Governance

🎯 How This Word Works in UPSC Writing

The system of rules, processes and institutions through which an entity is directed, controlled and held answerable. The distinction that carries marks is between government and governance: government is the set of formal state institutions, while governance is the process of steering, which draws in the state, the market and civil society together, so an entity can be governed well or badly quite independently of who governs it. Good governance is conventionally described through attributes including participation, rule of law, transparency, responsiveness, consensus orientation, equity and inclusiveness, effectiveness and efficiency, and accountability. In the corporate setting the same idea narrows to the structures that separate ownership from control and address the agency problem, through independent directors, audit committees, board oversight and disclosure, since dispersed shareholders cannot monitor managers directly. The Companies Act, 2013 also made corporate social responsibility statutory under Section 135, requiring qualifying companies to spend at least two per cent of average net profits of the three preceding financial years.