We are working with other institutions to raise the bar for corporate governance.
In an era of rapid globalization, the fate of entire economies can depend on how individual businesses are governed.
Well-run companies are better able to attract capital, respond to competitive challenges, and build conditions necessary for long-term success. They safeguard themselves—through sound corporate governance—against the perils of mismanagement and corruption. In doing so, they also help bolster national economies.
IFC has played an important role in promoting good corporate governance in developing countries for decades. Our broad experience spurs investors to look to us for leadership. Today, we are also working with leading development finance institutions to develop a common framework to improve the governance of companies we work with.
In FY11, a working group representing more than 30 development finance institutions agreed to adopt a set of standards based in part on IFC’s Corporate Governance Methodology—a system for evaluating corporate governance risks and opportunities that is recognized as the most advanced of its kind. DFIs plan to use these guidelines to assess the quality of corporate governance at companies they invest in. They also will urge global financial institutions to consider these guidelines for their own investments in developing countries.
The working group included IFC, the Black Sea Trade & Development Bank, the Latin American development bank CAF, CDC of the U.K., the European Bank for Reconstruction and Development, the Islamic Development Bank, the Dutch development bank FMO, and the German development bank DEG. Some of the banks, such as FMO, have already begun to implement the new guidelines. Others are expected to adopt them later in 2011.
IFC and our partners in this initiative believe our expertise as providers of financing and advisory services allows us to play an important role in improving corporate governance. Adoption of a common approach by DFIs sets a standard for due diligence and helps establish common expectations among our clients, raising the bar for corporate governance in emerging markets.