🚨 Governance Reform: Improving Organizational Decision-Making Structures

Today Korean Social News | 2025.04.29

📌 Long-term Education Plan Delayed Again... First National Education Committee Failed, Calls for Governance Reform Growing

💬 The National Education Committee has again postponed the announcement of the 2027-2036 long-term national education development plan until after the presidential election. The main reasons are concerns about influencing the election and delays due to internal conflicts. The education sector is pointing to the failure of the first National Education Committee and arguing that the second committee needs to completely reform its governance with enhanced transparency. There has also been confusion as policies still under review, such as introducing a September semester system and holding the college entrance exam twice a year, have been leaked to the press while internal discussions were kept private. Experts are emphasizing the urgent need to expand public discussion of key issues and introduce systems for citizen participation.

Summary

• Governance refers to the systems and methods by which organizations or societies make decisions and operate.
• Effective governance is characterized by transparency, accountability, stakeholder participation, and efficient decision-making.
• Governance reform is an essential process to solve organizational problems and achieve better results.

1️⃣ Definition

Governance means the systems and methods by which organizations or societies make decisions and operate. Simply put, it's the set of rules and procedures that determine who makes important decisions, how they make them, and how various stakeholders' opinions are reflected in the process.

Good governance improves the transparency, accountability, and efficiency of decision-making and helps achieve organizational goals.

💡 Why is it important?

• Effective governance is a key factor in improving organizational performance and reliability.
• Unclear and inefficient governance can lead to conflict, corruption, and waste of resources.
• The need for governance reform has been continuously raised in education, business, and public sectors recently.

2️⃣ Types and Characteristics of Governance

📕 Main Types of Governance

• Centralized governance improves decision-making efficiency. Centralized governance is a structure where a small number of decision-makers hold concentrated authority and make important decisions.

  • Examples include traditional hierarchical organizational structures, CEO-centered corporate governance, and central government-led administrative systems.
  • This type allows for quick decision-making and consistent policy implementation, but has limitations in reflecting diverse stakeholder opinions and risks of unilateral decisions.
  • It can be effective in crisis situations requiring quick responses or in early-stage organizations that need clear leadership.

• Decentralized governance strengthens participation and transparency. Decentralized governance is a structure where various stakeholders participate in the decision-making process and authority is distributed among multiple entities.

  • Examples include board-centered corporate governance, various committee systems, decentralized administrative systems, and educational autonomy.
  • This type has advantages in reflecting diverse perspectives, ensuring transparency in decision-making, and preventing abuse of power, but decision-making can take longer and responsibility can become unclear.
  • It is mainly used in public institutions, non-profit organizations, and mature large companies where cooperation among various stakeholders is important.

• Hybrid governance is flexibly applied according to situations. Hybrid governance is a flexible structure that combines characteristics of centralized and decentralized types according to situations and needs.

  • Examples include matrix organizational structures, systems where routine operations are decentralized but important decisions are made centrally, and public-private partnerships.
  • This type seeks balance between efficiency and participation, and allows selecting appropriate decision-making methods for each situation, but can cause confusion and role conflicts due to complex structures.
  • It can be effective in global companies operating in complex environments, educational institutions with diverse stakeholders, and rapidly changing industries.

📕 Key Elements of Good Governance

• Transparency and accountability are the foundation for building trust. The most basic elements of good governance are transparency and accountability.

  • Transparency means decision-making processes and results are disclosed and stakeholders can access necessary information. This includes information disclosure, openness of policy-making processes, and financial transparency.
  • Accountability means decision-makers have responsibility for their decisions and actions, and the obligation to explain the results. This is supported by clear role and responsibility definitions, performance evaluations, and audit systems.
  • These two elements complement each other: transparent information disclosure promotes responsible action, and accountability mechanisms demand greater transparency.

• Efficiency and effectiveness are the keys to creating results. The ultimate purpose of governance is to effectively achieve organizational goals.

  • Efficiency means achieving maximum results with minimum resources, reducing unnecessary procedures and costs, and enabling quick decision-making.
  • Effectiveness means how well set goals are achieved, supported by clear goal setting, performance measurement, and feedback systems.
  • Focusing only on efficiency risks emphasizing short-term results, while emphasizing only effectiveness may lead to low cost-effectiveness, so balance between the two is important.

