Governance and Rule of Law and Their Effect on Sustainable Development and Investment

Cambridge dictionary defines governance, as “the way that organizations or countries are managed at the highest level, and the systems for doing this.

” Corporate governance is the control and direction of companies by ownership, boards, incentives, company law, and other mechanisms. It is the system by which companies are directed and controlled. As there is no one globally accepted definition of corporate governance, commonly accepted principles of good corporate governance have evolved since the late 1990s and formed the basis of good governance codes. However, governments establish the institutional platform and legal framework for it.

The corporate governance objective is to boost economic performance and enhance social welfare.

The problem of corporate governance stems from the separation of ownership from control. When there is a separation between ownership and control, There is a need for control mechanisms. Therefore, internal control forms a necessary foundation for effective governance. The effective corporate governance system should take into consideration the local social norms and values but make no compromises that nullify it from its spirit. Despite all challenges, Jordanian institutions, the private sector, and civil society entities have a real opportunity to harvest the maximum benefits of adopting and applying proper governance practices.

In my opinion, His Majesty King Abdullah II’s sixth Royal Discussion Paper: “Rule of Law and Civil State” provides an unprecedented and unambiguous support for unleashing a proper implementation of the concept of governance. It is the responsibility of those charged with governance (i.e., boards and board members, decision makers, etc.) to implement the relevant governance codes and be accountable for the results. Integrity, transparency, responsibility, accountability, and fairness should be the driving principles in implementation.

Though there is no one single model for good corporate governance, the rule of law provides the basis for developing and implementing good corporate governance practices. However, good governance and corruption do not coexist. When effective corporate governance prevails, foreign direct investment increases, cost of capital decreases, unemployment decreases, and sustainable development becomes within our reach.