Definition of Governance 

Governance is the framework of Authority and accountability that defines and controls the outputs, outcomes, and benefits from projects, programs, and portfolios. The mechanism whereby the investing organization exerts financial and technical control over the deployment of the work and realizes value.

Governance empowers project professionals to execute their responsibilities by defining delegated limits of Authority and establishing effective escalation routes for issues and change requests. Good Governance also calls for the roles and responsibilities of the team and broader stakeholders to be clearly defined. Finally, Governance provides confidence to the Board of directors/trustees that investments in projects, programs, and portfolios are well managed.

When Governance is working well, it provides sufficient reporting and control activities to ensure that the sponsor and other senior leaders/stakeholders are informed of progress.

Difference between Governance and Management

Corporate Governance refers to the way a corporation is governed. It is the technique by which companies are directed and managed. It means carrying the business as per the stakeholders’ desires. It is actually conducted by the Board of Directors and the concerned committees for the company’s stakeholder’s benefit. It is all about balancing individual and societal goals, as well as economic and social goals.

Importance of Governance 

1. Good Corporate Governance ensures corporate success and economic growth.
2. Strong corporate Governance maintains investors’ confidence, as a result of which, the company can raise capital efficiently and effectively.
3. It lowers the capital cost.
4. There is a positive impact on the share price.
5. It provides a proper inducement to the owners and managers to achieve objectives that are in the interests of the shareholders and the organization.
6. Good corporate Governance also minimizes wastage, corruption, risks, and mismanagement.
7. It helps in brand formation and development.
8. It ensures the organization is managed in a manner that fits the best interests of all.

Principles of Good Governance 

Fairness and Equality

• A sense of equality in dealing with internal stakeholders.
• A sense of even-handedness in dealing with external stakeholders.
• An ability to reach an equitable judgment in a given ethical situation.

Openness/transparency

• The creation of a transparent relationship with shareholders reduces agency costs and ensures the development of accounting systems and standards to facilitate this openness.
• Lack of withholding relevant information unless necessary, leading to a default position of information provision (rather than concealment).
• Transparency in strategic decision-making assists in the development of an appropriate culture within the company.

Independence and Autonomy

• Independence from the personal influence of senior management from non-executive directors (NEDs).
• Independence of the Board from operational involvement.
• Independence of directorships from overt personal motivation since the organisation should be run for the benefit of its owners.

Integrity Probity and honesty

• Steadfast adherence to a strict moral or ethical code, high moral virtue.
• The highest standards of professionalism and integrity.
• A prerequisite within agency relationships.
• Honesty in financial/positional reporting.
• Perception of openness of the finance from internal and external stakeholders.
• A foundation ethical stance in both principles- and rules-based systems.

Responsibility and Accountability

• Willingness to accept liability for the outcome of governance decisions.
• The clarity in the definition of roles and responsibilities for action.
• Conscientious business and personal behavior.
• Accounting for a business position as a result of acceptance of responsibility.
• Providing clarity in communication channels with internal and external stakeholders.
• Development and maintenance of risk management and control systems.

Reputation

• Developing and sustaining personal reputation through other moral virtues.
• Developing and maintaining the moral stance of the organization.
• Developing and maintaining the moral perspective of the accounting profession.

Judgment

• The ability to reach and communicate meaningful conclusions.
• The ability to weigh numerous issues and give each due consideration.
• The development of a non-judgemental approach to business and personal relationships.

Professionalism 

Protection of stakeholders interests

Best Practice in Good Governance

Corporate Governance is concerned with establishing an appropriate legal, economic and institutional environment that would facilitate and allow business enterprises to grow, thrive, and survive as institutions for maximizing shareholder value while being conscious of and providing for the well-being of all other stakeholders and society.

Good Corporate Governance requires that the State puts in place and maintains an enabling environment in which efficient and well-managed companies can thrive. It is expected that companies will continue to play their part in encouraging dialogue between the public and private sectors in promoting good public Governance and an enabling business environment. It is the responsibility of the Corporation’s owners to elect competent directors and ensure that they govern the Corporation in a manner consistent with their stewardship.

