Ann Simpson, head of the World Bank’s new corporate governance initiative, explained her plans to UK NGOs in August. Simpson emphasised that there is no consensus on what “corporate governance” means. The main disagreement is between those who focus on management effectiveness and accountability for the long-term viability of the company and those who worry about companies’ social and environmental impacts.
The East Asian crisis made corporate governance issues shoot up the World Bank’s agenda. It demonstrated that, without good institutions, privatisation and liberalisation can leave countries vulnerable.
The Bank initiative, proposed by UK Chancellor Gordon Brown will use the corporate governance principles drawn up by the OECD as an important reference point. The World Bank and OECD will convene a Corporate Governance Forum to encourage exchanges of ideas and experience on the issues. It will include the Commonwealth and APEC who have worked on these issues, plus Regional Development Banks and professional standard-setting organisations.
Simpson will chair the Secretariat, housed in the World Bank. There will also be a Private Sector Advisory Group, chaired by Ira Millstein, with prominent business figures as regional representatives including Cyril Ramphosa from South Africa, and others from India, Thailand, Poland and Israel. They will provide experience and act as figureheads for reforms in their regions. To complement this there will be a Consultative Committee, formed of trade unions and NGOs.
A strategy paper went to the Bank’s board in August. The World Bank will contribute $500,000 seed money and establish a new funding facility to back corporate governance initiatives. Bilateral additions will be sought towards the $20m budget that has been drawn up. Corporate sponsorship will be sought for specific aspects.
The programme will work in areas including:
- legal/regulatory frameworks, corporate codes, insider dealing rules etc;
- bank supervision/prudential regulation: looking at short-term debt inflows, consolidated balance sheets;
- capacity building: training directors, accountants etc;
- institution building: eg helping establish shareholder action groups;
- public/private partnerships.
Responding to questions, Simpson said that changing the World Bank’s own policies and procedures will be handled by Bank staff member Nadereh Chamlu who will run a new thematic group on corporate governance. Countries which do not implement corporate governance policies may face formal conditionality from development agencies or poor ratings from agencies such as Standard and Poor’s. Suggestions for increasing UN and NGO involvement were welcomed.
See: Impact (IFC publication), Summer 1999, OECD website: www.oecd.org/daf/governance/principles.htm