Abstract

Significant progress has been made over the past decade towards reforming IMF governance, notably towards realigning quota and voice with member country positions in the global economy. There have also been numerous developments relative to the Board, Management, and the IMFC since the IEO evaluation. This chapter summarizes these developments as well as highlights areas where there has not been much change since 2008.

Significant progress has been made over the past decade towards reforming IMF governance, notably towards realigning quota and voice with member country positions in the global economy. There have also been numerous developments relative to the Board, Management, and the IMFC since the IEO evaluation. This chapter summarizes these developments as well as highlights areas where there has not been much change since 2008.

Quota and Voice Reforms

The 2008 Quota and Voice reforms (“the 2008 Reforms”) were approved by the Board in March 2008, as the IEO evaluation was being finalized. While the Board of Governors adopted the 2008 Reforms the following month, the provisions entered into force three years later in March 2011 following ratification by member countries holding more than 85 percent of the Fund’s total voting power.

The 2008 Reforms reflected the need to adapt representation at the IMF to the evolution of the global economy. Specific measures included an updated quota formula; an ad hoc increase in quotas for 54 member countries; a tripling of the basic votes;3 and an entitlement for multi-country constituencies exceeding 19 members (i.e., the two Sub-Saharan African constituencies) to appoint a second Alternate ED. Overall, the 2008 Reforms resulted in a significant shift in representation to under-represented and dynamic emerging market economies and an increase in the voting share of most emerging market and low-income countries.

In September 2009, as part of a broad strategy to respond to the aftermath of the global financial crisis, the Pittsburgh Summit G20 Leaders committed to further reforms to modernize IMF governance. After lengthy discussions, the 2010 Quota and Governance reforms (“the 2010 Reforms”) were approved by the Board in November 2010 and were adopted by the Board of Governors the following month (Resolution 66–2). The 2010 Reforms entered into effect in January 2016, following ratification by the U.S. Congress. The reforms were hailed by the MD at the time as “the most fundamental governance overhaul in the Fund´s 65-year history” (IMF, 2010a). Intended to enhance the Fund’s legitimacy and effectiveness and preserve the quota-based character of the institution, the package encompassed:

  • The completion of the 14th General Review of Quotas, which provided for an overall doubling of quotas and the realignment of quota shares. Over 6 percent of quota was to shift from over-represented to under-represented members, and more than 6 percent of quota was to shift to dynamic emerging market and developing countries (EMDCs). With this shift, Brazil, China, India, and Russia were included among the Fund’s 10 largest shareholders. Building on the 2008 Reforms, the voting share of EMDCs grew by 5.3 percent. At the same time, the quota shares and voting power of low-income members were protected.

  • A commitment to reduce the number of EDs representing advanced European countries by two, in favor of EMDC chairs. Board size and the principle of voluntary constituency formation were unchanged.4 It was also agreed to review the composition of the Board every eight years after the Reform resolution went into effect.

  • The elimination of the practice by which the largest shareholders appointed EDs and moving instead to an all-elected Board.

  • A further reduction in the threshold entitling multi-country constituencies to appoint a second Alternate ED from 19 to 7 members.

Work on the 15th General Review of Quotas is now underway. Following the guidance provided by the IMFC, the goal is to agree on a new quota formula and conclude the 15th Review with an increase in the quota share of dynamic economies in line with their relative positions in the global economy, and hence likely in the share of EMDCs as a whole, while protecting the voice and representation of the poorest members.

