The concept of governance is understood in many ways by different people. Its definition often depends on the goals to be pursued, the entities involved, and the socio-political environment within which these goals are to be achieved.
Many definitions of governance focus on processes, structures and arrangements that pertain to the administration of an entity or unit of organization. The ISSA aligns its definition of governance with those that underscore the exercise of vested authority and power. The Asian Development Bank (ADB) describes governance as “the manner in which power is exercised in the management of a country’s economic and social resources for development”. Similarly, the World Bank refers to governance as consisting of the traditions and institutions by which authority in a country is exercised.
In the context of social security administration, the ISSA defines governance as the manner in which the vested authority uses its powers to achieve the institution’s objectives, including its powers to design, implement and innovate the organization’s policies, rules, systems and processes, and to engage and involve its stakeholders. Good governance implies that the exercise of the vested authority is accountable, transparent, predictable, participative and dynamic.
Various authors define and associate a number of principles with good governance, four of which are of particular relevance to social security institutions: accountability, transparency, predictability and participation. The ISSA includes dynamism as a fifth principle that characterizes good governance. The five principles are mutually reinforcing. Observing one principle facilitates the practice of the other principles, thereby creating a virtuous environment for good governance. The principles are generally defined in the literature and, in the context of social security administration, the ISSA defines them as follows.
Accountability is the ability to hold legally responsible the officials who are in charge of the institution. It requires establishing norms and standards to evaluate the achievement of the institution’s mission, and a well-functioning system of redress that protects the interests of stakeholders and deters mismanagement and deviations from the institution’s mandate. As trustees, social security administrators are responsible, and hence accountable, for managing the programme prudently, efficiently and equitably.
Transparency is the availability and accessibility of accurate, essential and timely information to ensure that stakeholders are well informed of the true state of the social security programme and how it is being managed. Transparency in the decision-making process promotes honesty, integrity and competence, and discourages wrongdoing. Clarity and simplicity of rules, systems and processes help to limit the areas that would require discretion and arbitrariness in programme administration.
Predictability refers to the consistent application of the law and its supporting policies, rules and regulations. For social security programmes, the rights and duties of members and beneficiaries must be well defined, protected and consistently enforced. Surprises and sudden changes in contribution rates, benefit entitlements or other features may seriously undermine the credibility of the programme.
Participation refers to the active education, engagement and effective involvement of stakeholders to ensure the protection of their interests. The meaningful participation of stakeholders depends on their access to information about the institution and their capacity to understand and act on such information.
Dynamism is simply defined as the element of positive change in governance. While the other four principles of governance may well be applied in the context of maintaining a status quo, dynamism refers to changing and improving on the status quo itself, by doing things more efficiently and equitably, and by responding to the evolving needs of programme members and beneficiaries, thereby creating new value.