Transcript of a Conference Call on the Independent Evaluation Office report on Fund governance

IMF News, May 27, 2008

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Event: Conference call to discuss the Independent Evaluation Office (IEO) evaluation on Fund governance.
Date and location: May 27, 2008; International Monetary Fund, Washington, D.C.
Embargo: Documents were embargoed until 10:00 a.m. Washington time tomorrow.
Speakers: Thomas Bernes, Director of the Independent Evaluation Office, with Ruben Lamdany, Assistant Director of the IEO.

The evaluation examines how the governance arrangements of the IMF itself work, focusing on the three principal organs of IMF governance:
- the IMFC (the main body for ministerial engagement),
- the Executive Board (to whom most authority has been delegated),
- and management.
The evaluation considered:
- the formal role set out in the Articles of Agreement,
- the informal ways the Fund operates,
- best practice in the public and private sector.
Rationale: Good governance is a critical element in institutional performance and reforms have not kept pace with broader changes in the environment in which the Fund operates.

Overall performance dimensions:
- Effectiveness has been the strongest aspect of Fund governance.
- Accountability and voice have been the weakest aspects.
- If unaddressed, weaknesses in accountability and voice could likely undermine effectiveness over time.
Structural and evolutionary observations:
- The Fund started with 44 member countries and 12 Executive Directors some 60 years ago.
- Today the Fund has 185 member countries and 24 Executive Directors.
- While roles have adapted, the formal structure remains largely untouched.
Four main conclusions (high level):
- Lack of clarity in the respective roles of the main governance bodies, particularly between the Board and management.
- Need for more systematic ministerial involvement.
- The Board's effectiveness is hindered by an excessive focus on executive rather than supervisory functions.
- An operating framework is needed to hold management accountable for its performance.

Clarify roles:
- Clarify respective roles of the IMFC, Executive Board, and management to minimize overlaps and address possible gaps.
Ministerial involvement:
- Recommend activation of the Council provided for in the Articles as a decision-making body (the IMFC is currently an advisory body with only a limited mandate).
- At a minimum, activation of the Council would strengthen transparency and accountability.
Board function shift:
- Recommend that the Board shift away from day-to-day executive operational activities and focus more on:
- formulating strategy,
- monitoring policy implementation,
- exercising effective oversight over management.
Management accountability:
- Recommend putting in place an operating framework to hold management accountable for its performance.

The report is described as wide ranging and complex; many issues are interrelated and will need to be considered together.
Implementation will require the attention and commitment of all stakeholders: the Executive Board, management, and ministers and governors.
The IEO reported having had discussions with the Executive Board and management and viewed the issuance of press statements as a good start to the process.
The IEO offered to respond to follow-up questions during the course of the day via contact details in the press release.

The Board still discusses and approves most operational issues, reflecting an excessive focus on executive functions.
Good governance requires balancing effectiveness, efficiency, accountability, and voice; there are difficult tradeoffs among these elements.
There is no perfect model of good corporate governance; systems must address the elements above in a way appropriate to the institution.

Source: Transcript of a Conference Call on the Independent Evaluation Office report on Fund governance, May 27, 2008.