International organizations and corporate governance: the case of the AIIB

Abstract

ABSTRACT The relationship between the Board and management has been a key issue of corporate governance for Bretton Woods institutions, and there is no exception to the Asian Infrastructure Investment Bank (AIIB). A new multilateral development bank (MDB) derived from Bretton Woods, the AIIB is now the second largest after the World Bank by membership. The institution of a non-resident Board of Directors in the AIIB deviates from the practice of most leading MDBs, and it was designed to avoid two dilemmas that have long bewildered traditional MDBs: the dual position of the Board members, and the co-managerial issue between the Board and management. The arrangement of the non-resident Board requires that project approval authority be delegated from the Board to the President, and in parallel to such delegation, a robust oversight mechanism should be established with a view to holding the empowered President and management accountable. Efforts to craft an oversight mechanism were made initially in the Accountability Framework, and were completed in the Oversight Mechanism. As it strives for ‘appropriate separation of powers to ensure proper checks and balances’ between the Board and management, the oversight mechanism should not hinder the pragmatic management of the AIIB from serving the changing needs of its members.