Corporate Governance Overview
Corporate governance is defined as the structures and processes by which companies are directed and controlled. Good corporate governance helps companies operate more efficiently, improve access to capital, mitigate risk and safeguard against mismanagement. It makes companies more accountable and transparent to investors and gives them the tools to respond to stakeholder concerns. Corporate governance also contributes to development. Increased access to capital encourages new investments, boosts economic growth, and provides employment opportunities.
What we do
IFC works with firms to attract and retain investment by promoting the adoption of good corporate governance practices and standards.
How we do it
IFC and the World Bank are building on their successful track record with the aim of delivering targeted corporate governance support to more clients and stakeholders for even better results by:
- assessing a firm’s corporate governance practices and providing advice on how to improve them
- providing specialized advisory services on board effectiveness, the control environment and family business governance
- building capacity of local partners, institutes of directors, media, and educational institutions on corporate governance services, training and reporting
- working with regulatory institutions and governments to improve corporate governance laws, regulations, codes and listing requirements
- raising awareness of corporate governance through conferences, workshops and publication
IFC Corporate Governance Group
The Group brings together staff from investment support and advisory operations into a single, global team.
Promoting Corporate Governance Practices in Investee Companies
IFC is the first development finance institution to require corporate governance analysis for every investment transaction as part of its due diligence process. This analysis has been part of our appraisal process since July 2011. In this analysis, we make use of IFC's Corporate Governance Methodology, a system of evaluating the corporate governance risks and opportunities of client companies. The methodology helps to uncover these risks and opportunities, while offering direction on solutions that will address the issues and enable improvement. Focus is on commitment to good corporate governance practices, shareholder rights, accountability and the board of directors, the control environment, and disclosure and transparency.
Our Work With Partners
IFC’s supports local partners to create new economic opportunity in emerging markets around the world. In FY15, our partners generated over $900,000 in sales using IFC tools and materials. We cultivated strong local partnerships in Europe and Central Asia by working with partners in countries strengthening their capacity to deliver training and consulting services. In Sub-Saharan Africa, we partnered with the Africa Corporate Governance Network, South Africa’s Institute of Directors, and FITC, Nigeria’s leading financial training organization, to develop the corporate governance environment. In the Middle East and North Africa we worked with four universities in West Bank and Gaza, In Iraq we partnered with the Women Empowerment Organization to provide corporate governance training for current and prospective female directors of SMEs.
Our Work with Regulators
IFC is focused on further developing the regulatory environment for corporate governance in emerging markets by working in collaboration with our colleagues at the World Bank and building on our frontline experience as an investor. To date, IFC has contributed to the development of 95 corporate governance codes, regulations and laws, which have been adopted in over 30 countries.
In FY15, we created a corporate governance strategy for Latin America and the Caribbean, with a particular focus on Perú and Colombia. In Sub-Saharan Africa, we are teaming with the World Bank to create a corporate governance roadmap to improve the regional regulatory environment. We are also developing new corporate governance code for Sierra Leone. Other efforts underway include expanded use of scorecards to enhance the corporate governance code compliance of listed companies.
Our Work with Companies
In FY15, IFC helped firms attract over $200 million in financing, while 31 firms implemented corporate governance improvements based on our recommendations and 23 firms reported improved firm performance due to enhanced corporate governance practices. At the firm level, our corporate governance team contracted for more than 70 fee-based engagements. We delivered more than 200 corporate governance workshops, while our partners delivered 61 fee-based corporate governance training programs, reaching 380 entities and more than 5,000 participants, including more than 1,000 women.
This fiscal year we convened several global events to promote gender diversity on boards and expanded our efforts to provide corporate governance guidance to small- and medium sized enterprises. We also initiated efforts to establish sound corporate governance in several conflict-affected states, including Afghanistan, Bosnia and Herzegovina, Iraq, Myanmar, Timor-Leste, West Bank and Gaza, and Yemen.
Examples of Our Work
Myanmar. In 2014 IFC invested $7.5 million, including a convertible loan and a trade finance facility, for Yoma Bank Limited, a subsidiary of FMI Ltd., a family owned and market-leading business group. As part of a multi-pronged advisory assistance program that accompanied the investment, IFC provided governance support to build and strengthen Yoma Bank’s governance practices. Today, Yoma Bank’s increasingly sophisticated corporate governance framework continues to undergo refinements, as the bank experiences significant growth and the Myanmar market opens and expands.
Kyrgyz Republic. In 2011 IFC approved $2.25 million for Intermultiservice, LLC a Kazakhstani subsidiary of Altyn Ajydaar, a family owned business and a leading producer of high quality corrugated packaging in the country. IFC also delivered corporate governance assistance to help streamline governance within the companies, with clear policies and procedures for involvement of family members, succession planning and efficient decision making. Improved corporate governance has provided additional assurances to investors about the health and stability of the companies, enabling a lower cost of capital. In 2015, IFC rewarded Altyn-Ajydar and IMS for corporate governance improvements by reducing the relevant spread on the IMS’s existing loan and supporting its expansion to a larger market in neighboring Kazakhstan.
Summary of Results Achieved in FY15
- More than 1,500 entities reached; 100 received in-depth advisory services.
- 50 entities implemented changes recommended by IFC.
- 23 entities reported improved performance due to corporate governance improvements.
- $200 million in financing accessed by 13 firms, due in part to corporate governance improvements.
- 10,000 participants at training events and conferences, including 3,000 women.
- 5,000 participants trained by partners, including 1,000 women.
- More than 400 trainers trained by IFC.
- More than $900,000 in sales revenue earned by IFC partners for provision of corporate governance services.
- 9 laws, regulations, and codes adopted in 5 countries; developed with IFC guidance.
- 13 publications, including translations, produced and shared widely with stakeholders around the world
Areas of Work: