule of Law, Human Rights and Participation, Sustainable Development, and Human Development.
Additionally, in 2009 the Bertelsmann Foundation published the Sustainable Governance Indicators (SGI), which systematically measure the need for reform and the capacity for reform within the Organisation for Economic Co-operation and Development (OECD) countries. The project examines to what extent governments can identify, formulate and implement effective reforms that render a society well-equipped to meet future challenges, and ensure their future viability.
Examples of country-led assessments include the Indonesian Democracy Index, monitoring of the Millennium Development Goal 9 on Human Rights and Democratic Governance in Mongolia and the Gross National Happiness Index in Bhutan.
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