Good corporate Governance dictates that the Board of Directors governs the Corporation in a way that maximizes shareholder value and in the best interest of society. It is neither in the long-term interest of the enterprise or society to short-change customers, exploit labor, pollute the environment or engage in corrupt practices. The guidelines below shows best practices of good corporate Governance:

1. Authority and Duties of Members [or Shareholders] Members or shareholders [as owners] of the Corporation shall jointly and severally protect,preserve and actively exercise the supreme Authority of the Corporation in general meetings. They have a duty, jointly and severally, to exercise that supreme Authority of the Corporation to:

• Ensure that only competent and reliable persons, who can add value, are elected or appointed
• to the Board of Directors;
• Ensure that the Board is constantly held accountable and responsible for the efficient and effective Governance of the Corporation so as to achieve corporate objectives, prosperity, and sustainability.
• Change the composition of a Board that does not perform to expectation or by the mandate of the Corporation.

1. Leadership Every Corporation should be headed by an effective Board that should exercise leadership, enterprise, integrity, and judgment in directing the Corporation to achieve continuing prosperity and act in the best interest of the enterprise based on transparency, accountability, and responsibility.
2. Appointments to the Board Appointments to the Board of Directors should, through a managed and effective process, ensure that a balanced mix of proficient individuals is made and that each appointed can add value and bring independent judgment to bear on the decision-making process.
3. Strategy and Values The Board of Directors should determine the purpose and values of the Corporation, determine the strategy to achieve that purpose, and implement its values in order to ensure that the Corporation survives and thrives and that procedures and values that protect the assets and reputation of the Corporation are put in place.
4. Structure and Organization The Board should ensure that a proper management structure [organization, systems, and people] is in place and ensure that the structure functions to maintain corporate integrity, reputation, and responsibility.
5. Corporate Performance, Viability, and Financial Sustainability The Board should monitor and evaluate the implementation of strategies, policies, and management performance criteria and the plans of the Corporation. In addition, the Board should constantly review the viability and financial sustainability of the enterprise and must do so at least once every year.
6. Corporate Compliance The Board should ensure that the Corporation complies with all relevant laws, regulations, governance practices, accounting, and auditing standards.
7. Corporate Communication The Board should ensure that the Corporation communicates with all its stakeholders effectively.
8. Accountability to Members The Board should serve the legitimate interests of all members and account for them fully.
9. Responsibility to Stakeholders The Board should identify the Corporation’s internal and external stakeholders; agree on a policy or policies determining how the Corporation should relate to, and with them, in creating wealth, jobs, and the sustainability of a financially sound corporation while ensuring that the rights of stakeholders [whether established by law or custom] are respected, recognized and protected.
10. Balance of Powers The Board should ensure that no one person or group of persons has unfettered power and that there is an appropriate balance of power on the Board to exercise objective and independent judgment.
11. Internal Control Procedures The Board should regularly review systems, processes, and procedures to ensure the effectiveness of its internal systems of control so that its decision-making capability and the accuracy of its reporting and financial results are maintained at the highest level at all times.
12. Assessment of Performance of the Board of Directors The Board should regularly assess its performance and effectiveness as a whole and that of individual members, including the Chief Executive Officer. A summary of the major findings together with a statement confirming that the Board has carried out a self-assessment exercise should be made to the annual general meeting.
13. Induction, Development, and Strengthening of Skills of Board Members The Board should recognize the need for new members to be inducted into their roles and for all Board members to develop and strengthen their governance skills in light of technological developments, changing corporate environment, and other variables. The Board should accordingly organize for the systematic induction and continuous development of its members.
14. Appointment and Development of Executive Management The Board should appoint the Chief Executive Officer and participate in the appointment of all senior management; ensure motivation and protection of intellectual capital crucial to the Corporation; ensure that there is appropriate and adequate training for management and other employees and put in place a succession plan for senior management.
15. Adoption of Technology and Skills The Board must recognize that to survive and thrive, it has to ensure that the technology, skills, and systems used in the Corporation are adequate to run the Corporation and that the Corporation constantly reviews and adopts the same to remain competitive.
16. Management of Corporate Risk The Board must identify key risk areas and key performance indicators of the Corporation’s business and constantly monitor these factors.
17. Corporate Culture The Board should define, promote and protect the corporate ethos, ethics, and beliefs on which the Corporation premises its policies, actions and behavior in its relationships with all who deal with it.
18. Social and Environmental Responsibility The Board should recognize that it is in the enlightened self-interest of the Corporation to operate within the mandate entrusted to it by society and shoulder its social responsibility. For this reason, a corporation does not fulfill its social responsibility by short-changing beneficiaries or customers, exploiting its labor, polluting the environment, failing to conserve resources, neglecting the needs of the local community, evading taxation or engaging in other anti-social practices.
19. Recognition and Utilization of Professional Skills and Competencies The Board should recognize and encourage professional development and, both collectively and individually, have the right to consult the Corporation’s professional advisers and, where necessary, seek independent professional advice at the Corporation’s expense in the furtherance of their duties as directors. [This is in addition to and not a substitute to their obligation to acquire competence, training, and information that would help them make informed, independent, and astute decisions on issues relevant to the Corporation.
20. Recognition and Protection of Members’ Rights and Obligations Members of the Corporation have a right to receive any information that would materially affect their membership, to participate in any meeting of members and to participate in the election of directors, and be facilitated to fully participate in all other resolutions of interest to them as members. The attention of the Boards of Directors is increasingly being drawn to the need to ensure that:

