What is governance? At a broad level, as Mark Bevir has explained, governance refers to all processes of governing, whether undertaken by a government, market, or network; whether over a family, tribe, corporation, or territory; and whether by laws, norms, power, or language. Governance applies to many types of organisations ranging from a family to a whole state. It also includes many activities, such as making laws and establishing standards for conduct. Governance describes how a group or organisation works out how decisions will be made and how interactions will take place. How does this relate to the project management? Well, governance provides the instruments, principles, and techniques to steer an organisation. Governance drives the management organisation towards specific objectives. In a project context, governance can be studied from a variety of perspectives. We can study the formal aspects of governance, but we can also explore the governance from a social perspective. We tend to assess governance employing different theories. The theories provide multiple and overlapping perspectives to help describe project governance. Some of the most important governance theories includes: institutional theory, shareholder theory, stakeholder theory, transaction cost theory, and agency theory. Let's start with the institutional theory. From this theoretical stance, we are trying to understand what makes an institution and how it defines itself. There are three perspectives we can consider, the regulative, the normative, and the cultural-cognitive. The regulative perspective helps us understand how an institution is formally defined. We can analyse its governance by looking at how formal frameworks and laws provide structure to the institution. A typical example is the definition of a corporation. Where there isn't such formal structure, we might adopt a normative perspective. This studies an institution by analysing the standards, conventions or norms defining the institution. We can also adopt the cultural-cognitive perspective. This focusses on the way the members of the institutions perceive themselves. These approaches help us to understand the project organisation. For example, the regulative perspective might help us to analyse the governance involved in the contracts. The normative might help us to analyse specific working conditions. And the cultural-cognitive might help us explain how different individuals perceive themselves as part of the major project. For example, the workforce and the community affected. Now, let's look at the shareholder theory. Shareholder theory assumes that the shareholders are primarily concerned to maximise their profits, particularly the return of equity. It focusses on how governance and decision making rules are linked to the operation of a project and work to meet the ultimate strategic objective of the project, namely: maximising the profit for the sponsors. In projects, many parties are keen to maximise the return of equity from the project. So, shareholder theory helps us to focus on our design of project governance to fulfil this criteria. The stakeholder theory focusses on all those who might have a stake in the major project. So these could be employees, the local community, or the state. This theory enables us to broaden the scope of the governance in order to include stakeholders, others than just the sponsors. Stakeholder theory enables us to identify and to address additional project objectives. Another theory is the transaction cost theory. This assumes that the organisation adapts their governance structures to achieve the lowest possible transaction cost. Transaction cost theory is grounded on the economic analysis considering the project cost, including negotiation cost and the cost of engaging other partners. It suggests that the governance take into account all these costs and the organisation create a governance network to minimise the transaction costs. The transaction cost theory is closely linked to make or buy decisions made by the various project stakeholders. That is, whether the stakeholder produces items in-house or purchases them. Finally, let's look at the agency theory. It focusses on the relationship between two parties: the agent and the principal. Traditionally, we speak about the relationship between the shareholders and the appointed directors of the company. Agency theory addresses how the agent makes decisions on behalf of the principal. Often, the objectives of the agent and the principal are misaligned, and this leads to suboptimal decisions being made for the principal. The agent might make decisions based on his own self-interest rather than based on what is the best for the principal. The agency theory takes this into consideration and suggests the governance should seek to align the objectives of the agent to the principal. In terms of major projects, we can speak about aligning the objectives of the sponsor and the project manager and all other decision makers involved. To summarise, we have started to define governance, we have been introduced to the most relevance governance traditions, namely: public governance and corporate governance, and we've expanded on these to consider a more recent type of governance, project governance.