Main Types and Characteristics of Governance Reform

1. Centralized: High decision-making efficiency, limited reflection of diverse opinions
2. Decentralized: Diverse stakeholder participation, increased decision-making time
3. Hybrid: Flexibly applied according to situations, possibility of confusion due to complexity
4. Key elements: Transparency, accountability, participation, efficiency, effectiveness, fairness
5. Reform direction: Redesigning decision-making structures, expanding stakeholder participation, improving performance management systems

3️⃣ Cases and Current Status of Governance Reform

✅ Cases of Governance Reform in Education

• The establishment and challenges of the National Education Committee are receiving attention. The National Education Committee is a presidential body established in 2022 to enhance consistency and expertise in education policy.

  • However, as the announcement of the 2027-2036 long-term national education development plan has been postponed until after the presidential election, criticism of the committee's role and governance structure has emerged.
  • Main issues include lack of transparency in internal decision-making processes, limited participation of various education stakeholders, and overlapping roles with the Ministry of Education.
  • As a result, voices calling for governance reform in the second National Education Committee, including enhanced transparency, expanded stakeholder participation, and clear role division with the Ministry of Education, are growing.

• Educational autonomy is a representative case of decentralized governance. Educational autonomy is a governance system that distributes central government authority to local education offices and schools to realize education tailored to regional characteristics.

  • Korea's educational autonomy has developed through the direct election of education superintendents, expanded autonomy of education offices, and activation of school operating committees.
  • However, problems such as unclear authority and responsibility among the Ministry of Education, education offices, and schools, educational gaps between regions, and political influence have also emerged.
  • Recently, attempts at educational autonomy governance reform have been made through strengthened school-level autonomy, expanded participation of education stakeholders (students, parents, teachers), and cooperation with local communities.

✅ Trends in Governance Reform in Business and Public Sectors

• Corporate governance is changing toward responsible management and shareholder value. Corporate governance refers to a company's decision-making structure and management supervision system.

  • The recent trend is changing from owner-centered centralized governance to board-centered decentralized governance, with major reform directions including strengthened outside director systems, ensured independence of audit committees, and enhanced shareholder rights.
  • As ESG (Environmental, Social, Governance) management is emphasized, governance reforms considering corporate social responsibility and sustainability are also actively progressing.
  • Particularly for large corporate groups, governance improvements through transition to holding company systems, resolution of circular shareholding, and enhanced management transparency are receiving attention.

• Public institution governance focuses on strengthening efficiency and accountability. Public institution governance is a decision-making system for providing public services and realizing public interest for citizens.

  • Recent major reform directions include improving public institution management evaluation systems, strengthening the check function of boards, and introducing performance-centered management systems.
  • Citizen participation governance, such as participatory budgeting, expanded information disclosure, and diversified citizen communication channels, is also expanding.
  • Governance innovation using technology, such as data-based decision-making and smart administrative systems due to digital transformation, is also in progress.

4️⃣ Issues and Prospects of Governance Reform

💡 Main Issues in Governance Reform

• Balance between centralization and decentralization is an important task. The most central issue in governance reform is finding the right balance between concentration and distribution of authority.

  • Centralized governance allows for quick decision-making and consistent policy implementation, but it is difficult to reflect diverse voices from the field and bureaucratic problems may occur.
  • Decentralized governance allows for participation of various stakeholders and field-centered decisions, but responsibility may become unclear and overall coordination and integration may be difficult.
  • Therefore, finding the appropriate combination of centralization and decentralization according to organizational characteristics, situations, and goals is the key task of governance reform.

• There is also a dilemma between stakeholder participation and securing expertise. In governance reform, balance between diverse stakeholder participation and expert decision-making is also an important issue.

  • Participation of various stakeholders (citizens, students, parents, consumers, etc.) increases democratic legitimacy and representation, but may lead to non-expert judgments or increased influence of specific interest groups.
  • Expert-centered decision-making can enhance expertise and efficiency, but may diverge from actual field needs or show elitist tendencies.
  • Therefore, it is important to clearly define the scope and method of participation, the role of experts, and design complementary governance structures.

💡 Prospects and Tasks for Future Governance

• Digital technology will accelerate governance innovation. The development of digital technology is expected to bring major changes to governance systems.

  • Evidence-based decision-making using big data and artificial intelligence will expand, enabling more accurate and efficient policy decisions.
  • Transparent decision-making and recording systems using blockchain technology will be introduced, improving reliability and traceability.
  • Citizen participation and communication channels through online platforms will diversify, allowing more stakeholders to participate in the governance process.

• Building sustainable governance is a key task for the future. Building sustainable governance systems is emerging as an important task in a rapidly changing social environment.

