Current Challenges of Good Corporate Governance in NGOs: Case of Slovenia

Abstract

Organizations in the Third Sector operating in still non-Western contexts need to have enhanced governance models that match the need to ensure ethical and efficient commercial operations within their mission. The key research question of the present article is how the implementation of good corporate governance (GCG) in Slovenian NGOs will contribute to strengthening their legitimacy, stakeholder trust, and effectiveness in achieving social goals. This article develops a conceptual model that should include all key variables, mediators, moderators, and latent constructs in itself, serving as a theoretical basis for future empirical studies and best practices. The main finding is that GCG should be organized as a single-track administrative body of public institutes in the future. Better single-track GCG regulations, which would presuppose the amendment of legislation, can be created and executed in practice only by working together with the public, regulatory agencies, academic community, NGOs, and prominent intellectuals.

1. Introduction

In today’s dynamic global business environment, non-governmental organizations (hereinafter, NGOs) play a crucial role in promoting social values, sustainability, and moral responsibility. When considering the issues of the implementation of good corporate governance, the concepts that will be used in the text of present article must first be defined in compliance with long-standing academic tradition. “Good corporate governance” (GCG) refers to the system by which companies are directed and controlled, emphasizing the importance of trust, transparency, and accountability. According to the Financial Reporting Council (FRC), effective corporate governance contributes to long-term company performance by fostering an environment of trust, transparency, and accountability, which in turn promotes long-term investments, financial stability, and business integrity (FRC—Financial Reporting Council) [1]. Similarly, the Organisation for Economic Co-operation and Development (OECD) states that with the “right structures and systems in place, good corporate governance enables companies to create an environment of trust, transparency, and accountability, supporting economic growth and financial stability” (OECD) [2]. In recent years, the concept of good corporate governance has evolved to include considerations of environmental, social, and governance (ESG) factors. A 2024 article from the Directors’ Institute highlights that innovative approaches and strategic thinking are redefining the principles and practices of governance, with a focus on sustainability and ethical leadership (Directors’ Institute) [3]. Furthermore, a 2025 report by the Diligent Corporation discusses emerging trends shaping the future of corporate governance, emphasizing the need for boards to adapt to evolving expectations regarding transparency, accountability, and stakeholder engagement (A Modern Governance Company—Diligent) [4]. These recent perspectives underscore that good corporate governance is not only about adhering to regulatory requirements but also about fostering a culture that promotes ethical behavior, responsible decision-making, and long-term value creation for all stakeholders. Good corporate governance (hereinafter, GCG) [5,6] and corporate social responsibility (hereinafter, CSR) [7,8,9,10] are becoming increasingly important at the beginning of the 21st century, especially in the context of organizations operating in the not-for-profit sector [11,12,13,14,15,16,17,18,19,20,21]. The interest in this issue has not decreased in recent times, at least judging by the literature that has appeared since 2018 onwards. We will mention only that which we have studied for the purposes of conceiving this article and, consequently, included in its discourse NGOs and the implementation of GCG principles [22,23,24].

Some authors have undertaken the study of the complexity of the GCG phenomenon in NGOs by addressing the local level of their operations (e.g., Malaysia [25]). Others have focused on the persistent challenge of managing NGOs as organizations that are not market-oriented, examining (i) opportunities for improving the effectiveness of NGOs [26]; (ii) factors affecting the effectiveness and sustainability of NGOs [27]; (iii) a comparative analysis of the efficiency programs of environmental and social NGOs [28]; (iv) the influence of NGOs on corporate sustainability adoption from an institutional legitimacy perspective [29]; (v) case studies showcasing best practices [30,31,32,33]; (vi) perspectives on the phenomenon from a stakeholder viewpoint [34]; and (vii) insights from financial management perspectives [35,36], investigating, for instance, CG in light of the performance of microfinance institutions based on recent global evidence [37] or partnerships aimed at improving service delivery through State–NGO collaboration [38].

Recently, some scholars have dedicated their research to the theoretical foundations of GCG in NGOs [39] or even embarked on the ambitious endeavor of formulating a unified theory of nonprofit governance [40]. Meanwhile, other academics have sought to provide a comprehensive overview of this complex phenomenon through edited volumes [41,42], addressing GCG challenges in the third decade of the 21st century [43], among which one of the most pressing issues is the fight against corruption through the strengthening of moral responsibility, stakeholder participation, and management systems [44]. While some researchers have prioritized examining the evolution of empirical research in this field by reflecting on fundamental insights and future directions [45], others have been more interested in investigating how CG affects the performance of NGOs [46]—a topic that lies at the core of the present paper.

The present article explores the evolution of GCG practices and the challenges faced by NGOs worldwide as well in Slovenia, one of the EU member states, within the comprehensive framework of socially responsible business. Slovenia, as a country with a rich cultural heritage and an engaged civil society, represents a challenging area for the implementation of GCG in the NGO sector. Understanding the context and specificities of Slovenian organizations is crucial for identifying the essential elements shaping the approach to GCG and CSR in the administration of NGOs.

The aim of the current conceptual paper is a deeper understanding of the development of GCG practices within Slovenian NGOs and the identification of challenges arising from their implementation in a specific cultural, legislative, and economic environment. We will attempt to answer the research question RQ₁ regarding how the implementation of GCG in Slovenian NGOs will contribute to strengthening their legitimacy, stakeholder trust, and effectiveness in achieving social goals. In addressing this question, this article will use a theoretical framework that encompasses classical GCG concepts such as transparency, responsibility, and the balance between management and supervision to better understand the connections between GCG and the framework of CSR (and business ethics in general) in the context of NGOs. This study will be conducted based on the methodology as discussed further in Section 3. This methodology provides us with a holistic insight into current GCG practices and the creation of relevant recommendations for their improvement in the near future (see Section 5 below). In short, we aim to find an answer to our fundamental research question RQ₁ through a critical reflection on key aspects of GCG to achieve the proper type of leadership by governance bodies in the context of NGOs. This article provides insights into our conducted theoretical–conceptual investigation and into how these elements contribute to increasing the efficiency and long-term sustainability of NGOs.

We will also be interested in the phenomenon of the connection between GCG and CSR to identify key points of interaction between them and socially responsible practices in the context of the specific goals and values of Slovenian NGOs. The article will focus on determining how the implementation of GCG supports the achievement of the socio-economic, cultural–historical, and, above all, mission-based goals of NGOs. Concrete examples of adaptations in the governance structure, decision-making, and internal processes of Slovenian NGOs will be taken into account to enhance GCG. The examination of challenges arising from the specific nature of the Third Sector, including issues related to controlling, reward systems for, and the accountability of members of governing bodies and employees, represents one of the key objectives of this article.

The analysis will focus on how GCG facilitates building trust and collaboration with stakeholders such as founders, employees, service users, financiers, volunteers, the local community, donors, the interested public, and others. In this context, it is particularly important to explore how business ethics [47,48,49,50,51]—meaning its key concepts such as conscience, duty, responsibility, virtue, integrity, and transparency in business, along with regular, fair, and comprehensive reporting—support harmonious and sustainable relationships with stakeholders. The identification of specific challenges related to cultural, legislative, and economic conditions in Slovenia that influence compliance with GCG standards in developed Western societies is also one of the objectives of this article. Although Slovenia is an EU member, consideration of how differences in legal frameworks and cultural norms may affect the application of international and, especially, European standards and directives, will have to be avoided, this time, due to space limitations. Finally, this article will address proposals for concrete measures that Slovenian NGOs can take to improve their GCG practices. This includes changes to governance structures, training for members of governing bodies, the establishment of ethical guidelines, the strengthening stakeholder relationships, and considering how the future development of GCG norms may impact adjustments and innovations in Slovenian NGOs.

2. Theoretical Background

An insight into the relevant literature shows that CSR and business ethics are a key element that assists NGOs in achieving their goals by providing a framework for managing organizations in an ethical, transparent, and responsible manner towards all stakeholders ([52], also see [8]). It emphasizes the importance of both moral CG and “key stakeholders’ influence on the enterprise’s core values, culture, the ethical climate, and informal and formal measures of business ethics implementation as the constitutional elements of enterprise ethical behavior” [53] (p. 527). Additionally, research has explored the impact of corporate digital responsibility on building digital trust, determining Responsible Corporate Digital Governance in a global economy undergoing the process of digital transformation [54]. The existing literature investigating the role of the board of directors as a core element of GCG in CSR performance has been synthesized and critically evaluated by some researchers [55]. Therefore, it is not surprising that GCG is on the rise even in the not-for-profit sector. The following are the key authors and sources relevant to the study of GCG in the perspective of CSR, whose theoretical considerations will undoubtedly be incorporated into our present work: (i) Concept of Shared Values: Explores how corporations can create social value through their business operations [56]. (ii) Triple Bottom Line (TBL): Concept developed by Elkington and Rowlands (1999) [57]. Encompasses economic, social, and environmental dimensions of business. Includes critical analysis of TBL [58] and a systematic review of the literature on the topic [59]. (iii) OECD Guidelines and Norms (the OECD principles (2010) cover five basic subjects: (1) protection of shareholders rights; (2) equitable treatment of shareholders, including full disclosure of material information and the prohibition of abusive self-dealing and insider trading; (3) recognition and protection of the exercise of the rights of stakeholders as established by law and encouragement of co-operation between corporations and stakeholders in creating wealth and jobs in enterprise; (4) timely and accurate disclosure and transparency with respect to matters material to company performance, ownership, and governance, which should include an audit conducted by an independent auditor; and (5) a framework of corporate governance ensuring the strategic guidance of the company and effective monitoring of its management by the Board of Directors, as well as the board’s accountability to the company and its shareholders [2]): Provide a framework for GCG and CSR [2]. (iv) Stakeholder Theory: Freeman et al. emphasize the importance of collaboration with various stakeholders in business with divergent interests and needs that corporate governance must balance to ensure each stakeholder receives their share of the value added by the company [60,61,62,63]. (v) European Commission Guidelines and Initiatives related to CSR and GCG in year 2011 [64]. (vi) Comprehensive Understanding of the Relationship between Management and Corporate Responsibility: Particularly important in non-business organizations (such as NGOs or government agencies), where this relationship is, according to Drucker, more crucial due to the absence of the market discipline imposed on business organizations [65].

