Moving Quickly on Corporate Governance

Editor's Note: Loty Salazar provides knowledge management and communications support to IFC's corporate governance program. She previously worked with the World Bank's East Asia and Pacific region as a Communications and Information Officer. Welcome!

As the economic crisis of the century takes hold across the globe, companies in emerging markets face tough circumstances. While it may not at first seem like a “front of mind” issue, improving corporate governance will be vital to making the most of the situation. Effective decision-making processes, transparency, robust risk management, optimum internal controls and reliable regular reporting – these are what a company needs to attract and sustain the confidence of shareholders, lenders, investors and stakeholders, attributes that help improve performance and access to cheaper capital.

(To get an idea of the benefits of good corporate governance in practice, have a look at this short video on corporate governance reform at companies in Egypt and Ukraine).

So what is the World Bank Group doing to help? IFC, a member of the World Bank Group, is addressing the crisis by helping to improve the competence of the boards of directors of corporations in emerging markets through targeted training. For example, IFC will offer training in the proper role and functioning of boards of directors in crisis situations - here is one example of an existing training resource for boards of directors.

In the medium term, IFC will advise corporations in emerging markets in risk management functions and how to provide in-house board training. Over the long term, IFC will promote the development of local counterpart organizations, which will provide director training and other corporate governance assistance to local corporations on a sustainable basis. In addition, IFC will mainstream corporate governance due diligence on the investment side for the financial markets projects, with risk-based approaches.

But is this enough? There are some more complex issues around the crisis that do not just revolve around the board, e.g. are investors really acting like owners, and, if not, why not and what will it take? Is the current debacle a failure of regulatory oversight as well?  Why are some markets holding up and not others? Are the financial markets really committed to better corporate governance or is it really just about "the money."

The question also is how do lending institutions and investors move quickly to improve good corporate governance practices.

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