• The governance framework considers gender and children’s rights and the unique needs of disabled and disabled citizens.
• The Corporation promotes the interests, rights, and welfare of host communities.
• The Corporation protects and preserves the environment

Codes of Corporate Governance Practices

Corporate Governance is the system by which this Authority will direct, manage and monitor its functions. The fundamental principles that underpin good governance, among others are openness, inclusivity, accountability, integrity and effectiveness. The corporate framework comprises key areas of the organization, which may be:

1. Community Focus

The Authority, through carrying out its general duties and responsibilities, and specifically its duty to ‘seek to foster the social and economic well-­being of communities and exerting wider influence within the community, will

• Work for and with the local community
• Promote the well­-being of the where appropriate, through maintaining effective arrangements:

To ensure these principles are complied with, the Authority will:

• Publish each year its annual financial accounts under the statutory requirements; this report will confirm the Authority’s compliance with relevant professional standards and Code of Practice for Corporate Governance;
• Publish Best Value Performance Plan, to be known as a ‘Corporate Plan’ which will present an objective and understandable account and assessment of its activities and achievements and its financial position and performance;
• Engage in a professional relationship with External Auditors to allow independent scrutiny of its financial and operational processes;
• Establish appropriate relationships and arrangements with the relevant bodies, voluntary groups, businesses, and other local interest groups to ensure they can engage with and contribute to the work of the Authority;
• Adopt proper arrangements to enable complaints against any aspect of the Authority’s activities to be easily made and adequately addressed.

2. Service delivery arrangements

The Authority, through ensuring that continuous improvement is sought, agreed policies are implemented, and decisions are carried out, will:

• Discharge its accountability for service delivery at a local level
• Ensure effectiveness through setting targets and measuring performance
• Demonstrate integrity in dealings with service users and in developing partnerships to ensure the optimum provision of services
• Ensure policies and decisions are flexible and adapted to accommodate change and meet user wishes where appropriate.

To ensure these principles comply with the Authority will:

• Ensure that it has a management structure that delivers effective, efficient, and economical services
• Continually assess and adopt good practices in the delivery of services.
• Maximize the resources available and allocate them according to priorities
• Adopt comprehensive performance plans and monitor and report performance in the delivery of services against the agreed standards and targets
• Provide good and relevant management information to measure performance
• Foster effective relationships with other public sector agencies and the private and voluntary sectors.

