Governance: Hard to build, easy to erode: Global trends, business implications and the role of employer and business membership organizations
This report analyses global governance trends from 1996 to 2024, revealing widespread stagnation and persistent risks of backsliding. It highlights the critical link between stable institutional governance, increased foreign direct investment, and the necessary role of business membership organisations in sustaining long-term policy reforms.
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OVERVIEW
Why governance climate matters
Governance shapes the daily business environment, influencing contract predictability and policy stability. Weak governance increases uncertainty and costs. The report analyses 208 economies over 1996 to 2024 using a Governance Climate Index (GCI), categorising performance into political, economic, and institutional pillars.
The global governance landscape: Key findings
Global governance has largely stagnated since the mid-1990s. As of 2024, 53% of countries have Unsatisfactory (46.2%) or Unsound (6.7%) governance. Only 7.2% achieve Sound governance. Changes in governance are highly persistent and path-dependent, with backsliding being a persistent risk. A clear correlation exists between strong governance climates and higher foreign direct investment.
What the evidence means for policy and reform
Governance behaves as a long-term structural condition rather than a short-term policy outcome. Reformers should target the weakest pillar, as governance systems fail at their most vulnerable point. Designing reforms for durability and establishing institutional safeguards against reversal are critical. Short-term reform programmes rarely alter underlying conditions unless sustained.
Employer and business membership organisations as governance actors: Capacity, autonomy and national context
Employer and Business Membership Organisations (EBMOs) act as key institutional intermediaries. An EBMO Governance Index covering 166 organisations shows an autonomy-capacity disconnect: while 88.5% of EBMOs score highly on formal autonomy, most lack the internal resources and technical capabilities to translate this into effective advocacy. In developing and emerging-market economies, 52.7% of EBMOs face weak or developing governance structures.
Conclusions and takeaways
Governance is multidimensional, persistent, and shaped by a country’s historical trajectory. High-governance countries are more resilient, whereas weak governance creates vulnerability and deters investment. The report recommends that policymakers focus on building resilient institutions across political cycles. Both national frameworks and the organisational capacity of intermediary institutions like EBMOs must be strengthened to support stable investment and sustainable enterprise growth.