The importance of GCG for efficiency and success is, according to Golob and Bartlett [66], increasingly recognized by public institutes, societies, public interest societies, institutions, and foundations in Slovenia. For some authors, for example Lahovnik, there have not been positive shifts and changes in GCG practices in the not-for-profit sector in Slovenia in recent years, as they are illustrative of “the failed transformation of Slovenia’s corporate governance process and its consequences” [67] (p. 613). For some other authors, like B. Kovač, moreover, the entire not-for-profit sector has remained marginalized on the fringes of social events [68] (p. 3). Perhaps nowhere more in Slovenia is “the discrepancy between managerial theory and practice so wide and the schism so deep as in the field of non-for-profit organization management” [69] (p. 19). Therefore, it is not surprising that a comprehensive treatment of this issue at the beginning of the transition in the 1990s was scant in the domestic literature, as it can be found in only a few places [70,71,72]. A treatment of individual aspects or dimensions of NGO management can be found in works by distinguished Slovenian academics, researchers, and activists in the field of civil society published in a monograph titled Navigating the Turbulent Waters of NGO Management, which was edited by Jelovac (2002) [73]. This collection of contributions includes all key aspects of NGO management: (a) various scientific–theoretical approaches to the study of NGOs by Kolarič [74]; (b) economic aspects of NGO management by Hrovatin [75]; (c) characteristics of Human Resource Management (HRM) in the not-for-profit sector by Svetlik [76]; (d) an analysis of policies, actors, models, and community policy planning by Fink Hafner [77]; (e) the relationship between NGOs and Slovenian civil society, public services, the state, church, political parties, and profit organizations by Hren [78]; (f) the challenge that NGO management faces the influence of the relationship between civil society and the political subsystem on the social regulation of the socio-system in transition by Jelovac [79]; (g) NGOs, management, and the process of change by Lewis [80]; (h) NGOs as learning organizations by Raos [81]; (i) NGO leadership using the example of management in higher education in Slovenia by Trunk Širca [82] and at the University of Bristol in England by Stevenson [83]; (j) public relations by Verčič [84]; (k) lobbying by Kovač [85]; (l) negotiations in the NGO sector by (Svetličič [86]; (m) fundraising techniques by Čandek [87]; (n) current events in the field of NGOs in Slovenia and trends for the future by Šporar [88]; and (o) some possibilities for the development of the not-for-profit and NGO sector using the example of the introduction of the European regional structural policy in Slovenia by Horvat [89].

Since it has become clearer “that effective corporate governance is essential to a firm’s performance” [67] (p. 613), the literature has reflected an increased understanding of the role of the Third Sector in the welfare society. In this context, some authors attempt to comprehend the position of the Third Sector within the Slovenian welfare system through a comparative analysis of its characteristics and its role in other post-socialist and European countries [90]. Both individuals and NGOs are dedicating more resources and showing a greater willingness to address the most pressing social and environmental challenges, operating in a GCG-responsible and sustainable CSR manner, driven by the spirit of the times. As many as 35% of Slovenians are already willing to pay more for products and services offered by socially responsible brands, understanding that greater social engagement is in the best interest of all [91].

3. Materials and Methods

We relied on a critical reflection on the relevant literature and an analysis of the content of key documents and legal acts in the subject area, as well as on secondary data, anecdotal evidence, our own controlled observation of phenomena relevant to understanding the relationship between GCG and CSR in NGOs in the period 1991–2004, and finally, on our own multi-year practical managerial experience as directors and deans of three not-for-profit institutions (radio, scientific institute, and faculty) and as the president of the Broadcasting Council of the Republic of Slovenia (2006–2017), an independent regulatory body in the field of electronic media. In short, data will be collected and interpreted through the descriptive analysis method, literature study, and theoretical reflexional study. Based on the results obtained in this structured investigation, we have proposed necessary changes to GCG to achieve the modernization of the Third Sector, enabling it to finally “breathe freely” after years of wandering in the post-socialist transition period, as is the case with its counterpart in developed Western societies.

3.1. Current State of Affairs for the Subject Matter of Our Study

Despite the fact that Slovenia has been in the process of post-socialist transition for more than three decades, there is considerable confusion in the field of CG, which is partly inherited from the past and partly an inevitable companion of the Zeitgeist of the new era of transition from the socialist mind-set of Actors to a capitalist one. In their minds, the myth of amoral business [48] (pp. 5–8) still resonates, which, due to the introduction of the perspective of CSR and business ethics in general, has lost its former persuasiveness even in the area that is considered its birthplace—the economy. Therefore, the real dilemma is no longer which management method is more suitable for profit-making and which for non-profit organizations, but which management and leadership philosophy and business culture are useful for successful and effective GCG in NGOs. It does not matter whether it is an industrial company or a public institute, both must be managed according to such principles and models of GCG that can lead to the organizations realizing the goals and purposes for which they were founded. It is no longer essential whether the emphasis is on material profit, i.e., the owner’s private interest, or the founder’s mission, public interest, common good, etc. It is important to get the organization out of the survival zone, i.e., business at the so-called “positive zero” in which it was during the half-century period of so-called “real socialism” (1945–1991), and shifted to the zone of prosperity. Unfortunately, one of our findings indicates that the vast majority of NGOs in Slovenia are still in the first mentioned zone, which, in our opinion, represents, among other things, a serious GCG fiasco.

There are currently several types of NGOs operating based on their legal–organizational status in Slovenia. These include societies, associations of societies, societies of public interest, institutions, foundations, public institutes, and more recently, social enterprises (see

Table 1. Overview of NGOs in SLO.

Date	Total Number of NGOs *	Societies	Public or Private Institutes
17 September 2012	25,065	22,490	2324
4 November 2022	27,550	23,459	3831
17 November 2023	27,407	23,236	3907
4 December 2023	27,399	23,237	3902

* Note: Not all registered NGOs are necessarily active. According to established practice, active NGOs are considered those that submit their annual reports to the Agency of the Republic of Slovenia for Public Legal Records and Related Services (AJPES), and they are approximately 3% fewer than the registered ones. Therefore, in 2022, there were slightly more than 27,500 active societies, public institutes, and institutions (SLO: ustanova), whose number has stabilized at around 260 in the period from 2012 to the present (source: CNVOS, 2023) [92].

below).

Table 2. Characteristics of NGOs in Slovenia from an employment perspective (in 2021).

Category	Value
Total employees in NGOs (2021)	12,561
NGOs without employees (%)	92.17%
Societies without employees (%)	95.48%
Public institutes without employees (%)	70.11%
NGOs with at least one employee (%)	7.83%
Societies with at least one employee (%)	4.52%
Public institutes with at least one employee (%)	29.89%
Institutions with at least one employee (%)	6.33%
Public institutes’ share of total NGO employment (%)	>50%
Average employees per NGO	0.48
Average employees per public institute	2.13
Average employees per institution/society	0.23

Source: CNVOS, 2023 [92].

below provides the key characteristics of NGOs in Slovenia from the perspective of employees and employment in 2021 (source: CNVOS, 2023) [92].

Table 3. The financial situation of NGOs in Slovenia.

Category	Value
Total NGO revenue (2021)	>EUR 1 billion
Societies’ contribution to total revenue (%)	60.41%
NGOs with revenue < EUR 50,000 (%)	89.38%
NGOs operating without income (%)	19.25%
First recorded decline in NGO revenues	2020
Society revenue decrease (2011, 2013)	Yes
Society revenue growth after 2013	Steady increase
Society revenue increase (2018)	3.04%
Society revenue increase (2019)	6.63%
Society revenue decline (2020)	15.56%
Society revenue rebound (2021)	18.89%
Public institutes’ only revenue decline	2012
Public institutes’ revenue recovery	2013
Institutional revenue decrease (2011, 2014)	Yes
Institutional revenue surpasses pre-crisis	2015
Institutional revenue drops below 2009 levels	2016–2017
Institutional revenue recovery above crisis levels	2018–2019
Institutional revenue decline (2020)	~28%
Institutional revenue increase (2021)	14.39%
Institutional revenue in 2021 vs 2019 levels	Below 2019

Source: CNVOS, 2023 [92].

below provides the latest available key data on the financial situation of NGOs in Slovenia.

The basic indicators of the development, or more correctly, the underdevelopment, of the Third Sector in Slovenia are presented in

Table 4. Indicators of the (under)development of the Third Sector in Slovenia.

