Governance

Governance is the way an organization distributes authority: the rules, bodies and processes that determine who can make which decisions, how those decisions are checked and how the rules themselves change. Governance sets the framework within which managers run the day-to-day work.

Its form depends on the size and nature of the organization. It includes decision-making bodies such as a board of directors, an executive committee or a general assembly, along with the protocols, policies and internal procedures they follow. Public bodies, companies and nonprofits all have one, which changes as the organization grows.

An organization relies on its governance to set its strategic direction, monitor performance, manage risks and comply with laws and standards. Governance also sets who answers for what, which makes the organization accountable and transparent to its members, funders or the public.

Corporate governance

In a company, corporate governance is the way the company is directed and controlled by its shareholders, its board of directors and its management. Investors watch it closely, because a company that is well directed and controlled is more likely to last and to keep its business practices ethical.

Shared governance

Models such as holacracy, sociocracy and the teal organization spread authority across the organization. Decisions move from a small group of leaders to the people doing the work, organized in roles or in self-managing teams. More people then understand what is at stake and share responsibility for the outcome.

These models require a change of culture and a rewrite of the usual governance mechanisms before they work. They also fit some organizations and sectors better than others, depending on the work they do.