Governance Demystified

THE word, “governance” is derived from the Greek verb, kubernaein, which means “to steer.” However, the use of the term in its current broader sense gained prominence only in the 1990s due to fraud and malfeasance in public and private institutions, as well as subsequent reports and norms disseminated by multilateral institutions such as the United Nations, the Organisation for Economic Cooperation and Development, the World Bank and laws enacted by governments (e.g., the US Sarbanes and Oxley Act).

Governance also often refers to a level of governance associated with: a type of organization (e.g., public governance, corporate governance, nonprofit governance); a type of activity (e.g., environmental governance, internet governance, IT governance); or a particular model or theory (e.g., regulatory governance, participatory governance, collaborative governance).

Nonprofit governance, as in the case of associations, has a dual focus: achieving the organization’s purpose and mission, and ensuring its viability. Both these tasks relate to the fiduciary responsibility that a board of trustees (sometimes called directors or management committee) has with respect to the exercise of authority over the actions the organization takes.

The American Society of Association Executives (ASAE) defines governance as the responsibility of a volunteer board of directors, operating according to a set of bylaws and working in close collaboration with the organization’s chief executive-led management staff to set strategic direction, provide necessary resources and make key decisions that the staff then implements to meet members’ needs.

In the webinar, “Demystifying Governance,” organized by Australian online community “Answers for Associations,” Damien J. Smith, director at Enterprise Care, a governance consultancy firm, spoke about current issues on governance. Here are my takeaways from the webinar:

1. Many organizations still struggle with governance. This is because the term “governance” is used in so many different contexts (as cited in paragraph 2), highlighting reporting requirements, legal obligations, accounting/financial models, etc., which often oscillate between minimum legislation compliance and best practice recommendations.

Governance is also viewed through a narrow lens as one small aspect of a whole rather than as the central element of the whole, i.e., the “whole of organization” governance. In effect, governance has not been viewed as the central tenant of organizational evolution and peak performance.

2. Governance is at its tipping point. Despite the progress made on governance, failures still happen as evidenced by continual corruption inquiries, financial crises and laws enacted, among others.

Globally, a rethinking is underway on what governance really means as there has been no single event but a raft of forces (e.g., growing societal expectations, technology shifts, emerging generation priorities, effects of the pandemic) that have intertwined to fundamentally lead to a tipping point.

3. Key questions to ask your organization. On policies: Are they easily accessible, understood and practiced? On culture: Have you defined your culture goals and tested them whether these are lived day-to-day? On collaboration: Is information openly shared or is there a culture of cross-function competition?

On staff engagement: Are staff motivated, engaged and supported to reach their full potential? On strategy: Is your strategy well understood by all staff? On execution: Do all staff members understand their roles in executing the strategy? On workplace issues: Are there anonymous channels for concerns to be raised by the staff?

Governance can be complex but demystifying it entails a “whole-of-organization governance” pathway. Octavio Peralta is currently the executive director of the Global Compact Network Philippines and founder and volunteer CEO of the Philippine Council of Associations and Association Executives, the “association of associations.” E-mail: bobby@pcaae.org