OVERVIEW OF GOVERNANCE PREPARED BY FRANCIS ZULU

OVERVIEW OF GOVERNANCE

1. Definition of governance
✓ The system by which organizations are directed and controlled by senior officers in the interest of
shareholders and other stakeholders.
✓ The way people are ruled with or without their consent.
✓ The traditions and institutions by which authority in a country is exercised. This includes the process by
which governments are selected, monitored and replaced; the capacity of the government to effectively
formulate and implement sound policies; and the respect of citizens and the state for the institutions that
govern economic and social interactions among them.
✓ The manner in which public officials and institutions acquire and exercise the authority to shape public
policy and provide public goods and services.
✓ The manner in which power is exercised in the management of a country's economic and social resources
for development

2. Governance systems
✓ The set of institutional actors with capacity to decide on territorial region, have a central role in the
innovation process, through the projects that it defines, regional policies and also organization and
regulation of the local activities.

2.1. Three-tiered governance system

✓ Zambia has a three-tiered governmental structure, including the central government, the provincial
administration and the Local Government (LG). Unlike in some countries with federal systems of
governance, the provincial administration in Zambia has limited financial autonomy and acts as a
deconcentrated arm of the central government. Each of the ten provinces has a designated Minister
and a Permanent Secretary who coordinate the central government’s programs within their respective
provinces. The LG system includes City Councils, Municipal Councils and Town Councils. Currently,
there are five City Councils, 15 Municipal Councils, and 96 Town Councils in the country. The elected
Mayor (for City and Municipal Councils) or the Council Chairperson (for Town Councils) along with
elected councilors form the leadership of a LG. They are supported by an executive team of civil
servants headed by a Town Clerk (for City and Municipal Councils) or Council Secretary (for Town
Councils).
✓ South Africa is another example.

2.2. Federal governance system

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✓ A federal system of government is one that divides the powers of government between the national
(federal) government and state and local governments. Under federalism, each level of government
has sovereignty in some areas and shares powers in other areas. For example: both the federal and
state governments have the power to tax. Only the federal government can declare war.
✓ In federal systems, political authority is divided between two autonomous sets of governments, one
national and the other subnational, both of which operate directly upon the people. Usually a
constitutional division of power is established between the national government, which exercises
authority over the whole national territory, and provincial governments that exercise independent
authority within their own territories. Of the eight largest countries in the world by area, seven—
Russia, Canada, the United States, Brazil, Australia, India, and Argentina—are organized on a federal
basis. In Africa, Nigeria is a good case in point.
✓ A federal government is a system of dividing up power between a central national government and
local state governments that are connected to one another by the national government. Some areas
of public life are under the control of the national government, and some areas are under control of
the local governments.
✓ Federal governments are best used in large countries where there exists a diverse group of people
with diverse needs but a common culture that unites them together.

2.3. Unitary governance system

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✓ A unitary system of government, or unitary state, is a sovereign state governed as a single entity.
The central government is supreme, and the administrative divisions exercise only powers that the
central government has delegated to them. Subdivisional units are created and abolished, and their
powers may be broadened and narrowed by the central government. The United Kingdom, for
example, is a unitary state, as its constituent countries — England, Scotland, Wales, and Northern
Ireland — have no power to challenge the constitutionality of acts of Parliament.
✓ Unitary states contrast with federal states, such as the United States, in which power is shared
between the federal government and the states. (The states themselves are unitary.) More than 150
countries are unitary states, including Kenya, France, China, and Japan.

3.0. Types of governance

3.1. Corporate governance

✓ The system by which companies are directed and controlled by senior officers in the interest of
shareholders and other stakeholders.

✓ Corporate governance consists of the set of processes, customs, policies, laws and institutions
affecting the way people direct, administer or control a corporation. Corporate governance also
includes the relationships among the many players involved (the stakeholders) and the corporate
goals. The principal players include the shareholders, management, and the board of directors. Other
stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the
environment and the community at large.