Indicator	Value
NGO revenues as % of Slovenia’s GDP (2021)	2.10%
Global average NGO revenues as % of GDP (2013)	4.13%
EU average NGO revenues as % of GDP (2013)	3.8%
Slovenia’s NGO sector characterization	Marginalized compared to other countries
Key indicators of NGO sector development	(1) Share of public revenues in total NGO revenues (2) Share of GDP allocated to NGOs
State’s role in NGO development	Indicates level of NGO integration into public services

Source: CNVOS, 2023 [92].

below:

The share of public funds relative to all NGO revenues had been decreasing until 2017, when it became higher than the previous year after five years, reaching 35.57%. The data are presented in

Table 5. The share of public funds devoted to the Third Sector in Slovenia.

Indicator	Value
Public funds as % of total NGO revenues (2017)	35.57%
Public funds as % of total NGO revenues (2021)	46.35%
Public funds as % of total NGO revenues (2010)	40.01%
Key factor in 2021 increase	Increased funds from the Ministry of Labor, Family, Social Affairs, and Equal Opportunities (personal assistance services)
Share of GDP allocated to NGOs (Slovenia, 2021)	0.97%
Global average share of GDP allocated to NGOs	1.38%
EU average share of GDP allocated to NGOs	2.20%

Source: SURS, 2023 [93].

below:

In the year 2003, non-governmental organizations received EUR 166.76 million in public funds, while in 2021, they received EUR 507.87 million. In

Table 6. Public funds received by NGOs in Slovenia.

Indicator	Value
Public funds received by NGOs (2003)	EUR 166.76 million
Public funds received by NGOs (2021)	EUR 507.87 million
Funds from budget users (ministries, municipalities, FURS, public agencies, institutes)	EUR 482.54 million
Funds from FIHO and FŠO	EUR 25.33 million
Funds received by NGOs operating in the public interest (2021)	EUR 278.58 million
(57.73% of all budget user transfers)
NGOs receiving public budget funds (2021)	15,037 NGOs
(52.80% of all active NGOs)
Funds received from ministries (2021)	EUR 245.49 million
Increase in ministry funding compared to 2003	+522.02% (EUR 206.02 million more)
Increase in ministry funding compared to 2009	+213.25% (EUR 167.12 million more)
Ministry providing the most funds to NGOs (2021),
Ministry of Labor, Family, Social Affairs, and Equal Opportunities	(60.86% of all ministry funds)
Funds allocated for personal assistance
(from the above ministry)	EUR 107.99 million
(72.29% of ministry’s NGO funds, 43.99% of all ministry-to-NGO transfers)
Ministry of Education, Science, and Sport funding share	19.96%
Ministry of Defense funding share	6.08%
Funds received from municipalities (2021)	EUR 123.73 million
Increase in municipal funding compared to 2020	+7.79% (EUR 8.94 million more)
Increase in municipal funding compared to 2003	+97.68% (EUR 61.14 million more)
Increase in municipal funding compared to 2009	+34.93% (EUR 32.03 million more)

Source: CNVOS, 2023 [92].

below, we present the key indicators of spending of public money.

So much for the key data on the Third Sector in Slovenia at this point; so, we can move on to presenting findings on the essence of the state of affairs in this area.

3.2. Preliminary Insight into the State of Affairs in the Not-for-Profit Sector

An insight into the basis of controlled observation in the period of post-socialist transition (1991–2004) into the current state of affairs and main challenges in the not-for-profit sector, which is the focus of our study, can be best achieved by formulating the following set of factual findings (referred to as F₁–F_x):

• F₁: Third Sector continues to grapple with significant challenges, primarily stemming from unresolved issues of the post-socialist transition.
• F₂: Lack of self-awareness among owners: Ambivalence regarding ownership remains prevalent within the Third Sector, manifested in the fact that the founders of NGOs are both considered and not considered their actual owners. This means that the founders of NGO legal entities have limited sovereignty over them.
• F₃: An entrenched view still exists that civil society, non-profit organizations, or the public sector as a whole are a subsystem of the economy, which is seen as an independent, self-sufficient subsystem of contemporary, developed society that only actively creates new added value; the main difference is that the first is considered “non-economic activity”, which is seen as detrimental to the economy and represents public spending and expenses that are fundamentally thought to impede economic growth.
• F₄: A chronic disparity exists between the lofty programmatic goals, mission, and values of NGOs on the one hand and the actual results achieved in practice on the other. Consequently, this mismatch leads to a state of dysfunctional governance and/or managerial incongruence. The obvious shortcomings in non-profit organization management and leadership are among the main causes of this disparity.
• F₅: There is still a persistent bias in Slovenia’s Third Sector that professional management will diminish the importance of NGOs and turn them into capitalist businesses.
• F₆: Discrepancy between legal status regulation of NGOs and concrete conditions of their functioning in practice: they are obliged to operate in a market environment with non-professional staff, volunteers, enthusiasts, amateurs, etc., who are also underpaid for their work and often dissatisfied because of it.
• F₇: Chronic resource deficiency: The absence of comprehensive and stable financing for NGOs based on their mission and programs, as opposed to the prevailing practice of financing individual projects, has resulted in a situation where an increasing number of NGOs competing for financial support are confronted with increasingly limited sources. Moreover, more and more funders refuse to cover the entire project costs, instead requiring NGOs to secure co-financiers as a precondition for partial financial support for a concrete project. Consequently, NGOs in Slovenia often have very limited resources, undoubtedly complicating the implementation of GCG. The lack of systematic funding, a consequence of exclusively funding individual projects that are appealing to sponsors or the government, rather than supporting the overall functioning of the entire NGO, opens a persistent gap in their budgets. This creates stress, trauma, and frustration for their management, as they grapple with how to ensure their survival in a market-driven economic environment. This situation bears a striking resemblance to the conditions that prevailed at the onset of the development of liberal capitalism in the 19th century: ruthless competition, selfishness, self-sufficiency, and animosity among NGOs, which, in principle and in their declared mission, should collaborate, complement each other, connect, and create social networks within the World of Life, as opposed to the World of the System.
• F₈: Lack of expertise: NGOs in Slovenia exhibit a serious deficit of expertise in the field of GCG and management at all hierarchical levels. This is primarily due to their often-limited financial capabilities, preventing them from engaging and compensating educated personnel for undertaking such complex activities as GCG and their core operations. In the Third Sector, as of August 2023, according to data from the Statistical Office of the Republic of Slovenia, there were approximately 12,000 employees compared to a total of over 931,200 active workers in the country according to SURS (2023) [93] representing a mere 0.0128%. As a result, NGOs are typically forced to (a) employ sub-educated personnel merely to fill sensitive positions and (b) consolidate multiple different functions or departments into a single individual, creating managers who look like “generals without an army.” In this way, middle managers become the sole workforce in their organizational units, while institute directors or society presidents become “know-it-alls” as they must act as lawyers, economists, psychologists, HR professionals, educators, marketers, lobbyists, advisors, fundraisers, public relations specialists, influencers, and more if necessary.
• F₉: Lack of personnel in governing bodies and management: The dominant feature on the stage of the Third Sector is personnel understaffing and managerial illiteracy, coupled with the simultaneous belittling of the role and significance of GCG and management for the successful realization of an NGO’s mission in practice. Prejudices inherited from the past, when the communist party pejorative labeled so-called “techno-management” as a “deviation from the Party Line”, still persist. This deepens mistrust and aversion towards management as some kind of “foreign entity” in the realms of culture, healthcare, education, public services, and civil society. It has been perceived as a spirit of capitalism and commercialization, finding its rightful place in the world of business and finance.
• F₁₀: Lack of an appropriate GCG culture. In the not-for-profit sector in Slovenia, there is still some resistance to the concept of GCG, perceiving it as a capitalist and bourgeois creation. This is compounded by a widespread misunderstanding of the essential need for the following: (a) Fundamental changes in the culture of NGOs, including educating their leaders in managerial skills and acquiring necessary competencies and expertise in this field. (b) A deeper understanding of the origins of the most significant current issues in this sector. (c) Reflection on potentially meaningful paths to address post-socialist transitional challenges within them.
• F₁₁: Lack of autonomy: As seen above (Table 6), since the majority of civil society organizations are funded from the state budget, they become dependent on this sole source of income. Consequently, they lose autonomy from the current political option in power in Slovenia when determining their mission, setting the agenda for their projects, and behaving in practice. The glaring paradox is that non-governmental organizations in Slovenia are primarily financed by the Slovenian government, turning them into “governmental non-governmental organizations”, which is a contradictio in adiecto. Instead of establishing and maintaining a constant and critical distance from the political subsystem, civil society organizations in Slovenia have recently merged with it. As a result of such developments, the term “NGO” increasingly becomes something of an oxymoron.
• F₁₂: Lack of ideological–political balance: The vast majority of NGOs not only espouse a leftist–anarchist worldview and engage in ideologies and practices reminiscent of regressive post-socialist doctrines but are also highly intolerant towards anything perceived as “right-wing”, “fascism”, “Janšism”, and similar labels. Indeed, the majority of NGOs continue to operate today following the model of so-called “socio-political organizations”, such as unions, the Socialist Alliance of the Working People, the Alliance of Socialist Youth, and so on, from the former regime, essentially serving as a transmission of the Communist Party of Slovenia as the sole party within the political subsystem during the era of self-management socialism.
• F₁₃: The lack of resistance against cliques as a paradigm of corporate culture in the non-profit sector. Due to the prevalence of this phenomenon and insufficient attention to it in domestic academic circles, with one of the rare exceptions being our empirical study on cliques within a broader research on organizational culture, using the example of Pošta Slovenije d.d. [94], we had to rely on relevant global literature dealing with corporate culture in general (Deal and Kennedy [95]; Hofstede [96]; Schein [97]; Brown [98]; Cameron and Quinn [99]) as well as specifically on the phenomenon of cliques. By the way, a clique is an informal group of people within an organization who share common interests, goals, or values. Members of a clique often support and help each other progress within the organization. As a paradigm of corporate culture, a clique can have both positive and negative impacts on the organization. On the one hand, cliques can lead to increased productivity and innovation because members often share common ideas and goals. They can also contribute to greater cohesion and employee satisfaction, as members often feel a sense of belonging to the organization. On the other hand, cliques can lead to the following: (i) Spread of rumors and gossip, which can damage relationships among employees. (ii) Decreased productivity, as clique members may be more focused on their own interests than the organization’s. (iii) Discrimination and inequality in the organization, as clique members may favor each other over other employees. (iv) Bullying and mobbing, as clique members may harass or intimidate those who are not part of the clique. (v) Reduced productivity, as clique members may focus on their internal relationships rather than their work. Cliques can form based on various factors, including the following: (1) Job Type: Individuals performing the same or similar jobs may feel more connected and are inclined to form cliques. (2) Personal Characteristics: People with similar personal characteristics, such as age, gender, education, or interests, may be more likely to socialize and form cliques. (3) Position in the Organization: Individuals with the same or similar positions in the organization may feel that they share common interests and goals, making them more prone to forming cliques. (4) Shared Interests: Members of a clique may share common interests, such as sports teams, hobbies, or political ideologies. (5) Values: Clique members may share common values, such as respect, loyalty, or ambition. (6) Goals: Clique members may have common goals, such as career advancement or achieving specific business success. For example, we find that Ashforth and Mael’s seminal work on social identity theory provides a framework for understanding the formation and impact of cliques in organizations. They argue that individuals are motivated to join groups that provide them with a sense of identity and belonging. Cliques can fulfill such needs by creating a sense of shared purpose and values among their members [100]. Cialdini and Trost’s work on social influence highlights the role of conformity in group formation and behavior. They argue that individuals are more likely to conform to the norms of the groups they identify with. This can lead to the development of cliques with strong norms and a tendency to exclude outsiders [101]. Dill’s work on clique culture provides a detailed analysis of the characteristics and dynamics of cliques. He argues that cliques are often characterized by shared interests, strong bonds between members, and a sense of exclusivity. These factors can contribute to a clique’s power and influence within an organization [102]. Riordan and Shore’s research on organizational culture highlights the importance of a strong and positive corporate culture for organizational success. They argue that a culture that promotes open communication, collaboration, and respect can lead to increased employee engagement, productivity, and innovation. Cliques that foster negative or exclusionary behavior can undermine a company’s overall culture and hinder its progress [103]. “Shared values and goals, cohesion, participativeness, individuality, and the sense of ‘we-ness’ permeated clan-type firms. They seemed more like extended families than economic entities… typical characteristics of clan-type firms were teamwork, employee involvement programs, and corporate commitment to employees” [99] (p. 46). Finally, we would draw attention to more recent studies on the negative effects of cliques and negative relationships in team work [104], as well as to studies dealing with various problematic aspects of cliques in business life [105,106,107,108].
• F₁₄: Lack of adequate focus. In the non-profit sector, there is a complete preoccupation of employees, volunteers, and incompetent leadership with the organization’s mission, while simultaneously ignoring the importance of GCG, which is, so to speak, in the “blind spot” of the key stakeholders. The consequences of such an attitude have not been absent, as they have plunged the entire sector into a serious endemic crisis with no apparent way out. There prevails a mindset that views the non-profit nature of the organization as automatically relieving its leadership and staff from any obligations to create new added value. Productivity is consistently devalued to push forward organizational climate phenomena such as job satisfaction, feel-good factors, socializing, partying, in a word, enjoyment. For complete happiness, all they need is to find an altruistic donor who would generously finance such a circus.

