Understanding Governance

• Governance is equivalent to government, referring to the act or process of governing, including authoritative direction and control.
• The British Council defines "governance" as broader than government, encompassing interactions between formal institutions and civil society.
• Governance involves how elements in society use power, authority, and influence to enact policies concerning public life.
• Good government includes organizational effectiveness in policy and the pursuit of economic growth, stability, and popular welfare.
• Good government implies accountability, transparency, participation, openness, and the rule of law.
• The World Bank emphasizes predictable, open policymaking, professional bureaucracy, rule of law, transparent processes, and strong civil society.
• Poor governance involves arbitrary policymaking, unaccountable bureaucracies, unjust legal systems, abuse of executive power, and widespread corruption.
• Governance is defined as "the conscious management of regime structures, with a view to enhancing the public realm".
• Governance should be comparative, filling gaps left by others, emphasizing the creative potential of politics to change rules and inspire progress.

Eight Elements of Good Governance

• Good governance is responsive to present and future needs, exercises prudence, and considers stakeholders' best interests.
• This requires fair legal frameworks enforced by an impartial regulatory body to protect stakeholders.
• Transparency involves providing understandable information that is accessible to those affected by governance policies and practices.
• Responsiveness involves designing organizations and processes to serve stakeholders' interests within a reasonable timeframe.
• Consensus requires consulting stakeholders to understand different interests and reach broad agreement.
• Equity involves providing opportunities for stakeholders to maintain or improve their well-being.
• Effectiveness means implementing processes that produce favorable results and meet stakeholders' needs.
• Accountability requires documenting who is accountable for what in policy statements.
• Participation, directly or through representatives, is key, and needs to be informed, organized, and include freedom of expression.
• Good governance is an ideal that involves addressing stakeholder interests and reflecting them in policy initiatives.

Key Players in Corporate Governance

• A corporation's decisions and actions affect stakeholders, including shareholders, directors, employees, creditors, and suppliers.
• Corporate governance determines how a corporation's stakeholders interact to make decisions.

Importance of Shareholders

• Shareholders participate in corporate governance by voting on important issues.
• Institutional investors, like mutual funds, invest large quantities of stock on behalf of others.

Directors and Officers

• Directors, often called the board of directors, are appointed or elected by the shareholders.
• They are legally accountable for actions of the corporation.
• Directors decide important issues and long-term strategies.
• Officers are top-level management who serve the directors and make day-to-day decisions.
• Officers follow directives of the board to carry out the shareholders' will.

Governance Indicators

• Governance includes the traditions and institutions by which authority is exercised that includes:
• Voice and Accountability
• Political Stability and Absence of Violence
• Government Effectiveness
• Regulatory Quality; (V) Rule of Law
• Control of Corruption

Corporate Governance

• Corporate governance is derived from "corporare" (combined in one body) and "gubernare" (to steer or rule).
• Corporate Governance means a set of systems, procedures, policies, practices to ensure relationships with stakeholders is maintained honestly.
• Robert Ian Tricker defined corporate governance in 1984.
• Cadbury defined corporate governance as 'the direction, management and control of an organization' (1992).
• Corporate culture encompasses common values, beliefs, and behaviors that influence company's interactions and performance.
• Cultural Iceberg illustrates that observable culture is just a part of the components of culture which include behavior and practice, interpretation and core value.

Corporate Governance - History and Framework

• In 1844, Britain established corporations allowing them to define their purpose.
• Shareholders granted limited liability in 1855 emphasized the need for corporate governance.
• The Cadbury Report in 1922 provided a Code of Best Practice focusing on accountability, probity, and transparency.
• Framework has evolved fostering investor confidence, reducing risk and long-term business success.

Importance of Corporate Governance

• The ultimate goal of every business is to become profitable without compromising the company's responsibility.
• With good governance the company will preform better and make better descions bu reducing the risks and finding good business oportunities
• It also underpins the company's responsibility in handling company assets and conduct of business.

Agency Theory

• The agency theory states that managers or directors are agents of the principal.
• It is expected that the agents will use the asset to create profit, expand the initial capital and preserve and grow the asset of the business.

Stakeholder Theory

• Stakeholders are any group essential for the organization's survival and that successful companies prioritize the interests of all stakeholders.
• Examines the needs of not only shareholders but of every faction including employees, suppliers and business and states that on one group is more important then the other

Stewardship Theory

• The stewardship is who protect and takes care of the needs of all.
• This focuses on stakeholder satisfaction while creating a single channel to share business needs between shareholders