3.2. Public Sector Governance

✓ The traditions and institutions by which authority in a country is exercised. This includes the process
by which governments are selected, monitored and replaced; the capacity of the government to
effectively formulate and implement sound policies; and the respect of citizens and the state for the
institutions that govern economic and social interactions among them.
✓ Public sector organizations are organisations that are, in some way, connected to, or deliver, public
goods and services. This means that they help to, in some way, deliver goods and services that cannot
be, or should not be, provided by ‘for profit’ businesses.
✓ Level of public sector organization: It broadly deals with the governance of Central Government
(Ministries and other spending agencies), State owned enterprises (SOE) and grant aided
institutions and Local Government (Councils).

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✓ Public sector organisations tend to be concerned with social purposes and delivering their services
efficiently, effectively and with good value for money (3Es – Economy, efficiency and effectiveness).
✓ Nature of the state: Most states require the following four 'organs of state' in order to function: (a)
Legislature – makes the laws (b) Judiciary – interprets the law (c) Executive – government
departments headed by cabinet ministers (d) Secretariat – the administration or 'civil service'.
Government refers to the group of authorized people who governs a country or a state. State refers
to the organized political community living under a single system of government. The state is
permanent while a government is temporary.
✓ Agency arrangement and agency problem: Just like private sector organization, public sector
organisations also incorporate an agency relationship between the principals (the political leaders and
ultimately the taxpayers/electors) and agents (the elected and executive officers and departmental
managers). Because the taxpayers and electors have differing interests and objectives, establishing
and monitoring the achievement of strategic objectives, and interpreting what is best for the
principals, can be very difficult. The agency problem in public services is also enhanced by limitations
on the audit of public service organisations. In many jurisdictions the audit only covers the integrity
and transparency of financial transactions and does not include an audit of performance or fitness for
purpose.
✓ Strategic objectives: objectives are determined by the funding body or other responsible entity
such as Ministry of National Development Planning in the first instance, although institutions may
have a level of autonomy in how they operate and may be able to set local targets to meet specific
needs. Objectives are established in the light of political pressures, caused by varying taxpayer
demands. Some taxpayers may want a public sector organisation to do much more, others may want
it to do less or cease to exist with a resultant tax saving.
✓ Governments raise taxes on sales and profits and on shareholders' dividends. They also expect
companies to act as tax collectors for income tax and sales tax. The tax structure might influence
investors' preferences for either dividends or capital growth. Economic policies such as deregulation
may be influenced by the desire for economic growth and increased efficiency.
✓ Governments pass and enforce laws, and also establish and determine the overall regulatory and
control climate in a country. This involves exertion of fiscal pressure, and other methods of state
intervention. Governments also determine whether the regulatory framework is principles or rules
based (discussed later in the text).
✓ Governments may provide funds towards the cost of some investment projects. They may also
encourage private investment by offering tax incentives.
✓ In Zambia, the government has made some attempts to encourage more private individuals to
become company shareholders, by means of privatization, liberalization and tax incentives.

