The challenges facing governments nowadays are not easy. Such challenges include, but are not limited to, geopolitical tensions, macroeconomic factors (inflation, recession, cost of living crisis, etc.), climate change, robotics, and disruptive technology. Alongside these challenges comes increased scrutiny of performance, and a need to enhance governance practices that help government organizations navigate these complexities and uncertainties. To add to this, citizens and taxpayers are becoming more skeptical; they want to know how public money is being spent, about the quality of services provided, and about the overall value derived vis-à-vis the taxes being paid.
There is no doubt that good governance in the public sector will result in enhanced management, performance, and stewardship of public funds. Whilst publicly listed companies are following a very strict and rigid corporate governance framework in most of the financial markets globally, there have been several failures (such as the Enron scandal), in addition to increasing and evolving codes, which have also led to more emphasis on governance for the public sector. However, policy makers are facing challenges in deciding which governance framework to adopt to ensure a balance between public interest, central government requirements, and regulators’ requirements, and at the same time, achieving sufficient resilience in running the affairs of the public entity.
There are fundamental differences between governance in public and private sectors. As a starting point, the type and nature of government “bodies” vary – departments, councils, authorities, and both commercial and non-commercial entities. Furthermore, the ecosystem within which they operate is multifaceted and complex. The governance requirements for such bodies are not the same as those for privately owned entities. In the public sector context, good governance is central to the effective operation of those bodies and importantly plays a key role in supporting them to discharge their obligations as set out under law and driven by wider government policy. As such, it can be concluded that there is no “one size fits all” for government and public sector entities.
Principles of governance can be indicated in two dimensions: conformance and performance. The government policy makers often focus on the conformance aspect by emphasizing on meeting the expectations of external scrutiny through compliance with various laws and following acceptable and defensible governance standards. On the other hand, the performance aspect is often overlooked and little focus is exercised on the strategic activities and maximizing the benefits flowing to stakeholders. While the former focuses on accountability and responsibility to demonstrate due diligence under the law, the latter has a leadership role linked to the execution of business activities and, therefore, has more of a business orientation.
Several countries and bodies have developed guidance documents to support good governance in the public sector, such as the following codes:
Code of Practice for the Governance of State Bodies 2016 |
Globally, there are three types of guidance issued to support good governance in the public sector:
Yet, and regardless of the types of guidance issued, they all have common themes to be addressed which are depicted below:
With the several codes of governance and the differences in each government entity’s mandate, environment, and regulations, government policy makers are recommended to implement the following steps:
In the end, policy administrators could adapt the governance framework that they best see fit for the type and mandate of their organization. However, it is recommended that the adapted governance framework, that could enable and enhance the trust in government, reduces uncertainties to stakeholders and citizens, and achieves sustainability.
By Wael M. Kaafarani, Director, Risk Advisory, Deloitte Middle East and Melissa Scully, Director, Corporate Governance, Deloitte Ireland