Executive Board

Board composition. Progress has been made towards fulfilling the commitment made in the context of the 2010 Reforms to transfer two ED positions from advanced European to EMDC chairs, but it has not yet been fully achieved. Based on current rotation agreements in multi-country constituencies, ED positions have effectively been transferred from Belgium, the Netherlands, the Nordic countries, and Switzerland to the three Baltic countries, the Czech Republic, Hungary, Poland, and Turkey.5 Depending on the country classification used, the effective transfer to EMDCs would be between 1.33 and 1.64 ED positions.6

Offices of Executive Directors (OED) budget framework. There have been significant changes to OED budget policies and practices since 2008.7 The 2008 revised OED budget framework included a major redesign intended to bring it in line with institutional best practices and to create incentives for prudent budget management and savings. It also included modifications to provide supplemental financing for temporary, exceptional workload pressures to introduce greater responsiveness to differential workloads, which can vary significantly across OEDs. The framework underwent a further comprehensive revision in 2011. Significant amendments were also made in 2014, including inter alia the reallocation of the budget to make additional resources available for offices representing a number of countries above OED staffing norms.8 The smoothing adjustment sought to strike a balance between ensuring uniformity of treatment of similar-sized offices while recognizing that some offices may face unique pressures including a high program-related workload which occasionally may require additional budgetary resources. Directors agreed to further revisions in 2017 to ensure that the framework is transparent, credible, and durable.

Board tenure, qualifications, and skills. Many EDs spend only a limited time in their positions. The median ED tenure has decreased from around 25 months over 2009–13 to around 21 months in recent years, in part reflecting increased turnover in multi-country constituencies (see Appendix 3). Most EDs, Alternate EDs, Senior Advisors, and Advisors are seconded from national ministries and central banks. There has been little change to the employment framework for EDs’ offices. Notwithstanding the recommendations of a 2010 Committee on Executive Board Administrative Matters Working Group, generic job descriptions, recruitment standards, and performance assessments for EDs, Alternate EDs, Senior Advisors, and Advisors have not been established.9

Efforts have been made to strengthen on-boarding and training. Prior to 2008, the Secretary’s Department (SEC) organized one-day ED workshops twice a year, covering Board procedures and general Fund policies. The workshops were suspended during the global financial crisis until 2012 when SEC resumed a mini-workshop focusing on Board procedures. Based on feedback from OEDs, this was expanded. In 2014, SEC introduced and standardized a three half-day induction-type program on Fund policies and practices and has made other relevant materials available on an internal Fund website, which is also accessible by authorities. SEC also provides short courses, such as Board statement drafting, aimed primarily at Senior Advisors and Advisors. OED staff may also attend IMF staff training and seminars.

Board meetings. There have been extensive changes to Board practices and procedures over the past decade aimed at enhancing efficiency and effectiveness, with increased opportunities for the Board to play a strategic role. These include, inter alia: simplifying multiple meeting formats to Formal and Informal (to Brief or to Engage); lengthening circulation periods for Board papers for formal consideration; moving up the deadline for preliminary statements; reducing the indicative time limit on ED interventions to four minutes; and reducing the number of policy items per work program10 and per Board day, as well as attempting to reduce the bunching of items, particularly in the summer months. Preparation for Board meetings has also been enhanced by the circulation of Main Themes in Grays and Staff Responses to Technical Questions ahead of Board meetings. Board work program planning has also been given greater structure since the introduction in October 2012 of the Managing Director’s Global Policy Agenda (GPA) which sets forth the IMF’s agenda on behalf of the membership. While the Board comments on the GPA, it is understood to be the agenda of the MD.

Summings Up (SUs). Since the 2008 evaluation, there have been a number of process improvements in SUs, which provide an important channel for Board guidance by reflecting EDs’ views. The Rule of Silence was clarified11 and qualifier code words used to characterize the measure of support among EDs were updated and published. A 2013 EDs’ Working Group on Summings Up report12 concluded that it was appropriate to emphasize consensus views in country item SUs (i.e., Article IV consultations and use of Fund resources) but that there was scope to pay more attention to divergent views on non-country items. The Working Group also recommended that the Board consider earlier disclosure and simpler access to Board meeting minutes to address the perception that dissenting voices were not adequately represented in the record.

Board committees. Despite extensive discussions on the role, structure, and function of Board committees, there has been little substantial change in the delegation of Board work to committees. Committee attendance remains open to all OEDs. Efforts by some EDs to establish a Board Risk Committee and a Board Human Resources Committee arising from a 2016 Board Retreat discussion on effective Board oversight, strategic input, and Board best practices were not supported by the majority of EDs or the MD, who pointed to readiness to provide more regular opportunities for engagement with the Board on risk and human resource issues.

Transparency and archives. Substantial changes have been made to increase Fund transparency and the timeliness and ease of public access to IMF documents. The 2009 Transparency Policy review provided an impetus to efforts to publish more Board documents and a related staff guidance note was issued. In December 2009, the IMF also amended the Archives Policy.13 The amendments shortened the time period for public access to the Board documents series from five years for most of the series and ten years for Board meeting minutes to three and five years, respectively.14 The Open Archives Policy also enabled the Fund to provide electronic access to all documents permitted to be disclosed. During the 2013 Transparency Policy review, EDs welcomed progress in implementing the Open Archives Policy; however, most also saw scope for further reducing the public access lag for Board meeting minutes. In 2014, the Board agreed to reduce the lag for most Board meeting minutes from five to three years, while retaining the five-year lag for discussions related to the use of Fund resources or the Policy Support Instrument.

Board self-evaluation. Since 2016, EDs have participated in a Board self-evaluation exercise as part of a broader mutual performance accountability framework.15,16 In this exercise, EDs’ individual views have been treated anonymously and on a strictly confidential basis, as well as summarized to facilitate continuous learning and improvement of the Board. Summary results have been discussed informally with the entire Board and follow-up considered in various fora, including a Board retreat, an informal workshop, and relevant Board committees.

Independent evaluation. The IEO has continued to serve as a key component of the governance structure of the Fund over the last ten years, inter alia, by supporting the Board in its strategic and oversight functions. The process of following up on implementation of Board-endorsed recommendations has been elaborated with a view to increasing the impact of IEO evaluations. Nonetheless, a recent external panel highlighted the need for renewed commitment to effective independent evaluation by the Board, Management, and the IEO itself, and for further strengthening of institutional processes to increase the IEO’s traction (see Box 2).

Management

Selection of the MD. Some changes have been made to the nominations process with the aim of achieving greater openness and closer engagement with the membership, although outcomes have continued to conform with the

The Independent Evaluation Office and IMF Governance

The Independent Evaluation Office (IEO) was established in 2001 with a mandate to support the Board’s institutional governance and oversight responsibilities, enhance institutional learning, and strengthen the Fund’s external credibility.1 The IEO is independent from Management, and has an arm’s length relationship with the Board. The Director is appointed by the Board for a six-year non-renewable term. The IEO prepares two to three evaluations of Fund activities and policies each year. Since its inception, the IEO has received a high degree of support from the Board, which has endorsed around 85 percent of its evaluation report recommendations.

The IEO itself is evaluated approximately every five years by an external panel. The latest external evaluation of the IEO (Kaberuka and others, 2018) reaffirmed the conclusion of two previous external evaluations (Ocampo and others, 2013; Lissakers and others, 2006) that the IEO has cemented its independence and reputation in producing high-quality reports. The Kaberuka report also noted, however, that there is room to strengthen the traction of the IEO´s work and to increase its usefulness to the Board as a learning, oversight, and governance tool. The report recommended that the Board, Management, and the IEO itself send a strong signal of commitment to effective independent evaluation to fully contribute to the success of the IMF and suggested further development of institutional processes to strengthen the follow-up for IEO reports (IMF, 2018).

1 For the IEO’s terms of reference, see IEO-IMF.org.

long-established pattern of selecting the MD from an advanced European country.17,18 During the selection process that followed the resignation of Mr. Strauss-Kahn in May 2011, the list of those eligible to nominate candidates was widened beyond then current EDs and Governors to include former EDs and country authorities, and the names of nominees were not announced until the nominations period had closed.19 As in previous selection processes, the Board held a number of informal sessions; adopted a selection decision, including a clear timeline; provided information on the IMF’s external website; and conducted interviews of short-listed candidates. Ultimately, the Board selected Christine Lagarde of France for a five-year term from a group of three nominees.20 In 2016, Mme. Lagarde was the sole nominee and was reappointed to a second five-year term as MD.