  • Decision-making structures that consider not only short-term performance but also long-term impact and intergenerational equity are needed.
  • The importance of ESG governance that comprehensively considers environmental, social, and economic sustainability will increase.
  • Development of flexible governance systems with adaptability and resilience is needed in an environment of increasing uncertainty and complexity.

5️⃣ Related Terms Explanation

🔎 Stewardship Code

• The Stewardship Code refers to the principles of responsible investment by institutional investors.
• The Stewardship Code means the principles by which institutional investors responsibly manage assets of clients or beneficiaries, and actively participate in improving the governance of investee companies and enhancing their long-term value.
• This code emphasizes the active role of institutional investors in monitoring corporate management activities, and when necessary, engaging with management or making shareholder proposals to improve governance, beyond simple exercise of shareholder rights.
• In Korea, it was first introduced in 2016, and with the participation of major institutional investors like the National Pension Service, it is influencing corporate governance improvement. Through this, corporate transparency and accountability are strengthened, and corporate value and shareholder benefits are expected to improve in the long term.

🔎 ESG

• ESG stands for Environmental, Social, and Governance, the first letters of each word.
• ESG (Environmental, Social, Governance) refers to three core areas for evaluating a company's non-financial performance. 'Environmental (E)' includes climate change response, resource efficiency, pollution prevention; 'Social (S)' includes human rights, labor conditions, community relations; and 'Governance (G)' includes board composition, ethical management, transparent reporting systems.
• ESG means a comprehensive approach that integrates sustainability into the overall strategy and operation of a company, beyond simple social contribution activities. Recently, as investors expand 'responsible investment' considering ESG performance as well as financial performance, ESG management by companies is becoming more important.
• In terms of governance, ESG emphasizes board diversity and independence, appropriateness of executive compensation systems, protection of shareholder rights, and ethical corporate culture, pursuing long-term value creation and sustainable growth of companies through these.

🔎 Stakeholder Capitalism

• Stakeholder capitalism is a management paradigm that considers the interests of all stakeholders, not just shareholders.
• Stakeholder Capitalism is a management paradigm that companies should consider in a balanced way the interests and demands of various stakeholders such as employees, customers, partners, local communities, and the environment, not just shareholders.
• While traditional shareholder capitalism focused on maximizing short-term shareholder value, stakeholder capitalism believes that companies should be operated in a way that grows the value of all stakeholders together from a long-term perspective.
• As the World Economic Forum (Davos Forum) officially declared the transition to stakeholder capitalism in 2019, it is receiving attention worldwide, bringing fundamental changes to the purpose and direction of corporate governance. Companies now need to build governance systems that consider social value creation and sustainability as well as financial performance.

6️⃣ Frequently Asked Questions (FAQ)

Q: Does governance reform actually affect organizational performance?

A: Governance reform can positively impact organizational performance when properly designed and implemented. Research shows that companies with transparent and efficient governance structures tend to show 15-20% higher corporate value on average. Especially, enhancing transparency in decision-making processes, expanding stakeholder participation, and establishing accountability mechanisms contribute to performance improvement. For example, companies with independent boards and audit systems tend to have lower financial risks and more stable long-term growth. Also, in the public sector, local governments that have introduced citizen participation governance show better results in terms of resident satisfaction and policy effectiveness. However, for governance reform to lead to performance, customized design suitable for the organization's characteristics, culture, and goals is needed, and participation and consensus of members to drive real change are important. The effect of governance reform can be maximized when accompanied by real changes in organizational culture and practices, not just structural changes.

Q: In what direction should the National Education Committee's governance reform proceed?

A: The National Education Committee's governance reform needs to be approached in three main directions. First, enhancing transparency and communication. The currently criticized closed discussion method needs to be improved to transparently disclose major policy discussion processes and results, and to expand regular public hearings and opinion gathering channels. Second, expanding stakeholder participation. A structure should be created where various education stakeholders such as teachers, students, parents, and education experts can substantively express opinions and participate in policy-making. To this end, it is necessary to increase the diversity of committee members and institutionalize field communication channels where opinions of field educators can be directly delivered. Third, clear role division and strengthened accountability. Overlapping roles with the Ministry of Education should be resolved, with the National Education Committee focusing on setting mid to long-term education vision and direction, and the Ministry of Education focusing on specific policy implementation, clearly establishing a division of labor system. Also, accountability should be strengthened by establishing regular evaluation and feedback systems for the results and impact of decisions. Through such reform, a governance system should be established where the National Education Committee can develop consistent education policies reflecting the voices of the education field while being independent from political influence.