We hold that the aforementioned set of findings, which range from F₁ to F₁₄, most accurately capture the spirit and essence of the situation that exists today in Slovenia with regard to the administration, management, and leadership of non-governmental organizations. At the same time, they represent the most serious challenges for the functioning of GCG in NGOs.

3.3. Legal–Organizational Framework of Corporate Governance in Public Institutes

From the above presented secondary data (Section 3.1) and the observed set of findings (Section 3.2), it is evident that public institutes, although not dominant in terms of numbers, are actually the ones with the highest number of employees and thus the highest human potential in business operations. In addition, institutes are the only ones with a legally regulated structure that allows them to conduct economic and/or non-economic activities. Other forms of NGOs are not intended for such activities but only for carrying out their non-profit mission. Therefore, it will be interesting for us to examine the current structure and dynamics of corporate governance in public institutes within the framework of CSR and business ethics, considering the frameworks predetermined by the overarching Act on Public Institutes. The unofficially consolidated text of the Act on Institutes includes the following: (i) Act on Public Institutes (Official Gazette of the Republic of Slovenia, no. 12/91 of 22 March 1991), (ii) Act Amending the Act on Public Institutes—ZZ-A (Official Gazette of the Republic of Slovenia, no. 8/96 of 12 February 1996), (iii) Act on Prevention of Undeclared Work and Employment—ZPDZC (Official Gazette of the Republic of Slovenia, no. 36/00 of 26 April 2000), (iv) Act on Public–Private Partnership—ZJZP (Official Gazette of the Republic of Slovenia, no. 127/06 of 7.12.2006) [109]. (See Figure 1 below.)

A privately or publicly owned so-called “public institute“ (SLO: Zavod) represents by far the most popular legal–organizational form of a non-profit organization, in addition to which there are also societies, societies in the public interest, associations, institutions of civil society, foundations, and social enterprises. The statutes of such organizations, whose goal is not to make a profit, are determined by the Act on Public Institutes, the Act on Societies, the Act on Social Entrepreneurship, etc. It is indicative that the Act on Public Institutes [109] was adopted in April 1991, which actually means at the time when Slovenia was one of the six administrative units of the former socialist Yugoslavia, and with minor cosmetic corrections it is still valid today. The CG regulation, which bears a clear stamp of the “self-governing socialism” of the former regime, is shown in modern conditions to be outdated, inadequate, and very harmful. All attempts to change such kinds of regulation in the last 30 years, in the sense that it will properly support the models of best practices in GCG, have fallen by the wayside because the old ones still correspond to the interests of the left-wing governments that have been in power since independence for four-fifths of the time. Public institutes are governed by four bodies of CG as mandated by law, which are as follows:

1.

The Council, as a collegiate governing body, consists of representatives of strictly selected stakeholders such as (1) founder/s, (2) representatives of the public institute’s employees, and (3) representatives of users and/or the interested public. The composition, method of appointment or election of members, term of office, and powers of the Council are determined by the law or act of establishment or by the statute or rules of the public institute (Article 29) [109]. The powers, jurisdiction, and responsibilities of the Council are as follows: (i) to adopt the statute or rules and other general/internal acts of the public institute, (ii) accept the institute’s work and development programs and monitor their implementation, (iii) determine the financial plan and accept the institution’s final account, (iv) propose to the founder a change or expansion of activity, and (v) give proposals and opinions to the founder and director of the public institute on individual issues, and perform other matters determined by law or the act of establishment or by the statute or rules of the public institute (Article 30) [109].

2.

The CEO (Slovenian: direktor) as an individual management body (i) organizes and manages the work and operations of the institution, (ii) represents the public institute, (iii) is responsible for the legality of the institution’s work, (iv) manages the professional work of the public institute and is responsible for the professionalism of the institute’s work (unless the law or act of establishment, depending on the nature of the activity and the scope of work of the management function, stipulates that the management function and the function of managing the professional work of the public institute are separate) (Article 31) [109].

The CEO is appointed and dismissed by the founder, if the public institute’s Council is not authorized to do so by law or the founding act. When the Council of the public institute is authorized to appoint and dismiss the CEO of a public institution, the founder gives his consent to the appointment and dismissal, unless otherwise provided by law. If the management function and the function of leading the professional work of the core business are not separated, the CEO is appointed and dismissed by the Council of the public institute with the consent of the founder (Article 32) [109].

3.

The Expert Council as a collegiate professional body (i) deals with issues in the field of the professional work of the public institute, (ii) decides on professional issues within the framework of the jurisdiction specified in the statute or rules of the public institute, (iii) determines the professional basis for the institute’s work and development programs, (iv) gives opinions and proposals to the Council, the CEO, and the Expert Leader regarding the organization of work and conditions for the development of activities and performs other tasks specified by law or the act of establishment or by the public institute’s statute or rules. Its composition, method of formation and tasks are determined by the public institute’s statute or rules in accordance with the law and act of establishment (Articles 43–44) [109].

4.

The Expert Leader (i) manages the institute’s professional work, if it is so determined by law or act of establishment, (ii) his or her rights, duties, and responsibilities are determined by the statute or rules of the public institute in accordance with the law or act of establishment, (iii) he or she is appointed and dismissed by the Council of the public institute based on the prior opinion of the Expert Council of the public institute, unless otherwise stipulated by law or the founding act (Articles 40–42) [109].

We hold that the above explanations provide enough information to form a clear picture of the state of affairs in the area of GCG in NGOs in Slovenia.