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✓ Governments also influence companies, and the relationships between companies, their directors,
shareholders and other stakeholders.
✓ Service provision and funding: In a mixed economy the public sector delivers those goods and
services that cannot or should not be provided by private sector companies or the business sector.
The public sector provides services to the population either free of charge or for a cost. The services
provided may be on a national level, such as a national health service, or on a local level, such as
libraries. The public sector may be funded from local taxation, from central government grants, or
from a combination of the two. Public services are funded by taxpayers and are administered by
elected officials at national level (Members of Parliament) or at local level (local councils or
municipalities).
✓ Leadership: leadership in the public sector is founded on high standards of behaviour and leading
by example. Leadership is based on six principles of public life as determined by selflessness, integrity,
objectivity, accountability, openness and honesty.
✓ Governance arrangements: Public sector organisations must have arrangements in place to
demonstrate that public money is being used appropriately and that specified objectives are being
met in the provision of public services. Audit or inspection regimes may be in place to report on
success in achieving objectives.
✓ Nature of democratic control: In a democracy the government is answerable ultimately to the
electorate. This may be at national or local level.
✓ Policy implementation: At central government level policy implementation is the responsibility of
the Ministers in charge of government departments. In local government the Council conducts its
affairs through officers who head the various service departments in the local authority.
✓ Accountability and reporting: Public entities generally need to demonstrate that they have used
public money for the purposes intended and have obtained value for that money. One way of
measuring this is to evaluate performance against the three 'Es': Economy – obtaining inputs of the
appropriate quality at the lowest price available. Efficiency – delivering the service to the appropriate
standard at minimum cost, time and effort. Effectiveness – achieving the desired objectives as
stated in the entity's performance plan.
✓ Economic governance relates to effective guidance on the resource management, allocation and
use. It mainly focuses on effective public financial management.
✓ Political governance relates to politics and electoral system. It involves processes by which a group
of people (perhaps with divergent opinions or interests) reach collective decisions generally regarded
as binding on the group, and enforced as common policy.
✓ Good governance: government which is legitimate, competent, accountable, and respects human
rights and the rule of law. Good governance is not just about government, it is about how citizens,

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leaders and public institutions respond to each other in order to make change happen. It requires:
State capability (the extent to which leaders and governments are able to get things done);
responsiveness (whether public policies and institutions respond to the needs of citizens and uphold
their rights; and accountability (the ability of citizens, civil society and the private sector to scrutinize
public institutions and governments and hold them to account). Good governance indicators: voice
and accountability, political stability and absence of violence, government effectiveness, regulatory
quality, rule of law, control of corruption, citizen participation, respect for human rights, separation
of powers, independence of the Judiciary, political tolerance, accountability and transparency, regular
free and fair elections, existence of political parties, existence of civil Society, fairness, caring and
helpful.
✓ Bad governance: Bad governance is a government which is not legitimate, competent, and
accountable and does not respect human rights and the rule of law. It is a government which rules
against the wishes of the people. Bad governance indicators: restriction on political parties, lack
of separation of powers, lack of press freedom, violation of human rights, judiciary not independent,
arbitrary arrests, lack of freedom of association and assembly, neglect of public welfare, use of force,
unfair elections, lack of citizen participation and rampant corruption.

3.3. Private Sector Governance

✓ Private sector governance occurs when non-governmental entities, including private organizations, or
other third-party groups, make rules and/or standards which have a binding effect on the "quality of
life and opportunities of the larger public." Simply put, private—not public—entities are making public
policy. For example, insurance companies exert a great societal impact, largely invisible and freely
accepted, that is a private form of governance in society; in turn, reinsurers, as private companies,
may exert similar private governance over their underlying carriers.
✓ The term "public policy" should not be exclusively associated with policy that is made by government.
Public policy may be created by either the private sector or the public sector. If one wishes to refer
only to public policy that is made by government, the best term to use is "governmental policy," which
eliminates the ambiguity regarding the agent of the policy making.
✓ Strategic objectives: Principal aim of private sector company is making a profit for the benefit of
individual owners or shareholders who provide the capital or funding for commercial activity. For
private sector companies their reasons for existing are set out in the Memorandum and Articles
of Association or similar document. Strategic objectives are set by the board of directors and are
monitored against specific targets, such as increase in profit or market share.
✓ Leadership: In the private sector leadership is provided by the board of directors and decisions are
in some cases (eg appointing the external auditor) ratified by a majority of shareholders.

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✓ Funding: contributed by the shareholders.

