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What does governance mean and Explain whether the

following statement is true or false “ Governance is
exercised only by the government of a country”
Politics and Governance with Philippine Constitution (Polytechnic University of the
Philippines)

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John Joshua V. Leonardo

BSA3
AE10

1. What does governance mean?

Governance means the process of decision making and the process by which decision are 
implemented through the exercise of power or authority by leaders of the country and or 
organization.
2. Explain whether the following statement is true or false.
“Governance is exercised only by the government of the country”.
False, because governance can also exercise by the leaders of the organization where they 
implement their own rules and can make decision on their own organization.

3. Explain how governance can be used in the following context and give
appropriate examples:
A. National governance
B. Local governance
C. Corporate governance
D. International governance
National governance is defined as the exercise of economic, political and administrative 
authority to manage a country's affairs at all levels, and it comprises mechanisms, processes 
and institutions, through which citizens.
Local governance is defined as the people who have the authority to make decisions or pass 
laws in a small geographic area near to them. An example of local government is the town 
council.
 As such, a central feature of corporate governance involves policies to communicate with, 
involve and protect shareholders.  For example, shareholders must not divulge sensitive 
company information, and they must avoid certain personal or professional activities if they 
might be viewed as a conflict of interest.
International governance is a movement towards political cooperation among transnational 
actors, aimed at negotiating responses to problems that affect more than one state or region.

4. Explain briefly the eight (8) basic characteristics of good governance.

1. Rule of Law
Good governance requires fair legal frameworks that are enforced by an impartial 
regulatory body, for the full protection of stakeholders.

2. Transparency

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Transparency means that information should be provided in easily understandable forms
and media; that it should be freely available and directly accessible to those who will be 
affected by governance policies and practices, as well as the outcomes resulting 
therefrom; and that any decisions taken and their enforcement are in compliance with 
established rules and regulations.

3. Responsiveness
Good governance requires that organizations and their processes are designed to serve 
the best interests of stakeholders within a reasonable timeframe.

4. Consensus Oriented
Good governance requires consultation to understand the different interests of 
stakeholders in order to reach a broad consensus of what is in the best interest of the 
entire stakeholder group and how this can be achieved in a sustainable and prudent 
manner.

5. Equity and Inclusiveness

The organization that provides the opportunity for its stakeholders to maintain, enhance, 
or generally improve their well-being provides the most compelling message regarding 
its reason for existence and value to society.

6. Effectiveness and Efficiency

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.

7. Accountability
Accountability is a key tenet of good governance. Who is accountable for what should be
documented in policy statements. In general, an organization is accountable to those 
who will be affected by its decisions or actions as well as the applicable rules of law.

8. Participation
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. 

5. Transparency and accountability are synonymous. Explain whether the statement

is correct or not.
It is in this light that transparency has become synonymous with accountability. Transparency is 
an instrument through which accountability is articulated. Transparency is an accountability in 
itself. Transparency grants wider access to information than accountability.

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6. Explain whether the following statement is true or false.

“Responsiveness usually results to effectiveness and efficiency”
False, responsiveness is for their stakeholders while effectiveness and efficiency are for the 
protection on environment.

7. Define corporate governance.

Corporate governance is the structure of rules, practices, and processes used to direct and 
manage a company.
8. What does corporate governance structure involve?
The corporate governance structure specifies the distribution of rights and responsibilities 
among different stakeholders such as the board, managers or shareholders, and spells out the 
rules and procedures for decision-making in corporate affairs.

9. State the purpose of corporate governance.

The purpose of corporate governance is to help build an environment of trust, transparency and 
accountability necessary for fostering long-term investment, financial stability and business 
integrity, thereby supporting stronger growth and more inclusive societies.

10. Explain the basic objectives of corporate governance.

Fair and equitable treatment of shareholders
All shareholders deserve equitable treatment and this equity is safeguarded by good 
governance structure in any organization.
Self-assessment
Corporate governance enable firms to assess their behavior and actions before they are 
scrutinized by regulatory agencies.
Increase shareholders’ wealth
 Other corporate governance’s main objective is to protect the long-term interest of the 
shareholders.
Transparency and full disclosure
Good corporate governance aims at ensuring a higher degree of transparency in an 
organization by encouraging full disclosure of transaction in the company accounts.

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11. Explain the three basic principles of effective corporate governance.

Accountability means that actions have consequences. When corporate governance embodies 
the principle of accountability, shareholders know that performance will be measured. They 
know that good performance will be rewarded, and poor performance will not. And, most 
important, they know that misconduct will not be tolerated. Without transparency, it is difficult to 
have accountability. After all, shareholders can only hold corporate directors accountable if they 
know what is going on at the companies they own.

Multiple choice Question

1. D
2. A
3. B
4. A
5. B
6. D
7. B

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1. “Small business enterprises do not need good governance”

Do you agree? Explain.
No, because even it is a small business enterprise it still need a good governance in order to 
progress smoothly.

2. Does good governance require absolute rules that must be adopted by all
organizations?
There are no absolute rules which must be adopted all organization. 

3. What is the essence of any system of corporate governance?

The essence of any system of good corporate governance is to allow the board and 
management the freedom to drive their organization forward and to exercise that freedom within
a framework of effective accountability.

4. Where does the board of directors derive its authority?

The Board of Directors has the authority to approve policies and procedures to consider 
business strategies, business action plans, business budget, organization structure, salary 
structure, the company’s compensation and benefits scheme and structure, and manpower 
requisition.

5. To whom is the board of directors accountable?

The Board of Directors is accountable to shareholders for the company's business operations 
and corporate governance in accordance with management objectives and maximization of 
shareholders' benefit within the framework of sound business ethics whilst taking into account 
the benefits of all stakeholder groups.

6. On what aspects do shareholder demand accountability from the board of

directors?
 Financial performance
 Financial transparency
 Stewardship
 Quality of internal control
 Composition of the board of directors and the nature of its activities

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7. What is management’s responsibility as far as financial reporting is concerned?

Management is responsible for the integrity and objectivity of the financial statements. 
Management has established systems of internal control that are designed to provide 
reasonable assurance that assets are safeguarded from loss or unauthorized use, and to 
produce reliable accounting records for the preparation of financial information.

8. Describe the board role of the shareholders in corporation.

Shareholders make a financial investment in the corporation, which entitles those with 
voting shares to elect the directors.  If shareholders are not satisfied with the 
performance of the directors, they may remove the directors or refuse to re-elect them.

9. Describe the board role of the board of directors

The role of board of directors is to ensure the company's prosperity by collectively directing the 
company's affairs, while meeting the appropriate interests of its shareholders and relevant 
stakeholders.

10. What are the specific activities of the board of directors?

Multiple choice Questions

1. A
2. D
3. A
4. A
5. B

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