4. Results

Let us start the present section by asking ourselves, first and foremost, what needs to be clarified in terms of analysis, the interpretation of results, and/or critical commentary on the practical consequences of such a legally defined model of governance in the non-profit sector, according to which, there are four independent governance bodies in public institutes participating in its administration, each in its own way.

What needs to be emphasized first is the conceptual confusion in the relationship between the founder and owner. An indicative fact is that the Act on Public Institutes was adopted in April 1991, a time when the Socialist Republic of Slovenia was part of the former Yugoslavia. This explains why it is nowhere explicitly stated that the founder is also the owner of the public institute and has all the rights that belong to an owner. Instead, the operation relies on a vague ideological formulation that the founder has “founding rights”, which is, incidentally, logically circular and thus ideal ground for manipulation in practice. For example, the founder created the institute as their subsidiary “child” but is not responsible for its operations since they are not the owner of the public institute but only its founder. However, if and when needed, they can transform into an owner without explicitly stating it. We must not forget that Bolshevism, as the ideological basis of the self-management system, only recognized so-called societal ownership, prohibiting and persecuting all other forms, such as private, state, cooperative, etc. Since dialectics, in the sense of the unification of opposites, is on the rise, anyone can act in any way that makes sense to them.

The next phenomenon that should be highlighted is the real possibility that the founder of the public institute may lose control over “their” institute. If we accept the previously mentioned scenario, then consequently, the founder as a somewhat “castrated” owner faces a very real danger of an informal group of stakeholders taking over the public institute. This is because, due to their lack of self-awareness as an owner and the absence of an appropriate corporate governance culture, they do not have the necessary mechanisms to prevent it. This is a common occurrence that, unfortunately, is only evidenced by anecdotal evidence because it does not happen in the open but rather “under the radar”, in the deep shadow of captured public institutes, very similar to the phenomenon of a deep or captured state. This is why it has also remained below the radar of academic empirical research and the interest of the broader public, which could conclusively determine the actual state in this area.

In the described constellation, meaningful, efficient, and timely interaction between governance bodies is significantly hindered. This is due to their excessive number, composition and method of selecting members, decision-making structures and dynamics, complicated lines of subordination and superordination, and loosely defined competencies and responsibilities. The fact that, apart from the CEO who is in regular employment, members of other bodies are generally ambitious, egocentric, power-seeking enthusiasts and/or volunteers without remuneration for their functions adds to the complexity. Furthermore, in the Third Sector, members of governing bodies are often undereducated and insufficiently experienced for such managerial roles, potentially causing significant harm. Lastly, they often find themselves in conflicts of roles and interests.

Many individuals in the Third Sector are involved in the activities of various institutions, state organs, media, etc. They operate in a “bumblebee-like flight” fashion: a little here, a little there, a bit everywhere. For example, one might start as an intern at a student NGO radio, then progress to becoming a journalist or presenter at a state or private radio station, all while being politically active. This political involvement can lead to public recognition and influence, eventually reaching the position of a parliamentary representative. After their term in office, they may secure a well-paid job as a PR manager in the Government Information Office or as a correspondent for the public broadcaster in foreign countries or in the Brussels administration, and the cycle continues. In their “bumblebee-like flight”, it is never clear what these individuals truly are—activists, media creators, politicians, PR professionals, influencers, or a blend of all of them—creating an incredibly eclectic mishmash.

In Slovenia, it has long been a widespread practice to appoint a CEO (= director) of a public institute in primary and/or secondary education from among the teachers in the collective. Similarly, in universities or faculties, a full professor is typically selected for the position of rector, prorector, dean, or vice dean. In hospitals, a doctor is chosen, and in cultural institutions such as theatres or museums, an artist may be selected, and so on. In the media, a journalist is chosen, but almost never a professional manager. The consequences of this paradigm have not been absent: the sector, unlike the economy, is managed in an extremely amateurish and unskilled manner. It is well known that in this field, the rule is when the organization fails, improvisation begins. The best evidence for this claim is that, from the liberation in 1991 until today, not a single manager from the Third Sector has received the “Manager of the Year” award given by the professional association of managers in Slovenia. This award has always been won by managers from the business or public administration sectors.

It seems evident that there is a clear imbalance between the rights and responsibilities of the members of the governing bodies of public institutes because no one is held accountable for anything, except the CEO, who is the sole responsible person but only for the legality of operations, not for their success. Everyone has certain rights but not obligations. Such a situation is highly risky due to the potential for misuse. Namely, people who have not invested a single cent of capital in the public institute are deciding its fate, and, above all, they do not personally financially bear the consequences for any potential harm caused to the institute by their amateurish or deliberate wrong decisions. Moreover, it is widespread for members of the Public Institute Council to prioritize their selfish personal interests or the partial interests of their ideological–political options or clique above the overall public interest of the institute as a whole.

It is indicative that in the current state, none of the governing bodies in institutes is responsible for addressing CSR, business ethics, and the green transformation of business. Members and presidents of the Councils are primarily concerned with satisfying their political patrons and/or powerful figures from the deep state, rather than genuinely caring (not just declaratively) about the CSR agenda, business ethics in general, and environmental, civil society, and green innovation issues. The role of an Ethical Officer, who would systematically address such issues, is not legally mandated and does not appear in the everyday life of public institutes. This has the immediate consequence of weak practice, where NGOs are not at the necessary distance from the government, making them unable to exercise a critical self-awareness of a post-modern democratic society. Instead, they become either (a) a mere transmission of the political subsystem (as was the case in the past) or (b) an illegitimate participant in a radically left-oriented government, lacking legitimacy as they were not elected in free elections (as has been the case recently).

Now we have come to a phenomenon that requires further explanation. We are talking about cliques as a specific paradigm of corporate culture that denotes the creation of closed groups i.e., cliques within a NGOs. These groups have (a) their specific interests, values, or goals and (b) often develop internal hierarchies, rules, and norms that may be separate from the formal rules and procedures set by the NGO itself. Such dynamics can have various implications, both positive and negative, on corporate culture and the overall functioning of the organization.

In Slovenia, it is a common practice for a prominent intellectual or influencer, together with their clique, to establish a public institute (requiring no founding capital) with the aim of obtaining funds from the state budget, sponsors/donors, and various EU funds. These funds might be inaccessible to them as individuals, i.e., natural persons, but not as a legal entity. One of the negative consequences of this approach is the phenomenon of substituting institutional relationships with intersubjective relationships within the horizon of the non-profit sector in Slovenia. This substitution is directly responsible for distorting the patterns and rules of GCG in NGOs, where the mindset often becomes “we” (=our clique) are here to enjoy and benefit ourselves, rather than to fulfill what the mission and business policy of the institution require from us, as we are just one part of it and nothing more.

In practice, the seductive taxonomy becomes apparent, especially if one holds the commonplace belief that “Nomen est omen” (the name is a sign). The terminology in the Act on Public Institutes related to governing bodies is quite seductive. It implies that the Council of the public institute, as the highest governing body, has the right to confirm and/or advise other bodies, “give opinions and proposals”, rather than govern the public institute directly. In practice, this can take the form of either repressive tolerance or complete impotence or a combination of both, which is often the case.

It is useful to note in this discourse the composition of the institute Council as a tripartite body. As established earlier, the Council’s mandatory composition consists of three delegations: (a) representatives of the founder, (b) representatives of the public institute’s employees, and (c) representatives of users or the interested public. Consequently, practical problems typical of any triumvirate since Roman times will always arise. One option is to regulate it by the public institute’s statute in such a way that the founder/s have an absolute majority, in which case the very essence of the tripartite nature of that body is nullified, as the other two stakeholders (employees and the interested public) become mere decorations, having no real decision-making power. Another option is to structure the Council’s composition in the spirit of democracy so that all three delegations have an equal number of members from their ranks. This leads to an open battle for the creation of a majority in the Council who will reach power. Another option is to create an unprincipled coalition of two delegations against the third, as two are always stronger than one: “Two bad, Miloš dead”, asserts one of well-known commonplace on this issue. In this case, if a coalition is formed between employees and the interested public, there is a real risk of them taking over the public institute from the founder and de facto making it private. Except for dissolving the public institute or withdrawing from it, the founder has no other solution, which is weak because it may lead to the decline of their reputation and good standing in the public eye. In summary, the legal solution is weak, as it leaves only negative consequences in the practice of corporate governance in the non-profit sector. Therefore, it is necessary to replace it with contemporary solutions, for which, currently, there seems to be no political will.

So-called “self-management” control is another phenomenon that we must not overlook in the presentation of the results of our inquiry. The presence of employees in the highest governing body of the public institute means that they have the opportunity to control themselves. This not only exemplifies weak self-management practices from the former system, which failed precisely because of this, but also represents an obvious conflict of roles and interests. If a GCG system is established in the public institute, the same person should not serve as both the controller and the controlled. These are two distinct roles with divergent interests, and their syncretism creates various ambivalent and/or controversial situations. Let us illustrate this with an example. Suppose the head of marketing, head of finance, or head of accounting becomes a member of the Public Institute Council from the ranks of employees, automatically becoming the supervisor of the CEO, instead of the other way around, where the CEO directs and controls their operations. In the extreme case, they may desire and have the ability to remove the director who scrutinizes them too closely, just as the director may wish to dismiss them from their positions, thereby terminating their mandate as Council members and marking the end of their power over him.

