What Is Good Governance?

Governance covers the general actions, procedures and practices used to guide an organisation in a lean, efficient, ethical manner. Good governance aims to meet the goals of the organisation and create the best possible outcomes for stakeholders and mitigating risks effectively as a result of the systems put in place. 

The principles of good governance

The key principles of good governance include the following:

Accountability

Although directors hold powerful positions in any organisation, they are not free from the necessary checks and balances. The board can be held accountable to any individual or entity impacted by their decisions.

Transparency

Transparency regarding business communications and decision-making processes ensures that all records are available to the shareholders and concerned parties and that there is an open line of communication between the leadership and employees and other stakeholders.

Rule of law

The rule of law ensures that all governing policies and laws are consistent, fair and applied uniformly throughout an organisation. 

Participation

Participation from all members of the board with varying backgrounds and areas of expertise must be encouraged. The term also applies to public participation — a means for anyone to raise their voice on matters concerning them.

Equity and inclusiveness

Equity and inclusiveness ensure that all members of the board are given an equal say in all matters and that their opinions are respected at the same level as anyone else.

Effectiveness and efficiency

Board directors must be the archetype of effectiveness and efficiency. This means rightfully executing their assigned duties using time and other resources economically.

Responsiveness

Organisations must act promptly to handle any crises as they arise. They should openly communicate and collaborate with the concerned parties about current affairs.

How good governance is applied

Here are the ways good governance is applied in different institutions:

Corporate governance

Good corporate governance can be achieved by having a clear definition of the roles and duties of the board, managers and shareholders. Boards must maintain a diverse panel and have a good percentage of independent directors to ensure unbiased and efficient decision-making. 

Public governance

Good public governance includes practices to ensure the sound and fair functioning of public institutions. They must exercise openness, efficiency and responsiveness to handle public needs while encouraging public participation in key decisions.

Non-profit governance

Nonprofits must have a clear definition of their mission to ensure that all organisational operations support it. Diverse boards, sound leadership and mechanisms to improve shareholder trust and engagement are essential for ensuring good non-profit governance.