Comparative Corporate Governance
3.2 Current organizational structure of the IMF
Under Article XII of the IMF’s Articles of Agreement the organizational structure of the IMF is composed of: (i) the Board of Governors, (ii) the Interim Committee, (iii) the International Monetary and Financial Committee, and (iv)the Executive Board. But technically, the IMF has a three-tiered governance structure with a board of governors, an executive board, and a managing director.
Board of Governors Joint IMF–World Bank Development Committee International Monetary and
Finance Committee
Executive Board
Managing Director
…………..
Deputy Managing Directors
Investment Office-Staff Retirement
Plan
Office of Budget and Planning
Office of Internal Audit and Inspection Independent Evaluation
Office
Area Departments Functional and Special Service Departments
Information and Liaison
Support Services
African Department Asia and Pacific
Department Regional Office for Asia
and the Pacific
European Department
Office in Europe
Middle East and Central Asia Department
Western Hemisphere Department
Finance Department Fiscal Affairs Department
IMF Institute
Joint Vienna Institute Singapore Training Institute
Middle East Center for Economics and Finance
(in Kuwait)
Legal Department
Monetary and Capital Markets
Department Strategy, Policy
& Review Department
Research Department
Statistics Department
External Relations Department
Fund Office United Nations
Human Resources Department
Secretary’s Department
Technology and General Services
Department
Figure 3.1 International monetary fund organization chart as of March 26, 2011
3.2.1 The executive board
The executive board is the main decision-making body within the IMF.
It is composed of 24 executive directors (ED), five appointed by the coun- tries with the largest quotas and the other 19 elected by their constitu- encies (three of them are single-country constituencies). EDs are both the representatives of their respective countries and guardians of the IMF Articles of Agreement. EDs appointed by their countries are at the mercy of their countries, which can at any time and for no reason, replace them.
However those EDs elected by constituencies have a two-year tenure. The executive board meets three times a week and is responsible for conduct- ing the IMF business. Besides its administrative duties, the executive board has specific powers: it selects the managing director, approves loans, and conducts the surveillance of the international monetary system and the country level IV consultations, approves the use of the IMF resources, sets strategies and monitors implementation.
3.2.2 The board of governors
The IMF board of governors is overseen by finance ministers and cen- tral bank governors from 187 member states. As such the board is not directly or indirectly accountable to people in countries in which it oper- ates. It is the highest decision-making body within the IMF. The board of governors has overall responsibility for the Fund’s direction and per- formance. The board of governors meets once a year. It oversees the exec- utive board, it appoints the EDs, approves the new entrants, disapproves or disqualifies a member, increases the IMF quotas, and arbiters issues related to the management of the international monetary and financial system. The five largest shareholders are entitled to appoint their own EDs. The board of governors also elects the 24 member executive board on a quota voting system. The voting right is determined based on the principle of ‘one dollar, one vote’. Although the world wealth has shifted toward East, the IMF still functions under the status of the world as it was in the 1940s.
3.2.3 The international monetary and financial committee
The International Monetary and Financial Committee replaced the Interim Committee since 1999. It is composed of 24 members, all governors of the IMF. It advises and reports to the board of governors on issues related to the management of the international monetary and financial system. It is often considered to be the duplicate of the board of governors.
3.2.4 The management
The IMF management is composed of the managing director (MD) and the first deputy managing director. The office of the MD comprises eight senior staff, with a budget of about $US7 million. The MD is accountable to the board for his job performance, decisions and per- sonal behavior. But in reality, the board plays only a pro forma role in selecting the MD or renewing its tenure. The MD is selected through an opaque process among the European countries. While in private, companies separate the office of the chairman of the board from the office of the CEO, the MD of the IMF is both the chairman of the board and the CEO.
Since the creation of the IMF, the MD has always been a European, and the first deputy managing director a US Citizen, despite the merits.
3.2.5 The Joint IMF–World Bank Development Committee
The Joint Committee was established in 1974 as a forum which regroups the boards of governors of the IMF and the World Bank. The Joint Committee is made of 24 members representing all the shareholders that elect an ED to the boards of the two institutions. The chairperson of the Joint Committee is usually from a developing member country.
It reports on all aspects related to transfer of resources to developing countries.
3.2.6 The Independent Evaluation Office
To respond to criticisms pursuant to its lack of transparency, the IMF has created an internal Independent Evaluation Office (IEO), which reports to the executive board on the efficiency of the IMF’s mandates. The IEO is headed by a director, an official of the IMF appointed and terminated at the will of the executive board, for a renewable term of six years. Besides its director, the IEO is composed of 12 members in charge of the con- duct of investigations and reporting to the executive board. However, the IMF executive board has, under extraordinary circumstances, the right to keep secret the IEO investigations, findings or recommendations. While such an office lacks independence from the executive board, the IMF has praised its IEM (Independent Evaluation Mission) as an example of ‘hori- zontal accountability’ due to the fact that the IEO itself is evaluated regu- larly by an external agency hired by the IMF. What could be seen as an open conflict of interest is seen as an appropriate response by the IMF’s resisting any outside checking or auditing of its policies.
3.2.7 Inadequacy of the IMF governance
The IMF governance put in place in 1944 by the United Nations Monetary and Financial Conference commonly referred to as the ‘Bretton Woods’
Conference does not reflect the economic world of the twenty-first cen- tury. In many respects its governance is outdated: the quota system which determined the voting right and the ability of a member state to borrow needs to be abandoned or at least reconsidered. The IMF governance should provide all members with a fair measure of right and participation. The selection of the leadership or the management remains perplexing and exclusive, with the unwritten convention that its MD must be European.