However, such a state of affairs creates an ambivalent situation, an unbearable tension that usually leads to an irresolvable conflict, resulting in weak corporate governance practices. Additionally, the CEO needs to have a “friendly” Public Institute Council, as any other scenario creates an impossible situation where someone has to leave—and there is a higher probability that it will be the CEO rather than the entire Council. Therefore, all institute directors in Slovenia strive to have their friends, ideological–political like-minded individuals, schoolmates, godparents, acquaintances, or friends of friends elected to the Council. These could be individuals who owe them something or even intimate partners (with different last names to avoid obviousness at first glance). By doing so, they secure a governing body that will not hinder them from doing what they want, rendering the so-called two-tier administration virtually meaningless.

The management of NGOs in Slovenija is still not sufficiently committed to establishing and measuring received financial resources based on their non-financial performance. However, it should be at the forefront in the fight to transition to a low-carbon and more inclusive economy. In doing so, they should express less concern about “greenwashing” and more about the fact that it is not only the task of environmental NGOs to be involved in preserving the human environment but actually all of them without exception. Therefore, the main concern of the Boards of Directors of NGOs should be to conduct a critical review of the situation in this regard by adopting the classification, analysis, and assessment of current sustainability measurement methods already used by investment funds from the industry and academic community. Such an evaluation is based on a matrix of seven criteria developed based on gaps identified in academic papers and reports of international organizations. After careful evaluation, Popescu and colleagues [20] discovered “that carbon footprints and exposure metrics and environmental, social, and governance (ESG) ratings, while widely used, have several shortcomings, failing to capture the real-world sustainability impact of investments” [20]. Based on this insight, they proposed that in the future, “open-source, science-based, and sustainability-driven assessment methods” become the priority assessment methods, which can be upgraded “by incorporating the measurement of positive impact creation and by adopting a life cycle perspective” [20]. Considering the need for sustainability assessments by NGO leadership to be directed towards reality, the compatibility of their outputs (products or services) with scientifically based sustainable development goals should become a central element both in their daily practice and reporting, which is currently not the case.

The legal (dis)culture best exemplified by the slogan “we have the right to enemies because we will agree among ourselves” (regardless of applicable legal norms) is a predominant paradigm inherited from the period of self-management socialism in the Third Sector and one that still prevails today. Although Slovenia was part of the Austro-Hungarian monarchy for several centuries, which was, at least in the last period of its existence, a “rule of law”, and spent only 46 years in the communism of the former Yugoslavia, the influence on shaping corporate culture has proven to be more powerful, although not completely dominant. Slovenia has become a kind of bridge halfway between Central Europe and the Balkans, so it does not fit purely into the “Catholic zone” as a newcomer from the former “communist zone”, according to Inglehart and Welzel (2005; 2023) [110,111], but is a cultural “cocktail” mixed from elements of communist collectivism, Protestant work ethic, a Catholic sense of community solidarity, communist atheism, and hedonism. This blend seriously complicates the moral and professional functioning of members of governing bodies, not only in the Third Sector but also in the First and Second Sectors. In this context, Slovenia is still waiting for the real onset of the post-socialist transition process. At this moment, there is nothing to suggest that this will happen anytime soon.

5. Discussion

If the decision-making factors within the political subsystem and stakeholders of civil society were to gain the political will in the future to incorporate corporate governance with the intention of adapting to the spirit of the times and providing a more adequate response to its challenges and pitfalls, they would primarily need to contemplate the business–moral, responsible–sustainable, and green agenda. For such an opportunity, it might be welcome to consider the content of our undertaking in this article. In our opinion, the sequence of events will then be very simple: “first the small stable, then the little cow”. This essentially means that one should start primarily with changing the current legal framework to achieve a new legal–organizational arrangement of corporate governance, stemming from an attempt to eliminate all the aforementioned shortcomings of the controversial state of affairs in this area, before moving on to the more challenging task—gradually and painstakingly changing outdated and entrenched patterns of corporate governance and management culture. In our assessment, establishing an effective single-track administration instead of the current dual track represents a necessary precondition for any meaningful change. In that case, the public institute would have only one centralized GCG body, which instead of a Council would be called by its proper name, the Board of Directors, composed of the following:

• The Chairman of Board;
• CEO;
• Professional Leader;
• CFO;
• CMPRO (Chief Marketing and PR Officer);
• CECO (Chief Ethics and Compliance Officer); his/her duties & responsibilities should be to:
  • creates and distributes business ethics policies, statements, and acknowledgments to support them;
  • offers an internal evaluation of other NGO policies in order to guarantee corporate coherence and alignment with the ethical principles, incorporates the message of business ethics into the entire organisational culture;
  • oversees the creation and execution of business ethics and conflict-of-interest policies. CECO also teaches senior management how to make ethical decisions and steer clear of conflicts of interest.
  • investigates complaints and claims of unethical behaviour or conflicts of interest as soon as possible; writes investigative reports when required;
  • every year, in collaboration with legal counsel of the Board of Directors, conducts corporate governance audits to assess the NGO’s condition and reports results to upper management and founder/s. The corporate goal of minimising the amount of employee data that must be kept by the NGO will be covered by corporate audits, together with risk minimization with regard to situations that encourage identity theft;
  • creates and upholds private protocols for the processing and management of accusations and complaints. Establishes procedures for the private hearing of employee concerns about conflicts or ethics;
  • keeps current on standards for corporate governance, compliance and reporting obligations, and relevant legal benchmarks from both state level and local communities.
  • as allocated by Board of Directors, carries out further related tasks (summarised by: SHRM.org.) [112].
• RKS (representative of key stakeholders).

According to our proposal for changes to corporate governance in the field of NGOs in Slovenia, the most crucial aspect is related to the current Council as the governing body in the public institute. In the future, GCG in the institute would be executed through a single-track process with the assistance of a unified collegial administration, management, and leadership body consisting of seven members responsible for overseeing various processes in the not-for-profit core activities of the institute and potential supplementary for-profit activities aimed at generating funds for the realization of their mission. Each of them would be associated with an advisory body and/or organizational unit, department, or function, which, with its competencies, would assist them in fulfilling their role in the successful GCG of the public institute (see Figure 2 below). In doing so, we agree with the arguments of those authors (i.e., Jouber, 2021) who “reveal that tenure, ideology, and educational level (gender and nationality) predominantly appear to drive a firm’s CSR within one (two)-tier boards settings” with the difference that we give priority to the first [113].

The key responsibilities and authorities of the members of the Board of Directors should be as follows:

Ad (1) Chairman of the Board: The Chairman should act as primus inter pares; he/she is the President of the public institute and simultaneously the responsible person representing the institute in legal transactions.

Ad (2) CEO: Among other responsibilities, the Chief Executive Officer ensures harmonious collaboration and communication among all internal organizational units, departments, functions, and individuals in achieving the purpose for which the public institute was founded, both internally and with external stakeholders. This especially relates to the business ethical agenda and the management of active corporate citizenship and sustainability, as well as environmental, civil society, and green innovation issues.

Ad (3) Professional Leader: This individual is an expert manager in the field of the public institute’s basic activities or core business. Their primary function is to lead the professional work in the institute and represent the interests and needs of employees in the core activities of the institute on the Board.

Ad (4) CFO: Among other responsibilities, the Chief Financial Officer is in charge of diversifying funding sources, fundraising for the institute, and ensuring a systematic and regular flow of sufficient financial resources needed for its normal operations.

Ad (5) Chief Marketing and PR Officer: Responsible for maintaining the institute’s reputation, successful communication with the public, and efficient sales of its products or services in the market.

Ad (6) Chief Ethics and Compliance Officer: Serves as the organization’s internal control point for ethics and improprieties, handling allegations, complaints, and conflicts of interest. Provides corporate leadership and advice on GCG issues within the framework of CSR, business morality, environmental, civil society, and green innovation. Manages corporate citizenship and sustainability in the Age of Trans-Modern Transition. With compliance, the boundary is defined by law, rules, regulations, or policies, and adherence is mandatory. Ethics involves judgment and making choices about conduct that reflect values, aiming to achieve best practices of honorable behavior that builds trust among stakeholders and the public, including integrity, impartiality, transparency, honesty, reliability, loyalty, and credibility.

Similarly, since cliques (as we already seen above) are a common occurrence in corporate culture in Slovenia, as well as in other countries of the former communist bloc, non-profit or non-governmental organizations aiming to create a positive and inclusive work environment should be aware of the potential negative impacts of cliques and take steps to prevent them. Actively preventing the organization from splitting into formal and informal subsystems inevitably establishes a clique-driven corporate culture where cliques compete for dominance. In this context, it is undoubtedly a continuous task for all members of the board of the public institute to actively prevent “cliquish” behavior, as they should be the first to be aware of its potential risks and the necessity to consistently and permanently take steps to reduce it to an acceptable level and, in the last consequence, prevent the detrimental influence of cliques on corporate culture. Some of the steps they could take include the following:

(a)

Promoting diversity and inclusion: This reduces the likelihood of cliques based on personal characteristics or position in the organization;

(b)

Promoting transparency, open communication, and collaboration among all employees and other key stakeholders of the public institute: This reduces the likelihood of conflict and discrimination between different cliques;

(c)

Setting clear expectations: This prevents or at least reduces the likelihood of corruption and other negative behaviors that may occur within cliques;

(d)

Emphasizing the importance of moral values and norms such as honesty, respect, equality, and justice: This reduces the influence of cliques on the institute’s corporate culture;

(e)

Appointing responsible individuals: Designate the CEO and CECO as individuals primarily responsible for resolving conflicts arising from cliques;

(f)

Training employees on the impact of cliques on corporate culture: NGOs should educate and train employees and volunteers on the dangers and negative aspects of cliques, how to recognize them, and how to reduce them to a manageable level.