Selection of Deputy Managing Directors. Since July 2011, there have been four DMD positions. In early 2015, in consultation with the Board, the MD modified one of these slots to establish the position of DMD and chief administrative officer (CAO). DMDs serve as staff of the Fund; as such it is the MD’s prerogative as head of staff to appoint these positions. In selecting a DMD, the MD formally consults in advance with the Board on requisite qualifications. The Board must also sign of on the contract. However, other than for the DMD/ CAO position, there has been a tendency for DMDs to be selected from specific nationalities with input from the respective country authorities.21

Office of Risk Management. Management is supported by a relatively small group of advisors and budgetary and audit staff. A significant addition was the creation of a Risk Management Unit in 2014, now the Office of Risk Management (ORM). It reports to Management and the Board on the Fund’s risk profile, across all operations and working with all departments, and proposes mitigation measures as needed. The Board is involved in the process by periodically setting risk acceptance levels and providing oversight over risk mitigation measures.

Accountability framework for Management. Steps have been taken to strengthen the accountability framework for the MD since 2008. The 2011 hiring contract for Mme. Lagarde was enhanced with a provision regarding ethics and personal conduct. It also included a new provision that the MD would participate on an annual basis in a confidential and informal performance feedback process between herself and EDs.22 In December 2012, the terms of reference for the Board Ethics Committee were also revised to note that the Committee is responsible for advising on issues that may arise in connection with the application of the standards of ethical conduct to the MD pursuant to the MD’s contract.

International Monetary and Financial Committee

Status of the IMFC. The IMFC remains an advisory-only body and the Council has not been activated. In 2009, the Board viewed that activation of the Council was premature as it would dilute the powers delegated to EDs by the Board of Governors. A number of EDs welcomed a subsequent proposal designed by IMF staff to replace the IMFC with the International Monetary and Financial Board (IMFB) which, inter alia, called for the decision-making authority over surveillance policy to be transferred from the Board to the IMFB. They noted that the proposal struck a balance between securing deeper ministerial engagement in decisions of strategic importance and preserving the role of the Board. Some EDs, however, characterized this as an alternative Council, for which there was no support (IMF, 2010b).

Selection of the IMFC Chair. There have been changes in the way the IMFC Chair is selected that have increased diversity. An informal understanding on geographic rotation of the chair was reached among IMFC members in late 2007. Since 2008, four successive IMFC Chairs have been chosen from a different region for a term of up to three years.23 Three have come from an EMDC, and one from a small advanced economy.

Ministerial-level involvement. Efforts have been made aimed at improving IMFC meetings to make them more engaging. The agenda continues to feature an informal Breakfast session restricted to IMFC members and a few special invitees, which is reported to be highly interactive. Changes include the addition of a restricted session on the joint IMF–Financial Stability Board Early Warning Exercise; discussion of the macroeconomic and financial outlook in a separate open introductory session; and consideration of the MD’s GPA in a shortened open plenary session. In addition, there has been earlier preparation and dissemination of the draft communiqué.

Role of the G20. The challenge of ensuring substantial ministerial-level engagement in IMFC meetings has been heightened by the enhanced role of the G20 as the preeminent group for international economic cooperation since the introduction of the Leaders’ track in 2008. As was the case with the G7 prior to the 2008 evaluation, the G20 Finance Ministers and Central Bank Governors typically meet two to three times a year, including shortly before the two IMFC meetings, and the Leaders meet once a year. These meetings conclude with a communiqué providing, inter alia, guidance for the IMF and other IFIs including policy direction and requests for follow-up work, analytical support, or technical assistance to the G20. The G20 does not have a formal role in IMF governance, but its membership accounts for nearly 80 percent of IMF voting power.

