CORPORATE GOVERNANCE vs PUBLIC GOVERNANCE IN THE CONTEXT OF LOCAL GOVERNMENT

WHAT IS CORPORATE GOVERNANCE?

Corporate governance has succeeded in attracting a good deal of public interest because of its apparent importance for the economic health of corporations and society in general. However, the concept of corporate governance is poorly defined because it potentially covers a large number of distinct economic phenomenon. As a result different people have come up with different definitions that basically reflect their special interest in the field.

Corporate governance is a field in economics that investigates how to secure/motivate efficient management of corporations by the use of incentive mechanisms, such as contracts, organizational designs and legislation. This is often limited to the question of improving financial performance, for example, how the corporate owners can secure/motivate that the corporate managers will deliver a competitive rate of return.

Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance.

WHAT IS PUBLIC GOVERNANCE?

Good, effective public governance helps to strengthen democracy and human rights, promote economic prosperity and social cohesion, reduce poverty, enhance environmental protection and the sustainable use of natural resources, and deepen confidence in government and public administration.

Government exists to serve the needs of the public. Governance exists to ensure those needs are served efficiently, effectively and fairly. It accomplishes that goal by providing clear processes and structures for all aspects of executive management such as decision-making, strategic alignment, managerial control, supervision and accountability. Governance has been a hot topic in corporate boardrooms for nearly a decade — and it's gotten even hotter due to recent corporate scandals like Enron. Citizens and regulators are calling for higher levels of transparency and accountability in all areas of business. And they're making those same demands of government, which has always been held to high standards for governance and accountability. In a recent study, the World Bank found a strong relationship between good governance and good government performance.