Good governance, bad governance: a refinement and application of key governance concepts

Abstract

Understanding what makes governance ‘good’ or ‘bad’ has been impeded by construct ambiguity. Contemporary governance research has struggled to define ‘governance’ and related constructs such as ‘ownership’, ‘agency’, and ‘management’ in a way that clearly separates and distinguishes them. Often, the line between governance and management is so blurred that it is impossible to say what is good or bad ‘governance’ versus ‘management’. Here we provide a systematic classification of key governance concepts in terms of their distinct economic functions. ‘Governance’, for instance, is the economic function of behavioural constraint. This allows us to state what ‘good’ governance is and how it might be assessed. We conclude that goodness of governance is idiosyncratic to each organisation, or even to each owner. Thus, while objective measures of good governance are possible, broadly utilised criteria for measuring governance are unlikely to capture whether governance is actually good or bad.