Evaluation Update
  • De Las Casas, Miguel, 2016, “The IMF Executive Board and the Euro Area Crisis— Accountability, Legitimacy, and Governance,” Independent Evaluation Office (IEO) Background Paper, No. BP/16–02/2 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Group of Twenty (G20), 2009, “G20 Working Group: Reforming the IMF—Final Report, 4 March 2009.”

  • Independent Evaluation Office of the IMF (IEO), 2008, Governance of the IMF: An Evaluation (Washington: International Monetary Fund).

  • Independent Evaluation Office of the IMF (IEO), 2011, IMF Performance in the Run-Up to the Financial and Economic Crisis: IMF Surveillance in 2004–07 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Independent Evaluation Office of the IMF (IEO), 2015, Self-Evaluation at the IMF: An IEO Assessment (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Independent Evaluation Office of the IMF (IEO), 2016, The IMF and the Crises in Greece, Ireland, and Portugal (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Independent Evaluation Office of the IMF (IEO), 2018, Structural Conditionality in IMF-Supported Programs: Evaluation Update (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund (IMF), 2008a, “Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund,” October (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund (IMF), 2008b, “Managing Director Strauss-Kahn Appoints Committee on IMF Governance Reform,” IMF Press Release No. 08/200 (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund (IMF), 2009, “Review of the Fund’s Transparency Policy—Archives Policy 14498-(09/126)” (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund (IMF), 2010a, “IMF Executive Board Approves Major Overhaul of Quotas and Governance,” IMF Press Release No. 10/418 (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund (IMF), 2010b, Minutes of Executive Board Meeting on IMF Governance Reform,” EBM 10/78–1 (Washington).

  • International Monetary Fund (IMF), 2016, “Gender Diversity in the Executive Board—Draft Report of the Executive Board to the Board of Governors” (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund (IMF), 2017, “Implementation Plan in Response to the Executive Board-Endorsed Recommendations for the IEO Evaluation Report—The IMF and the Crises in Greece, Ireland, and Portugal” (Washington).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund (IMF), 2018, “The Acting Chair’s Summing Up—External Evaluation of the Independent Evaluation Office, Executive Board Meeting 18/62, July 6, 2018” (Washington).

    • Search Google Scholar
    • Export Citation
  • Kaberuka, D., C. Der Juin, and P. Meyersson, 2018, “Time for a reboot at a critical time for multilateralism: The Third External Evaluation of the IEO” (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Kramer, Vicki, and others, 2006, “Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance” (Wellesley, MA: Wellesley Centers for Women).

    • Search Google Scholar
    • Export Citation
  • Lissakers, K., I. Husain, and N. Woods, 2006, “Report of the External Evaluation of the Independent Evaluation Office” (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Manuel, Trevor, and others, 2009, “Committee on IMF Governance Reform: Final Report” (Washington: International Monetary Fund).

  • New Rules for Global Finance Coalition, 2009, “Report on the Civil Society (Fourth Pillar) Consultations with the International Monetary Fund on Reform of IMF Governance” (Washington).

    • Search Google Scholar
    • Export Citation
  • Ocampo, J. A., S. Pickford, and C. Rustomjee, 2013, “External Evaluation of the Independent Evaluation Office: Report of the Panel Convened by the Executive Board” (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Peretz, David, 2009, “The Process for Selecting and Appointing the Managing Director and the First Deputy Managing Director of the IMF,” Chapter 11 in Studies of IMF Governance: A Compendium (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Torchia, Mariateresa, and others, 2010, “Critical Mass Theory and Women Directors’ Contribution to Board Strategic Tasks,” Corporate Board: Role, Duties & Composition, Vol. 6, No. 3, pp. 4251.

    • Search Google Scholar
    • Export Citation
  • Torchia, Mariateresa, and others, 2011, “Women Directors on Corporate Boards: From Tokenism to Critical Mass,” Journal of Business Ethics, Vol. 102, No. 2 (August), pp. 299317.

    • Search Google Scholar
    • Export Citation