Governance remains stagnant, with decline more common than progress, ILO report says

GENEVA (ILO News) - A new International Labour Organization (ILO) report finds that more than half of the world's economies face governance conditions that create uncertainty for business and investment, highlighting that governance gains are fragile and declines more common than progress.

The report, produced by the ILO Bureau for Employers' Activities, analyses governance trends across 208 economies between 1996 and 2024. It shows that, despite ongoing reform efforts, overall performance has changed little over time, with uneven progress across countries and regions.

A diverse global governance landscape

Governance conditions vary widely across countries. Only 7.2 per cent of economies operate in what the report classifies as "sound" environments, characterized by strong institutions and high predictability. At the other end, more than half (52.9 per cent) face conditions that create uncertainty for business and investment.

Overall, global average governance levels have changed only modestly since the mid-1990s, reflecting both gradual improvements and setbacks across different contexts.

Why governance is easier to lose than to gain

One of the report's central findings is that governance changes are not symmetrical.

Governance is highly persistent: countries that performed well three decades ago tend to remain so today, while those with weaker institutions have struggled to improve. But when change does occur, it is more likely to be negative than positive. Progress is possible, but decline is more common. Nearly one-third of top-performing countries saw their ranking fall.

Political governance - including accountability, stability, and checks on executive power - emerges as the most vulnerable dimension. Improvements in regulation or legal frameworks can be gradually built, but political stability and accountability are more susceptible to erosion, particularly in contexts of polarization, democratic backsliding or weakened oversight.

The message for reformers is that governance gains must be actively defended, and cannot be taken for granted.

Governance and investment

The report finds a clear link between governance quality and a country's ability to attract investment.

Countries with stronger, more predictable governance environments consistently receive higher levels of foreign direct investment, even after accounting for global and regional trends.

Governance is not the only factor. Market size, infrastructure, and macroeconomic conditions also play a role. But it plays a foundational role, shaping whether other economic advantages translate into sustained investment and job creation.

Employers' organizations as part of the governance ecosystem

The report also examines employer and business membership organizations (EBMOs) as institutional actors within governance systems.

Drawing on new data from 166 organizations worldwide, it introduces an EBMO Governance Index to assess autonomy, internal governance and organizational capacity.

The findings show that independence does not necessarily translate into influence.

Most EBMOs have achieved a significant degree of formal independence from government. However, many lack the capacity to turn that independence into effective advocacy and sustained policy engagement.

This gap is particularly pronounced in developing and emerging economies, where more than 83 per cent of organizations surveyed report limited capacity.

Strengthening internal governance and operational capacity is therefore not a secondary issue. It is essential to ensuring that business voices are heard, that reform efforts are sustained, and that governance gains endure over time.

Building governance that lasts

The report closes with a set of clear principles for reform.

Effective reform efforts need to focus on the weakest dimension of governance rather than headline improvements. They should be designed for durability, not short-term visibility, and include safeguards against backsliding.

They also require sustained investment in intermediary institutions - including employers' organizations - that help anchor and carry reforms over time.

Deborah France-Massin, Director of the ILO Bureau for Employers' Activities. said: "Governance underpins sustainable enterprises, decent work, and inclusive growth. Building strong institutions requires time and commitment, and progress can be fragile. Employers' organizations play a key role by both advocating for and embodying good governance."

Governance underpins sustainable enterprises, decent work, and inclusive growth. Building strong institutions requires time and commitment, and progress can be fragile. Employers' organizations play a key role by both advocating for and embodying good governance.

Strengthening governance for decent work

The report reinforces the ILO's longstanding conviction that effective social dialogue, decent work, and sustainable development all depend on functioning institutions and accountable governance. It calls for renewed cooperation among governments, employers, and workers to strengthen the institutional frameworks on which resilient and inclusive labour markets depend.

Access full report here: Governance: Hard to Build, Easy to Erode - Global Trends, Business Implications and the Role of Employer and Business Membership Organizations

Contact:

Jose Luis Viveros Añorve, [email protected] , Employers' Activities specialist, ILO-ACT/EMP

Jae-Hee Chang, [email protected] , Senior relations specialist, ILO-ACT/EMP