Towards Semantics and an Algebra of Governance

Just as accounting has formal semantics (assets, liabilities, equity, comprehensive income, investment by owner, distribution to owner, revenues, expenses, gains, losses) and an algebra (assets = liabilities + equity; beginning equity + comprehensive income + investment by owners - distribution to owners); governance can be viewed as having its own semantics and algebra.

This same perspective is emerging in fields such as policy-as-code, computational law, enterprise modeling, defensible compliance, and governance frameworks.

Semantic Model of Governance

A semantic model identifies the fundamental concepts of a domain and the meaning of those fundamental concepts. For governance, the core question is: How do rights, obligations, authority, and accountability exist, change, and interact within an enterprise?

Rather than viewing governance as a collection of isolated rules, a semantic approach views governance as a structured state of affairs consisting of:

  • Knowledge (what is known; transparency into rules, ability to query)
  • Actors (who participates; people, organizations, agents)
  • Resources (what is governed; things that can be controlled, owned, or used)
  • Rights (what actors are permitted to claim or do)
  • Obligations (what actors are required to do)
  • Authority (who has the power to establish, create, modify, or enforce rules)
  • Constraint (what is prohibited, limited, or otherwise restricted)
  • Accountability (who is responsible)
  • Event (what changes the state)
  • Governance (the system of constraints and accountability that gives rules legitimacy)

A particularly interesting approach to organizing the semantics of governance is KROG. KROG explicitly centers governance around the relationship between four key pillars:

  • Knowledge (K): Transparency and query-ability of all rules, states, and relationships; no hidden rules, no surprises; if it affects you then you can see it.
  • Rights (R): permissions; defines what actions are permitted; clear boundaries of allowed behavior
  • Obligations (O): duties; defines what actions are required; deadlines, compliance requirements, mandatory disclosures, noncompliance with obligation defines specific consequences
  • Governance (G): types and phases of rules; defines how rules themselves are created, modified, enforced; the rules about the rules

KROG proposes governance as the framework that constrains and coordinates the others: 

(K ∩ R ∩ O) ⊆ G (Every valid action satisfies Knowledge (K) intersection Rights (R), and intersection Obligations (O); and remains contained within Governance (G).

Algebra of Governance

What is a Governance Algebra? An algebra specifies the specific operations that can be performed on those concepts and the laws that govern their behavior in a specific domain. In governance, operations are things like:

  • Grant Right
  • Revoke Right
  • Delegate Authority
  • Create Obligation
  • Fulfill Obligation
  • Transfer Ownership
  • Enforce Policy
  • Appeal Decision

Governance as a State Space

A governance system can be viewed as maintaining an institutional state. Events change or transform state. The role of the rule engine is not merely to infer facts, but to maintain the integrity of this governance state. A financial statement reports state and changes in state.

Verification is different from verifying ordinary logical state such as if  some thing is true or false. Where as in traditional logic one might ask, "Is statement X true?" While governance does ask the traditional logic type questions; governance goes further and asks additional questions such as:

  • Who may act?
  • Who must act?
  • Who is accountable?
  • What happens if they do not?

This introduces concepts that ordinary predicate logic does not naturally capture such as:

  • Permissions
  • Prohibitions
  • Duties
  • Delegation
  • Accountability
  • Enforcement
  • Temporal obligations

These are often called normative semantics because they describe what ought to occur rather than merely what is true. For example, "Do not enter" is normative semantics; how the world ought to be; as contrast to the fact that you have, or have not, actually entered.

The interesting question is not: Is "Do not enter" true? but rather: Is it in force? Does it apply here? Who issued it? Was it violated? Those are governance questions.

Very succinctly: Facts tell us what is. Norms tell us what ought to be. Governance transforms facts into institutional rights and obligations. That transformation is the heart of normative semantics.

One of the most intriguing observations is that accounting appears to be a specialized form of governance semantics.  Accounting and governance appear to be tightly related.

A Possible Governing Equation

Accounting achieved remarkable success because it discovered a simple invariant conservation law referred to as the accounting equation:

  • Assets = Liabilities + Equity

Might governance also ultimately have an analogous principle? Here are some possibilities:

  • Authority >> creates >> Rights and Obligations
  • Governance >> constrains >> Authority
  • Accountability >> links actions  >>  to consequences
  • Rights + Obligations = Governed Knowledge
  • Rights + Obligations = Governance(Knowledge)
  • (K ∩ R ∩ O) ⊆ G (Every valid action satisfies Knowledge (K) intersection Rights (R), and intersection Obligations (O); and remains contained within Governance (G).
  • Knowledge >> records  >> facts 
  • Governance >> interprets  >> facts
  • Rights >> represent >> enterprise claims
  • Obligations >> represent >> enterprise duties

Basically, the key idea is: Rights and/or obligations do not appear from nowhere. They must be grounded in: knowledge of facts, an authority structure, and a governance framework.

Just as assets and liabilities are created together in accounting, rights and obligations are often co-created by governance acting on knowledge.  It seems to be the case that accounting and governance share the notion of "duality".

Whether such a law can be expressed formally remains an open question. Frameworks like KROG are interesting because they suggest that governance may not merely be a set of rules, but a structured semantic system whose states, transformations, and invariants can be studied algebraically, much as accounting studies financial states and transactions algebraically. In that sense, a governance algebra is the study of how rights, obligations, authority, and accountability compose and transform, while a governance semantics is the study of what those concepts mean and how they define the state of an enterprise.

So, maybe I am seeing this wrong.  Maybe there is less of a link between accounting and governance; maybe the link is more about accountability and governance.


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