✓ Accountability and reporting: Private entities generally need to demonstrate that they have used
shareholders money for the purposes intended and have obtained value for that money. Some ways
of measuring this is to evaluate performance against the set target, profits, dividends and market
share etc. External auditors are appointed to check what is going on in the private company.
✓ Indicators of bad public sector governance: dominance by a single individual, lack of involvement
of the board, lack of adequate control function, lack of supervision, lack of independent scrutiny, lack
of contact with shareholders, emphasis on short – term profitability, strikes and demonstration, going
months without salaries, corruption and breaking of the laws (not paying taxes), mistreatment of
workers, failure to honor suppliers, under declaring profits, liquidation, insolvency, bankruptcy and
receivership.

3.4. Non-governmental organization or Non-profit making organization

✓ Organisations set up for not-for-profit purposes and mainly funded from donations.
✓ In many countries there are thousands of charities and voluntary organisations that exist to fulfil a
particular purpose, maybe social, environmental, religious or humanitarian. In most countries
they are allowed tax privileges and reduced legal requirements.
✓ Accountability: charities will be accountable to those who supply them with donations.
Transparency, particularly as regards who receives aid and the reasons for expenditure for non-
charitable purposes, will be significant.
✓ Nonprofit governance has a dual focus: achieving the organization's social mission and
ensuring the organization is viable. Both responsibilities relate to fiduciary responsibility that a
board of trustees (sometimes called directors, or Board, or Management Committee—the terms are
interchangeable) has with respect to the exercise of authority over the explicit actions the organization
takes. Public trust and accountability is an essential aspect of organizational viability so it achieves
the social mission in a way that is respected by those whom the organization serves and the society
in which it is located.
✓ Agency: the agents in a charity are those responsible for spending donations and grants given.
They include the directors and managers of the charitable services.
✓ Controls are needed to ensure that the interests of the principals (donors and recipients of
charitable services) are maintained, and that funds are used for the intended purpose and not
embezzled or used for self-enrichment.
✓ Agency problem: Charities ensure that the agency problem is reduced, and the goodwill of donors
maintained by having a board of directors to run the charity, but also trustees to ensure that
the board is delivering value to donors and to ensure that the charity's aims are fulfilled. The trustees

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generally share the values of the charity and act like non-executive directors of public companies.
The trustees are likely to have the power to recruit and dismiss directors. Agency problems in charities
may not just arise from managers' activities. An ambiguous relationship between the aims of the
charity and commercial requirements may cause difficulty. Trustee prejudices may also hinder the
relationship, particularly if they are trying to represent donors and beneficiaries who are largely silent.
A lack of commercial knowledge and an unwillingness to change attitudes by the trustees may make
the relationship problematic. Publication of information about the contribution that the charity
makes can help resolve the agency problem in charities. An annual report that clearly states
how the charity is run and how it has delivered against its stated terms of reference and
objectives can increase the confidence of donors, beneficiaries and regulators. A comprehensive
audit of this information will reinforce its usefulness.
✓ In some regimes, charities face a light disclosure regime which allows them to provide minimal
financial detail. Charities have been criticised for this and some has responded by making fuller
disclosures than required by law. The strategy for dealing with stakeholders set out in Good
Governance: A Code for the Voluntary and Community Sector is that trustees should ensure that they
identify those with a legitimate interest in their work. They need to ensure there is a strategy for
regular and effective communication with them about the organisation's achievements and
work, including the board's role and the organisation's objectives and values.
✓ Principles: Many of the principles that apply to company corporate governance also apply to
government bodies or other major entities such as charities. Boards will be required to act with
integrity, to supervise the body's activities properly and to ensure appropriate control and
risk management and reporting systems are being maintained. However, governance
arrangements will also reflect the strategic purpose of the organisation. Governance should always
ensure that income is being used to optimal effect and that operations are being run
efficiently.
✓ Lobbying groups are those that come together with a common interest, with a view to influencing
government policy. They may come under criticism if they are seen to have sufficient power to
influence policy in their favour.
✓ Examples of organisations includes charities, trade unions, CSO (FODEP, GEARS, TIZ).

