Good governance ensures that political, social and economic priorities are based on broad

consensus in society and that the voices of the poorest and the most vulnerable are heard in
decision-making over the allocation of development resources.

Governance encompasses the state, but it transcends the state by including the private sector
and civil society organizations. What constitutes the state is widely debated. Here, the state is
defined to include political and public sector institutions.
UNDP's primary interest lies in how effectively the state serves the needs of its people. The
private sector covers private enterprises (manufacturing, trade, banking, cooperatives and so
on) and the informal sector in the marketplace. Some say that the private sector is part of civil
society. But the private sector is separate to the extent that private sector players influence
social, economic and political policies in ways that create a more conducive environment for the
marketplace and enterprises.

Developing the capacity of good governance is the primordial way to eliminate poverty.

Good governance creates a strong future for an organization by continuously steering towards a
vision and making sure that day-to-day management is always lined up with the organization’s
goals. At its core, governance is about leadership. An effective board will improve the
organization’s results, both financial and social, and make sure the owners' assets and funds are
used appropriately. Poor governance can put organizations at risk of commercial failure,
financial and legal problems for directors/trustees or allow an organization to lose sight of its
purpose and its responsibilities to its owners and people who benefit from its success.

Why is Good Governance Important?

Report # 1: Legal Basis/Social Function of Businesses

Article 12 Section 6
The use of property bears a social function and all economic agents shall contribute to the
common good. Individual and private groups, including corpos., coops., and similar collective
orgs., shall have the right to own, establish and operate economic enterprises subject to the duty
of the State to promote distributive justice and to intervene when the common goods to
demand.

 Right to own, establish, and operate economic enterprises

o Many economic systems
o Free enterprise system – “free private enterprise” persons can own & operate
business enterprises risking their own resources.
o Intervention by the State
o Regulated Capitalism
Article 13 Section 3
The State shall afford full protection to labor, local and overseas, organized and unorganized,
and promote full employment opportunities for all. It shall guarantee the rights of all workers to
self-organization, collective bargaining and negotiations, and peaceful concerted activities,
including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage.

Government Regulations:
1. Business Registration – business must secure the necessary licenses and certificates of
registration
a. Single Proprietorship - (business name, DTI)
b. Partnerships/Corporations - (certificate of registration must be obtained --- SEC
(Securities and Exchange Commission)
c. Cooperative - (register with the CDA (Cooperative Development Authority)

*Village Business – homeowner’s clearance, must secure a barangay clearance & community tax
certificate, etc.
2. Foreign Ownership, Equity, & Investment
ex. Mass media, small-scale mining, etc. --- PROHIBIT FOREIGN EQUITY
Foreign companies & investors can acquire lands as long as these are privately owned & foreign
equity doesn’t surpass the 40% cap

Social Purpose of Businesses:

1. Should embody the purpose of its leadership & its leadership should embody the social
purpose of the business.
2. Based on the beliefs that social change is good for the business & business is good for
social change.
3. Speaks to the ends (social change) rather than the means (corporate social
responsibility)
4. Relevant to firms of all sizes & industries.
5. Is integrated with indivisible from, everything the business does to make money.
6. Is aligned with the unique culture & character of the business.
7. Is genuine, on-going, and unassailable.

Article 13 Sec 1
Summary: the State shall promote social justice, agrarian, and natural resources reform, urban
land reform and housing; protect labor; recognize the rights of every citizen and people’s
organization, and adopt an integrated health development program. It also mandates Congress
to enact a law creating an independent Commission on Human Rights, with the responsibility of
investigating cases of human rights violation.

Report # 2: The Nature & Forms of Business Organizations

3 Types of Businesses:
1. Service Business – provides intangible products
2. Merchandising Business – buy& sell business
3. Manufacturing – buys raw mats and manufactures it into finished goods.
 4. Hybrid Business – classified in more than one business.

Forms:
1. Sole-Proprietorship – owned by one person only
a. Least costly
b. Unlimited liability
c. DTI, business permit, mayor’s permit, barangay clearance
d. Above 10 employees, pay the benefits
2. Partnership – owned by 2/more persons
a. General and Limited Partnership
3. Corporation – a business organization that has a separate legal personality
a. Owners= stakeholder
4. Cooperative – business organization owned by a group individual

Report # 3: Key Actors of Governance

1. The State – principal actor of government to facilitate participation & provide an

enabling environment to other elements of the society
 As Enabler – provides for the legal & regulatory framework & political order within
w/c firms & organizations can plan & act. It encourages citizens to act by being
liberated when they criticize policies/serve-marginalized groups.
 As Resource Provider – facilitates by providing resources to assist markets &
communities. (information, technical expertise, research & development programs,
physical infrast., etc.)
As a part of the state, the Local Government is the real actor in effecting governance &
development. Local Government formulates & defines the legal & regulatory framework; serves
as he basis for the involvement & participation of the various orgs. & groups in the governance
of the community.
 Roles of the States & key Milestones in Governance
Sound Development Management Roles of the
State
1. Creating conducive economic environment
Protecting the Vulnerable
Improving Govt. Efficiency & Responsiveness
Empowering people & democratizing the
political system
Decentralizing the Admin. System
Key Milestones
> Enact & enforce laws that promote economic
competition.
> Decentralized economic decision-making &
stabilize inflation.
> Reduce public deficit & free market to set
prices for privately produced goods/services
> Ensure the survival of pension systems
> Create/maintain reasonable unemployment
benefits.
>Establish & maintain a system of private
health & social insurance
>Maintain social assistance programs for the
disabled & disadvantaged
>Attract qualified, competent, & realistically
paid individuals into public service.
> Establish a civil service system that relies on
merit-based recruitment, incentive-based
compensation, etc.
> Protect professional civil servants from
political interference in carrying out their
responsibilities.
> Establish a conducive institutional
environment comprising properly functioning
parliaments, and legal systems.
> Respond quickly to local needs & conditions.
> Re-distribute authority, responsibility among
diff. govt. levels.
Reducing gaps between RICH & POOR
Encouraging CULTURAL DIVERSITY & SOCIAL
INTEGRATION
Protecting the ENVIRONMENT
Reduce social disparities
> Maintain cultural identity & roots while
promoting social cohesion.
> Ensure political systems are accessible &
legal systems afford equal opportunities
Integrate economic & environmental
accounting