Ad (7) Representative of key stakeholders: This role plays a special part in registering and understanding the conflicting interests, desires, and intentions of different stakeholders of the public institute in order to effectively balance them.

The enduring responsibility of the Board of Directors as a whole should be to do as follows:

(1)

Establish and foster an entrepreneurial spirit and transformational leadership according to Bass and Riggio [114]: This entails planning for the future as well as fostering an environment that rewards creativity and dynamic leadership in the face of pressing issues or challenges;

(2)

Transform the prevailing clan-type organizational culture in the corporate culture of the Adhocracy, which includes (a) management that “responds to urgent problems rather than planning to avoid them” [99]; (b) dealing with what is always ad hoc, implying something temporary, specialized, and dynamic [99] (p. 49); (c) recognizing that GCG in a hyper-turbulent world must resort to innovative and pioneering initiatives, developing new products and services to meet the future with an entrepreneurial spirit, creativity, and activity on the cutting edge [99]; and (d) a new cultural paradigm characterized by orienting the organization towards creativity, demanding that its leaders be innovators, entrepreneurs, and visionaries. The theory of efficiency, relying on innovation, vision, and new resources that bring transformation, innovative outputs, and agility, guides them in practice [99]. This is particularly challenging given that the metamorphosis of deeply rooted patterns of retrograde behavior in individuals and groups in the Third Sector to overcome the past and achieve current exemplary Western models of successful business will be a tough nut to crack for the board;

(3)

Influence the reduction in established governance incongruence: The Board of Directors, through its activities, impacts a reduction in governance incongruence as it creates dissonance, which poses a serious hazard to successful corporate governance. To avoid dissonance between words and actions, decisions and outcomes, a relationship of highly correlated consistency must be established and maintained (see Figure 3 below);

(4)

To incorporate social entrepreneurship into the public institute’s operations to the greatest extent possible, because the principles of social economy align best with the not-for-profit nature of NGOs. The entrepreneurial spirit primarily aims to provide a market response to solving social, environmental, local, and other issues, thereby enabling the promotion of societal well-being. As is well known, social entrepreneurship is by definition a form of entrepreneurship that focuses on achieving social goals and community benefits. In contrast to traditional entrepreneurship, it places social goals, values, and missions ahead of economic goals. This aligns with the primary goal of all not-for-profit organizations, which is to shift the focus from profit to the following:

(i)

Addressing social problems and challenges (such as poverty, unemployment, social exclusion, environmental issues, health inequalities, and others);

(ii)

Improving the quality of life (especially for vulnerable communities and individuals, ensuring access to basic goods, services, and opportunities for all);

(iii)

Creating social value (by enhancing social capital, reinvesting profits back into the community, funding social programs, improving people’s quality of life);

(iv)

Social inclusion (particularly for vulnerable groups, including people with disabilities, the homeless, long-term unemployed, immigrants, and other marginalized groups);

(v)

Sustainable development (which includes environmental sustainability, social justice, and long-term economic stability, CSR, morality, and green initiative issues, etc.).

In Figure 4 below, the conceptual model is presented, synthesizing all the key latent constructs from this perspective of GCG in NGOs. We believe that by creating this, we have adequately addressed our original research question (RQ1), hence nothing prevents us from spending further time working on this article’s theoretical and practical implications. In the Conclusion, we will summarize the answer to RQ1 in the form of synthetic propositions based on all those partial answers that have already been given in Section 4 of present article.

By this means, we have reached the position where we can, for the last time in this article, reflect on our fundamental research question RQ₁ on key aspects of GCG to achieve the proper type of leadership by governance bodies in the context of non-governmental/non-profit organizations. Although we believe that we have satisfactorily answered it by now, it will not hurt to approach it in the form of synthetic concluding propositions, namely, theorems (hereinafter, T) and their corollaries (hereinafter, C). So, let us proceed in order.

T1. 

Good Corporate Governance in the Third Sector is still insufficiently developed in relation to comparable countries in the EU (of which Slovenia has been a member state since the year 2004).

C1. 

The causes of the above-established state of affairs and spirit should primarily be sought in the fact that the sector itself is a neglected and overlooked field.

Proof of T1. 

Let us mention at least the key indicators that clearly demonstrate the marginalization of the Third Sector in Slovenia:

• A total of 92.17% of NGOs have no regularly employed staff, so the entire sector employs an average of 0.48% of those employed in NGOs; out of approximately 900,000 employed in Slovenia, only 12,500 have found employment in NGOs, representing a mere 0.14%;
• Regarding the annual income of NGOs, 89.38% generate less than EUR 50,000, while one-fifth (=19.25%) have no income at all. The total revenue of NGOs accounts for a modest 2.10% of the Slovenian GDP, while the EU average is twice as high. In such circumstances, the intention of professionals in the field of management and leadership to seek employment in NGOs cannot be expected, resulting in the sector being mainly managed by volunteers who are amateurs and enthusiasts;
• Most NGOs rely on state budgets and donations/sponsorships instead of independently earning financial resources for their existence and development, for example, in the form of social entrepreneurship, the green economy, circular economy, etc.;
• The Slovenian state allocates less than 1% of its budget to support the activities of NGOs (=0.97%), while the EU average is twice as high (=2.20%).

□

T2. 

The marginalization of the Third Sector in the Age of post-socialist transition has a strong positive correlation with deficient management and corporate governance in NGOs.

C2. 

Consequently, such a state of affairs and spirit particularly relate to managerial inconsistency when not considering the perspective of corporate social responsibility and the green economy agenda.

Proof of T2. 

No NGO has an “ethical office” and a “chief ethical officer”, only a few have business ethics codes, and everything else we have proposed must be changed if there is political will and the will of Actors in the civil society to lift the Third Sector out of the lethargy it is currently in. In the process of demarginalization, a mere change in the outdated legal framework will not be sufficient; a radical metamorphosis of the inadequate patterns of the currently dominant corporate culture that hinders the transition to postmodern GCG is needed. □

T3. 

In terms of smart, timely, and responsible GCG, if it relies on the CSR, business ethics, and green innovation agenda within its frame, the implementation of the proposed conceptual model could be useful in building highly professional and sustainable corporate culture.

C3. 

The above concept of GCG implemented in this way ought to lead to the building and maintaining of NGOs’ excellence.

C4. 

The prerequisite for something like this will be the previous elimination of the deficiencies that we defined using findings F₁–F₁₄ (see Section 3.2 above), while simultaneously implementing the necessary changes in the legal status of NGOs, as well as their corporate culture, that we proposed in Section 5 and Section 6.

C5. 

NGOs should be at the forefront in the fight to transition to a low-carbon and more inclusive economy; in doing so, they should express less concern about “greenwashing” and more about the fact that it is not only the task of environmental NGOs to be involved in preserving the human environment, green innovations, and societies without the use of fossil fuels but actually all of them without exception.

C6. 

Only if it goes in the direction described above, then GCG in the non-profit sector opens up a great potential for real opportunities for rapid development in the future, despite the current situation, which we cannot assess as satisfactory.

Proof of T3. 

The above proposed conceptual model (see Figure 4 above), as a result of an analysis of and critical reflection on previous research, can be the basis for further research in the domain of building the GCG culture of NGOs as a mechanism for the professionally and ethically accountable behavior of Actors to build stakeholders’ trust. The proposed model stands in for the review of the influences of trust (and its individual dimensions) as latent constructs, which are mediators between the NGO as the main independent variable and the GCG as the main outcome i.e., dependent variable. Empirical research, by implementing this model, would probably enable the assessment of its validity. Moreover, the model would enable the measuring of the exact influences of individual dimensions of the GCG process on its implementation in transmodern socio-systems, especially, economy and politics. The application of this model in empirical research will surely be the subject of our future work. □

6. Theoretical and Practical Implications

Despite ample research on corporate governance (CG) and corporate social responsibility (CSR), there is a lack of consensus on the nature of the relationship between these two concepts and on how this relationship manifests across institutional contexts. Drawing on the national business systems approach, Zaman et al. [115] have systematically reviewed 218 research articles published over a 27-year period to map how CG-CSR research has evolved and progressed theoretically and methodologically across different institutional contexts. The authors categorized the nature of this relationship into two strands: (i) CSR as a function of CG and (ii) CG as a function of CSR [115]. To us, such a dilemma seems very similar to the well-known paradox of what comes first, the chicken or the egg. In our view, this involves something entirely different, namely, the concept of feedback loops, in which, of course, the impulse must originate from the leadership of the NGO that has already become sensitive to the moral dimension of business and management (i.e., CSR). This is to achieve the trust of key stakeholders, primarily based on moral values and norms (see Figure 4 above), enabling good corporate governance (i.e., GCG) to act as feedback that influences the leadership of the not-for-profit organization. This, in turn, respects, develops, and enhances the CSR and green agenda of their organization, which is represented in the NGO’s choices of how it will operate within the internal and external environments in which it finds itself, as well as free choices about where it will and will not operate. As such, an NGO’s CSR strategy is unlikely to be independent, or even separable, from its basic value propositions to its main stakeholders, like founders, customers, workers, suppliers, and interested public–societal groups, which are, according to Freeman (1984), themselves embedded wholly or partially within their own societies. This implies that “one cannot understand the CSR strategy and politics of organizations without understanding the nature of the institutional environments in which they choose—or are forced—to operate” [116]. The NGO’s Board of Directors, Ethical Office, key stakeholders, collaborators, and managers make important decisions about how to be well governed, and CSR strategies and policies are a crucial part of those decisions. This includes identifying the stakeholders who should be granted legal and moral recognition in NGO decision-making, as well as those who the NGO, its managers, and its founder(s) feel have a rightful claim to the benefits.