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Main characteristics of some selected organisations type

3.5. Global Governance

✓ Global governance or world governance is a movement towards political cooperation among

transnational actors, aimed at negotiating responses to problems that affect more than one
state or region. Institutions of global governance—the United Nations, the International Criminal
Court, the World Bank, etc.—tend to have limited or demarcated power to enforce compliance. Global
governance encompasses the totality of institutions, policies, norms, procedures and
initiatives through which States and their citizens try to bring more predictability, stability
and order to their responses to transnational challenges.
✓ The modern question of world governance exists in the context of globalization and globalizing regimes
of power: politically, economically and culturally. In response to the acceleration of worldwide
interdependence, both between human societies and between humankind and the biosphere, the term
"global governance" may name the process of designating laws, rules, or regulations intended for a
global scale.
✓ While the importance of global governance has been acknowledged, we are witnessing the increasing
need to manage global problems more effectively in the face of increased interdependence.
✓ Global governance is not a singular system. There is no "world government" but the many different
regimes of global governance do have commonalities.
✓ Intergovernmental cooperation is at the centre of the global partnership for development. It has a
vital role to play in the achievement of global development goals, in terms not only of the resources
and technical assistance it can provide, but also in the areas of policy decision-making and norm-
setting. Examples of global goals include MDGS, SDGs and Agenda 2063.
✓ Effective global governance can only be achieved with effective international cooperation.

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3.6. Regional block governance

✓ Regional block governance is a movement towards political cooperation among transnational actors,
aimed at negotiating responses to problems that affect more than one state or region. Institutions of
regional block governance—the SADC, COMESA, ECOWAS, etc.—tend to have limited or demarcated
power to enforce compliance. Regional block governance encompasses the totality of institutions,
policies, norms, procedures and initiatives through which states and their citizens try to bring more
predictability, stability and order to their responses to transnational challenges.

3.7. Project governance

✓ Project governance is the management framework within which project decisions are made. Its role
is to provide a repeatable and robust system through which an organization can manage its capital
investments—project governance handles tasks such as outlining the relationships between all groups
involved and describing the flow of information to all stakeholders.
✓ Planning, procurement, financial management are crucial in project governance.

3.8. Contract governance

✓ Contract governance focuses on creating a governance structure in which the parties have a vested
interest in managing what are often highly complex contractual arrangements in a more collaborative,
aligned, flexible, and credible way. Governance structure for a contract is the "framework within which
the integrity of a transaction is decided, adding further that because contracts are varied and complex,
governance structures vary with the nature of the transaction.

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Examination standard type of questions

1. Using a University as a public sector organization, identify and elaborate the key characteristics
of public sector governance.
2. With the aid of relevant examples, distinguish between public sector governance and public sector
governance.
3. Discuss the three types of governance system in the world and provide a case study of your own
choice.
4. Identify and elaborate the five types of governance and provide relevant examples.
5. The Worldwide Governance Indicators (WGI) project reports aggregate and individual governance
indicators for over 200 countries and territories over the period 1996–2018, for six dimensions of
governance. Critically examine the six dimensions of governance according to WGI.
6. Identify and elaborate the five indicators of bad governance in the public sector and provide
relevant examples.
7. Identify and elaborate the five indicators of good governance in the public sector and provide
relevant examples.
8. Corruption is a social evil that strangles the society and nurtures inequalities and enhances
underdevelopment. Zambia has been described as one of the countries where there are high levels
of corruption. In view of the above statement, elucidate the extent, causes and effects of public
sector corruption in Zambian society.
9. Performance measurement in public sector entities generally need to demonstrate that they have
used public money for the purposes intended and have obtained value for that money. One way
of measuring value for money (VFM) is to evaluate performance against the three 'Es'. Use the
University to apply the concept of VFM.
10. Discuss the governance features of an NGO such as a charitable organization.
11. Discuss the global governance issues.
12. Discuss the three-tier governance system that is used in Zambia.

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