Governance of the International Financial Institutions: The case for merit-based selection of agency heads
AbstractThe Managing Director of the International Monetary Fund and the President of the World Bank are appointed under a 60 year old unwritten convention that the Managing Director is nominated by the countries of Western Europe while the President is nominated by the United States. All ten Bank Presidents since 1946 have been US citizens and all nine IMF Managing Directors have been citizens of one of six Western European countries.This paper argues that these arrangements are anachronistic, are contrary to modern corporate governance best practice, are inconsistent with the multilateral character of the IMF and World Bank, and undermine their legitimacy and effectiveness. Removing nationality restrictions on candidates for senior leadership positions would be an important complement to other initiatives to modernise the governance arrangements, strategies and operations of the IMF and World Bank. In particular, it would be consistent with measures being taken to enhance the voice and participation of developing member countries, particularly emerging market economies whose voice has not kept pace with their growing economic weight. Australia has been a strong advocate for these governance reforms.The paper briefly examines the origins of the convention and the evolution of selection processes for the positions of Managing Director and President over recent years. It also identifies concerns expressed by many member countries about the processes. These concerns relate to transparency and consultation as well as the nationality restrictions inherent in the convention. Alternative selection models are also discussed to illustrate how the issue might be taken forward in a practical way.
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Bibliographic InfoPaper provided by Treasury, Australian Government in its series Treasury Working Papers with number 2007-03.
Length: 28 pages
Date of creation: May 2007
Date of revision: May 2007
International Monetary Fund; World Bank; governance;
Find related papers by JEL classification:
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
- F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
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