In this conceptual paper, we explored the importance of CSR and business ethics as such in the non-for-profit sector, particularly in the context of GCG. We examined trends contributing to the growing significance of GCG in the Slovenian Third Sector, together with its most obvious challenges. Our investigation indicates that GCG helps NGOs in Slovenia achieve their goals, improve transparency and accountability, and enhance the efficiency of resource utilization. However, we also identified the obstacles and pitfalls that NGOs face in adopting and implementing GCG, including a lack of resources and expertise and an inappropriate GCG culture. This article demonstrated that GCG, as the most crucial factor in CSR, plays a key role in the success of NGOs by enabling them to achieve their objectives, build public trust, and effect positive societal changes. We hope that this paper will stimulate further theoretical and empirical research on GCG in the Third Sector worldwide, and not only in Slovenia. It would also be beneficial for the Slovenian government, academic institutions, and other relevant organizations to become more engaged in supporting NGOs in strengthening their capacities for GCG. In our opinion, NGOs in Slovenia can improve their GCG practices by following the proposed guidelines, which arose as a practical implication of this article: (1) Establishing a clear structure and dynamics of single-track corporate administration. (2) Enhancing the public engagement, transparency, and reporting of corporate governance bodies. (3) Ensuring the expertise and ethical conduct of all participants in the field of corporate governance. (4) Creating a culture of trust based on moral responsibility, integrity, impartiality, honesty, loyalty, credibility, seriousness, and transparency. (5) Establishing a new structure and dynamics of stable, systemic, and sufficient funding for programs that represent the concretization of the mission of the non-profit organization, not just its individual projects (as is currently the case). In this process, key stakeholders should actively assume their roles, including the following: (i) Founders with regular contributions to the own public institute. (ii) Employees and management incorporating social entrepreneurship, economic activities, and fundraising into the context of independently generating income for their core non-profit activities, instead of passively waiting for money from another source. This approach would put an end to the current culture of begging and corruption in the competition for financial resources. (iii) The government creating some form of public fund for autonomously financing part of the costs of implementing programs of the Third sector and/or the operations of NGOs.

It is assumed that NGOs investing in GCG will become more efficient, transparent, and accountable organizations. Therefore, they are better positioned to achieve their goals and bring about positive societal change if they act as follows:

• Use CSR not only as a promotional message but as a moral practice that builds trust among stakeholders and the broader public, serving as a necessary prerequisite for GCG;
• Ensure the Ethical Office effectively fulfills its role in the everyday life of the NGO consistently and tirelessly;
• Transfer the principles and norms of business ethics and green economy from “soft” factors to “hard” factors in their business policies;
• Recognize the importance of GCG in the constellation of business morals and consistently integrate it into their practices;
• Establish clear goals and values for their organization [117,118,119]. Based on empirical research on the organizational values used in practice by managers in the public and private sectors in Slovenia, researches found, in a representative sample of 400 respondents, that “efficiency” ranked 17th in importance in the public sector and even last (20th place) in the private sector [117]. This result was replicated in a study of Slovenian entrepreneurs, where efficiency also turned out to be of least importance [118]. For comparison, using the same research instrument, Van der Wal and Huberts found that efficiency ranked a high 7th among managers in the private sector in the Netherlands [119]. The authors of the Slovenian study attributed such results to historical and cultural factors in Slovenia, where it is evident that Weber’s Protestant ethic did not take deep roots, and memories of the half-century rule of self-managed socialism still influence the mindset and practical behavior patterns of managers [117];
• Effectively manage their resources;
• Use the grants from EU funds for structural policies to develop GCG;
• Collaborate with all key stakeholders;
• Better respond to the needs of their users and society as a whole;
• Process and disclose complete and timely information about their activities and finances transparently and responsibly.

As far as we know, these would be the key implications of our conceptual model, which represents a synthesis of answers to our initial research question RQ₁, posed in the Introduction: how, through a critical reflection on key aspects of GCG, to achieve the proper type of leadership by governance bodies in the context of NGOs. We took the NGO sector in Slovenia as an example, which, based on secondary data (see Section 3.1) and our diagnosis of the state of affairs derived from controlled observation of the facts, provides insights through our conducted theoretical–conceptual investigation, the result of which has been formulated in the form of 14 key findings (see Section 3.2). We have provided a detailed explanation of the essence of public institutes as the most promising type of NGOs in Slovenia. We were particularly interested in their ability to adapt to the factors of internal and external environments, which bring significant challenges to corporate governance. We determined that, under the current legislative framework, the leadership of public institutes cannot adequately address such issues. A fundamental change is required not only in the legislation governing the functioning of the Third Sector but also in the evolution of organizational culture patterns (primarily the cliques syndrome), a radical shift in the mindset of all key stakeholders of public institutes, and the systematic and consistent overcoming of accumulated stereotypes, outdated clichés, and absurd taboos that, despite more than three decades of post-socialist transition, remain deeply entrenched in the minds of most Actors in this sector. Our proposed remedies for the current state of affairs have not been omitted. To this end, we have suggested to legislators and other key stakeholders a single-track administration body for public institutes as their new CG system and additional measures to achieve the desired state (see Section 4, Section 5 and Section 6), a state synthesized in the new GCG structure scheme (Figure 3) and the conceptual model presented in Figure 4. In this way, we have accomplished what we set as the main goal and task of this paper, thus closing its hermeneutic circle. What remains before we move on to the Conclusion are reflexional analyzes on its limitations.

Limitations

There is no paper that contains only strong aspects without any limitations. In this sense, ours is no exception. At this point, it would be very useful to recall in mind the words of the glorious Scottish philosopher David Hume: “It is difficult for a man to speak long of himself without vanity; therefore, I shall be short” [120]. Speaking in this spirit about the limitations of this conceptual article, as much as we, as its authors, can assess, they include the following:

(i)

The absence of empirical research that would test the proposed conceptual model and thus verify its validity; we expect that such research will be conducted in the near future;

(ii)

Taking a single country (SLO) as a paradigmatic example for studying the phenomenon of GCG within NGOs, which here are still deeply embedded in a non-Western context due to their ongoing post-socialist transition;

(iii)

In the pursuit of truth through the maximization of value neutrality and objectivity, an occasional lack of political–ideological correctness;

(iv)

The use of anecdotal evidence, the authors’ extensive managerial experience accumulated over five decades in academia and in leading nonprofit organizations, and self-citations in cases where there is a lack of directly relevant literature by other authors on the specific aspect of GCG that lies at the core of our research interest;

(v)

Certain parts of the above text may seem to the reader prima facie as digressions from the main thread of the present article, but in fact they are a necessary explanation of the broader horizon within which our main subject of research is located;

(vi)

Definitions of well-known concepts within the academic community are omitted due to concerns about the scope of the article;

(vii)

Despite our maximum effort to maintain an academic, neutral writing style, in some places we had to make an exception and resort to stronger expressions that may be closer to slang because they better correspond to an authentic description of situations on the scene of the Third Sector, in which sometimes anomalies or insults to common sense occur;

(viii)

Because we have no prejudice against so-called older references, which is evident in the text, we did not divide references into fresh, say, not older than five years, and outdated, but into relevant vs. irrelevant, high-quality vs. weak, regardless of the year of publication, which may seem controversial to some academic people.

There is so much we can say about this topic at this point.

7. Conclusions

In accordance with well-established academic practice, authors of original scientific articles are expected to briefly summarize their findings in the conclusion and propose directions for future research. We believe that we have clearly and distinctively presented and explained our findings within the text itself, so repeating them here, even in a condensed form, would be entirely redundant and, therefore, inappropriate. For this reason, we have decided to simply omit this expected part of the conclusion in order to make room for the other task—unlocking dilemmas and possible directions and trends for future research.

After all, we hold that the research area addressed in this article is conducive to further theoretical and empirical research on GCG in the not-for-profit sector in Slovenia and beyond. Therefore, in our opinion, it would be especially valuable for researchers to focus on investigating the following study dilemmas: How can NGOs in Slovenia further enhance their GCG practices? How can NGOs in Slovenia address the main challenges in implementing GCG? How can the not-for-profit sector in Slovenia promote the importance of GCG from the perspective of CSR and green economy innovations? What have NGOs done concretely so far to accelerate the transition to a low-carbon and more inclusive economy? What should they have done and could have done in that regard but have not? Have they shown innovation in the process, and if so, what kind? Have the leaderships of NGOs demonstrated agility and initiative in seeking creative solutions to challenges and pitfalls on this path, or have they been passive, “waiting for Godot”? What role do other stakeholders of NGOs play in all of this? What should be the changed role of the government and the state in general, especially its political subsystem, in the near future? Such a line of suggesting important research questions could continue, but at some point, it is necessary to bring it to a close.