Principles of Good Governance

But how can governance be good? Again, the straightforward answer is: if it is in  line with the principles that the common good naturally lays down as necessary for it to be achieved.

 

The principles are not many. There are only ten.

 

The first principle is independence. The group enjoys some autonomy and freedom. It can and should be able to stand on its own. This should be true of any self-respecting family and country. In the case of a corporation, its personality in the eyes of the law is separate and independent of the personality of its owners. Therefore, the interests of the corporation cannot be indiscriminately commingled with or subsumed under the interests of its owners. In the case of a Regulatory Commission, the law mandates its independence so as to free it from the political dictation of other officials in power.

 

The second principle is the complementation of rights and duties. Rights necessarily go with autonomy and freedom. Any grouping in society- from the family, a city or town, a corporation, a Regulatory Commission, to the nation- has rights to act and decide on its own in the pursuit of its common good. The law recognizes such rights; in many instances, the law itself grants and specifies them. But rights always come with duties: it is this complementation between the enjoyment of rights and the fulfillment of duties that helps to secure order and promote the general welfare.

 

The third principle is the grant of authority to govern. A head is empowered to direct and manage the affairs of any social group, be it a family, a city or town, a corporation or a Regulatory Commission, or the nation as a whole. Normally, this is a collegial body that is tasked, or given the power and authority, to decide and act in behalf of the group, as is clear in a corporation or Regulatory Commission. It is no less clear in a city or town or in the country as a whole, where a separation of powers or authority is mandated.

 

The fourth principle is the duty of loyalty. Those given the power to govern, in particular, owe it to the group for which they have a governance responsibility. Again, this is clear in the case of parents with respect to their family; of board directors to their corporation; of commissioners to the Regulatory Commission; of City (Town) Mayors to their city (town); of the President (and Members of Congress) to the entire nation. And this duty of loyalty must prevail over- and be ahead of- any preference or natural tendency to pursue one’s personal or other narrower interests.

 

The fifth principle is the promotion of the long- term interest of the social group. It is long-term value that needs to be maximized; and it is the common good of the entire group that needs to be pursued. In governance, the horizon can not be limited to the ‚here and now‛ or the short-term; a strategic perspective is required so the long-term is given its due and much greater importance. The same strategic perspective extends the horizon way beyond merely narrow interests of specific individuals or sub-groups within the bigger social group: it must cover the common interest and the general welfare of the bigger social body.

 

The sixth principle is fairness. This asks that all decisions and actions taken in behalf of the bigger social group- be it family, city or town, corporation or Regulatory Commission, or the nation as a whole- should aim at giving what is due to everyone. In the case of a corporation, all decisions and actions taken in its behalf need to be just to all parties with some stakes in (or claims upon) it, whether they are shareholders or other stakeholders.

 

The seventh principle is transparency. This is a call for truthfulness and integrity. Decisions and actions taken in behalf of the group need to be honest and kept above board. Reporting on their results and consequences needs to be truthful and complete, enabling all others- stakeholders and especially shareholders in the case of corporations, or citizens in the case of cities (towns) and the nation as a whole- to make proper judgments on whether in fact they have been given their due.

 

The eighth principle is accountability. This demands a system for measuring performance, giving out appropriate rewards and punishments, and properly managing risks. Generally, a system of checks and balances is essential: it should be one that delegates, limits and clarifies authorities and lines of reporting.

 

The ninth principle is ethics. A moral tone is set, especially at the top, and a distinctive ethical mark is stamped upon the culture that is made to pervade and influence the social group. A culture of compliance with ethical standards, laws and regulations needs to be cultivated so that all decisions and actions in behalf of the social group are taken in line with the dictates of a properly formed conscience, and with great sensitivity to as well as respect for moral norms.

 

The tenth principle is social responsibility. All the decisions and actions taken in behalf of the group should reflect a deep awareness of their social, cultural, environmental impact on the broader system within which the group operates. There is a wider world out there, and this can be affected, for good or for ill, by the decisions and actions that a family, a city (or town), a corporation or Regulatory Commission, a nation may take. Thus, any social group cannot limit its sense of responsibility to itself and its members; it also has to take into account the influence it can have on the broader community with which it is closely linked, and of which it is a part.

 

Good governance principles may be formulated in many different ways. The ten-way formulation above is a way of summarizing and simplifying the key principles that have been articulated in various global conventions. In the case of global conventions for corporations, the OECD corporate governance principles articulate the same ten principles listed above, although expressing them differently. In the ongoing work aimed at raising the standards of public governance, the same ten principles are echoed, although at a different vibration and pitch or form of expression.