3. Structures and processes

The Authority, through establishing effective governance structures and processes for decision­making and the exercise of Authority within the organisation will:

• Define the roles and responsibilities of members and officers to ensure clarity and accountability of its business
• Ensure that there is proper scrutiny and review of all aspects of its performance and effectiveness
• Demonstrate integrity by ensuring a proper balance of power and Authority
• Document clearly and review such structures and processes and ensure that they are available, communicated and understood, and are capable of being adapted to accommodate change.

To ensure these principles are complied with, the Authority will:

• Ensure there are proper protocols in place which clearly define the roles and responsibilities of and relationships between members and officers
• Ensure there is corporate ownership of policy development and implementation by ensuring that the Authority provides effective strategic leadership and discharges its overall responsibilities and meet on a regular basis.
• Develop and maintain a scheme of delegation that reserves appropriate responsibilities to the members and also provides the powers necessary to officers to conduct routine business
• Put formal arrangements in place which govern the conduct of the Authority’s business, ensuring that all activities are legal and comply with financial regulations, are fully documented and appropriately authorized
• Ensure that members are properly trained for their roles and have access to relevant information, advice and resources as necessary for them to carry out their role effectively
• Ensure that an officer is made responsible for ensuring that appropriate advice is given on all financial matters, for keeping proper financial records and accounts and for maintaining an effective system of internal financial control
• Ensure that a director is made responsible for all aspects of operational management
• Ensure that an officer is designated as the monitoring officer and that the responsibilities of the post are properly defined.

4. Risk management and internal control

The Authority has established a systematic strategy, framework and processes for managing risk that includes:

• Robust systems for identifying, profiling, controlling, and monitoring all significant strategic and operational risks
• Making public statements to stakeholders on its risk management strategy, framework, and processes to demonstrate accountability.
• Mechanisms for monitoring and reviewing effectiveness against agreed standards and targets and the operation of controls in practice
• Ensuring that risk management and control processes are monitored and complied with, and reviewed regularly.

To ensure these principles adhere to the Authority will:

• Maintain effective and robust systems for identifying and evaluating all significant risks, including systems of internal control
• Ensure compliance with all statutes, regulations, and relevant statements of best practice to assure that public funds are properly safeguarded and are used economically, efficiently and effectively, and following agreed policies
• Maintain an internal audit function, and ensure that its staff are competent to perform their role;
• Ensure that risk management systems, including systems of internal control and internal audit, are reviewed as part of the performance management system
• Include an objective and balanced assessment and statement of the Authority’s risk management and internal control mechanisms and their effectiveness in practice in the annual accounts.

5. Standards of conduct

The reputation of the Authority, in terms of good corporate Governance, depends upon the openness, integrity, and accountability of its members and officers. Therefore, to ensure these standards of conduct are adopted, the Authority will ensure that its members and officers, as appropriate:

• Exercise leadership by conducting themselves as role models for others within the Authority
• Define the standards of personal behaviour that are expected from members and staff and all those involved in service delivery, and put in place arrangements to ensure:
• Accountability through establishing systems for investigating breaches and disciplinary problems and taking action where appropriate, including arrangements for redress
• Compliance with these systems are monitored.
• Integrity is demonstrated by applying objectivity and impartiality in all relationships.
• Standards are documented and clearly understood, and reviewed regularly.

To ensure these principles are adhered to, the Authority will have in place.

• Formal codes of conduct define the standards of personal behaviour which members, staff, and agents of the Authority are required to adopt
• Appropriate processes and systems to ensure all codes of conduct are complied with
• Operational procedures that reinforce compliance with appropriate ethical standards
• Codes of Conduct, Standing Orders as to Contracts and Financial Regulations, to ensure that members and officers are not prejudiced, biased or subject to conflicts of interest in their dealings on behalf of the Authority
• Arrangements for reporting concerns at work (whistle-blowing) are accessible to all staff and contractors.