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Governance is the act of governing. It relates to decisions that define expectations, grant power, or verify performance. It consists of either a separate process or part of decision-making or leadership processes. In modern nation-states, these processes and systems are typically administered by a government.
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, governance relates to consistent management, cohesive policies, guidance, processes and decision-rights for a given area of responsibility. For example, managing at a corporate level might involve evolving policies on privacy, on internal investment, and on the use of data.
To distinguish the term governance from government: "governance" is what a "governing body" does. It might be a geo-political entity (nation-state), a corporate entity (business entity), a socio-political entity (chiefdom, tribe, family, etc.), or any number of different kinds of governing bodies, but governance is the way rules are set and implemented.
The word governance derives from the Greek verb κυβερνάω [kubernáo] which means to steer and was used for the first time in a metaphorical sense by Plato. It then passed on to Latin and then on to many languages.
As a process, governance may operate in an organization of any size: from a single human being to all of humanity; and it may function for any purpose, good or evil, for profit or not. A reasonable or rational purpose of governance might aim to assure (sometimes on behalf of others) that an organization produces a worthwhile pattern of good results while avoiding an undesirable pattern of bad circumstances.
Perhaps the moral and natural purpose of governance consists of assuring, on behalf of those governed, a worthy pattern of good while avoiding an undesirable pattern of bad. The ideal purpose, obviously, would assure a perfect pattern of good with no bad. A government comprises a set of inter-related positions that govern and that use or exercise power, particularly coercive power.
A good government, following this line of thought, could consist of a set of inter-related positions exercising coercive power that assures, on behalf of those governed, a worthwhile pattern of good results while avoiding an undesirable pattern of bad circumstances, by making decisions that define expectations, grant power, and verify performance.
Politics provides a means by which the governance process operates. For example, people may choose expectations by way of political activity; they may grant power through political action, and they may judge performance through political behavior.
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.
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.
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.
In general terms, governance occurs in three broad ways:
These modes of governance often appear in terms of hierarchy, markets, and networks - but also in democracies. For instance, the tripartite governance of the United States consists of three branches of power (the Executive, the Legislature and the Supreme Court).
Corporate organizations often use the word governance to describe both:
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.
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.
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.
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). These origins support a multiple constituency (stakeholder) definition of corporate governance.
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.
See Kafue River article, section Participatory governance
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.
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.
With the process of governing now involving a variety of private as well as public actors, governance is becoming an increasingly complex issue. More traditional theories of conceptualizing and understanding governance (such as the Westminster system) are now considered unsuitable, as they are too "government-oriented" and are unable to examine the more complex, modern nature of interactions between governing actors. This is where the 'Orders of Governance' conceptualisation comes in. It breaks down governance into three different orders, first, second and meta, which "correlate to the different levels at which governance is used" and allow for a more detailed analysis of the governing process.
First-order governance is the level at which problems are identified and solutions enacted. This is done through interaction between the governing organisation and its citizens which helps identify what the problem is, who is experiencing it and what an appropriate solution may be. There can be differing opinions in an organisation as to what constitutes a problem and there is, to some extent, a degree of subjectivity in coming up with an "ordered problem definition". The interaction with those being governed helps in this respect as it legitimises the definition. Once a problem is identified, a solution usually comes in the form of laws and/or regulations passed by the governing body.
Second-order governance is the level at which the "institutional arrangements" are provided "within which first order governing takes place". Institutional arrangements can take many forms in both the public (a regulatory agency) and private (the financial market) sectors. What is important is that a framework is provided that enables first-order governance to take place. Again, there is a distinct "two-way role" at this level with both "those being governed and those governing" having input into the process to provide an effective and legitimate institutional setting. This approach enables a more comprehensive analysis of governing interactions, as actors can often "be influenced by institutions (and the way) these help or hinder them" in the pursuit of their goals.
"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.
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.
The seat of government is defined by Brewer's Politics as "the building, complex of buildings or city from which a government exercises its authority". The seat of government is usually located in the capital. In some countries the seat of government differs from the capital, e.g. in the Netherlands where The Hague is the seat of government and Amsterdam is the de jure capital of the Netherlands. In most, it is the same city, for example Moscow as the capital and seat of government of Russia. In the United Kingdom, the seat of government is London, the capital, or more specifically the City of Westminster.
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