2. The Private/Business Sector – Corporate Governance – serves as the engine of the

society.
 It generates jobs & incomes for the people in the community.
 Can also provide the needed resources for the govt. to enable it to pursue big
projects that are beyond the local govt’s. Financial capability.
 Expected Outputs = EFFICIENCY & ECONOMY
 Can help the L.G in the development of technologies that would help proper growth
& development of the economy in the community.
 Effective Local Governance = Private Sector can assist the L.G promote the transfer
of technology such as the application of spatial planning & decision support
systems.

3. The Civil Society – consists of complex of citizens & groups outside government working
in the public arena. (CSOs – Civil society Organizations OR 3RD SECTOR)
 Comprises: academe/schools, NGO’s
 Plays an important role in: Facilitiation & interaction among the key players of local
governance.
 They negage in programs & deliver services in areas where govt. is absent/private
sector is not interested in.
 They facilitate political & social integration by mobilizing & empowering people to
participate in economic, social, and political activities.
 “Governance” = exercise of governing functions by responsible persons.
  In Local Governance, Civil Society provides the forum for airing of grievances,
concerns, issues, and problems among the populace. IT PROVIDES VOICE TO THE
“ARTICULATE & UNARTICULATED”.
Relationships Between Governance & Human Development (each domain of governance)
1. State
a. Establishing & maintaining stable, effective, and fair legal-regulatory
frameworks for public & private activity
b. Ensuring stability & equity in the marketplace.
c. Ensuring the good governance addresses the concerns & needs of the poorest
by increasing opportunities for people to seek, achieve, & sustain the kind of life
they aspire to.
d. Upholding the right of the vulnerable, protecting the environment, maintaining
stable macroeconomic conditions, maintaining standards of public health &
safety at an affordable cost, etc.
2. Private Sector
a. Sustainable Human Development = creating jobs that provide enough income to
improve living standards.
b. Primary source of opportunities for productive employment
3. Civil Society
a. More than just a society. It’s the part of society that connects individuals w/ the
public realm & the state – it’s the political face of society.
b. Civil Society Org’s. channel people’s participation in economic & social activities
& organize them into more powerful groups to influence public policies & gain
access to public resources – POOR.
c. Offer opportunities to improve living standards (monitoring the environment,
assisting the disadvantaged, developing human resources, etc.)
d. Does not always pursue the qualities of good governance --- That’s why states
must ensure that the rules of law & values that reflect societal norms are
ADHERED TO.
Report # 4: Accountability – the fact/condition of being accountable; responsibility

Report, explain, and be answerable

Importance:
 State/Public Sector - evaluating the ongoing effectiveness of public officials/public
bodies ensures that they’re performing to their potential, providing value for money in
public services
 Business Sector & Civil Society – lack of accountability leads to corruption
 Individuals

Types of Accountability
1. Horizontal Accountability – the capacity of relatively autonomous powers that can call
into question, and eventually punish improper ways
2. Social Accountability
3. Diagonal Accountability – seeks to engage citizens directly in the workings of horizontal
accountability institutions

Report # 5 : Efficiency & Effectiveness

Efficient – “doing things right”

Effective – “doing the right things”

EFFICIENCY EFFECTIVITY
Short-term focus Long-term Focus
Feeling of Accomplishment: qty. of task Feeling of Accomplishment: Goal Achievement
accomplished = Quantity based = Quality Based
Focus on PROCESS Focus on GOALS
Minimize Resource Usage OPTIMIZE
Reduce Costs Increase Opportunities
Good governance means that the processes implemented by the organization to produce
favorable results meet the needs of its stakeholders, while making the best use of resources –
human, technological, financial, natural and environmental – at its disposal.
Report # 6: Equity & Inclusiveness

Equity – the quality of being fair & imaprtial

Inclusiveness – including/encompassing the stated limit/extremes in consideration.

 All groups, particularly the most vulnerable, have opportunities to improve/maintain

their well-being
 Equal opportunities for participation in decion-making process
 A society’s well-being depends on ensuring that all its member feel that they have a
stake in it & do not feel excluded from the mainstream society. All groups, particularly
the most vulnerable, have opportunities to improve/maintain their well-being.
 Consensus- oriented: must consult w/ people to understand the interests needs of the
people.

Report # 7: Participation

- involvement of citizens in various activities

o decision making process
o increase public influence
o connected w/ accountability

4 Levels of Participation:
1. Informing
2. Counseling
3. Inclusion
4. Partnership

Requirements for an EFFECTIVE PARTICIPATION:

1. Transparency Clarity of Purpose
2. Voluntary
3. Commitment
4. Accountability
5. Learning & Development
6. Communication

Issue on Participation
1. It delays decision-making
2. Decision-making should be left to the experts who know the technical details & political
realities.

Importance of Participation in Good Governance:

- Engage in Learning
- Enhance in Confidence
- Sense of Activeness

Participation by both men and women, either directly or through legitimate representatives, is a
key cornerstone of good governance. Participation needs to be informed and organized,
including freedom of expression and assiduous concern for the best interests of the organization
and society in general.
This can be fruitful if and only if the leader is ready to be open to share new ideas.