Governance can be viewed as the management of the organisation, distinguished from the general need to organise and support company activity by the strategic nature of the concept of governing or controlling at the highest level.
A dictionary definition confirms the root of the Governance to be the Latin word “Gubernare”, meaning “to steer”. This suggests that governance is about commanding the direction of the vessel as it ploughs the seas of trade. This direction will be provided by the board of directors and so governance relates to the actions of directors and the decisions that they reach.
It is also true that governance is perceived as the actions of government in determining how others operate in society. In this sense governance relates to regulation of the nature of external control over corporate activity.
These two ideas are usefully drawn together in a formal definition by the father of UK governance, Adrian Cadbury 1992:
“Governance is the system by which companies are directed and controlled”
This definition can be expanded in order to give a sense of the focus and importance of such activity.
“Governance is the system by which companies are directed and controlled in the interest of shareholders and other stakeholders”