The ‘public interest’ agency of international organizations? The case of the OECD Principles of Corporate Governance

ABSTRACT

This article seeks to outline and explore some of the conditions necessary for International Organizations (IOs) to perform in a public interest fashion through a case study of the Principles of corporate governance formulated by the OECD. Rather than the more commonly documented pathological and dysfunctional behavioural forms of IOs, the case of the Principles, both in their formulation by the OECD, and in their assessment by the World Bank through the ROSC process, represent an episode of IO agency protecting and promoting a wider public interest. In exercising their agency, IO staff, have made the Principles more agreeable to a wider range of interested parties, giving them a general interest orientation, in accordance with a proceduralist definition of public interest. This case should therefore encourage IPE scholars to consider carefully and systematically the sets of circumstances and conditions, which might be required for IO agency to take more socially useful forms. In the final section, three indicators are identified which might be evaluated in future research into the positive public interest agency of IOs across a range of cases.

KEYWORDS:

• Organisation for Economic Co-operation and Development (OECD)
• the World Bank
• corporate governance principles
• public interest
• international organizations
• reports on the Observance of Standards and Codes (ROSCs)
• Anglo-American

Notes

1. There is some debate about whether it is meaningful to talk about Anglo-American corporate governance amongst legal scholars who argue that the legal systems of the United States and the United Kingdom are so different that the term is redundant. However, the OECD itself has drawn the distinction between insider and outsider models (OECD, 1996).

2. Of course, other pressures for convergence towards Anglo-American forms of corporate governance may exist (Coffee, 2002; Perry and Nolke, 2006). What follows is not an argument about corporate governance trends per se, but about the contribution of IO staff in relation to the social purpose of the Principles and what that tells us about how we can conceive of the forms IO agency can take.

3. For an important exception, see Lavelle (1999), who emphasized the positive role IFIs can play in the very specific context of closed end funds. Keohane (1984) famously made the argument that IOs make cooperation between states possible, but this perspective largely neglects the role of IO staff.

4. The literature on regulatory capture is extensive dating back to the contributions of Marver Bernstein and George Stigler. For summaries, see Mattli and Woods (2009) and Baker (2010).

5. A rejectionist school denies that public interest has any meaning simply because society consists of individuals with heterogeneous preferences, but notions of public interest have a long heritage and can be traced to Rousseaunian notions of a ‘general will’ and more recent elaborations in the work of Philip Pettit and Brian Barry. Communitarians would similarly deny that the concept of the ‘public’ has any meaning outside of national settings. However, as international governance processes increasingly involve deliberations over outcomes between a range of state and non state actors, the concept of an international public sphere (Bohman, 1999), has becoming increasingly influential as evident in the work of IPE scholars such as myself and Randall Germain (Baker, 2009).

6. I am broadly in agreement with this sceptical camp concerning the contradictions and difficulties associated with pushing the neoliberal ‘transparency’ vision of the standards and codes exercise. Where I go beyond this existing perspective is in suggesting the staff of the World Bank and the OECD have used the Principles to promote international policy dialogue rather than explicitly to push neoliberal convergence and the ‘Anglo-Saxon’ model (also Chaudhury and Seabrooke, 2009).

7. For a critique that the potential for capital flight in a corporate governance context is overstated, see Lavelle (1999, 2000).

8. This does not mean the Principles immediately shape the daily activities of firms and regulators. Rather the argument here is that Principles’ impact is cumulative and long-term, as they shape knowledge, understandings, patterns of thought, policy debate and therefore discourse about corporate governance. This of course fits with Barnett and Finnemore's constructivist argument that IO influence comes from the social knowledge they generate about the world. It is also worth noting that the OECD is an IO that both governments and media hold in high esteem and to which they pay attention.

9. Corporate governance is an area where responsibilities are often split between a range of national government agencies and different governments are often represented by different agencies – finance ministries, trade and industry ministries, securities commissions and departments of justice, are all present in settings such as the OECD's ad-hoc task force and the regional corporate governance round tables. Six regional roundtables exist in Asia, Russia, Latin America, Eurasia, South East Europe, and Middle East and North Africa.

10. The OECD secretariat has also developed Principles on State-Owned Enterprises and a Boardroom Guide in an effort to increase the Principles’ usefulness in different contexts (OECD, 2006).

11. the World Bank Corporate Governance ROSC team's website currently shows 58 published corporate governance ROSCs for 48 countries, covering regions as diverse as Latin America, Central Asia, South Asia, Africa, East and South East Europe, East Asia, and the Middle East (see http://www.worldbank.org/ifa/rosc_cg.html).

12. Investors usually consider the individual practices of target companies when making decisions on whether to invest, but ROSCs evaluate entire jurisdictions, which often makes them less relevant as a source of information for investors. The OECD's methodology for assessing the Principles acknowledges that ROSCs require ‘reasoned observers’ to reach judgements about how widespread a practice has to be, for a verdict to be reached on the jurisdiction as a whole (OECD, 2007: 10). ROSCs are therefore primarily a statement on national jurisdictions rather than on individual companies.

13. Many of the procedures put in place informally by the World Bank team in the early 2000s have now been formalized by an OECD-authored methodology for applying and assessing the Principles (OECD, 2007).

14. It remains to be seen what the implications of the Financial Stability Board's intentions to identify non-cooperative jurisdictions might be for ROSCs.