On the AIIB’s Non‐resident Board: Strategic Trade‐offs, Roles and Responsibilities
| Author | Elke Baumann,Camillo Müller |
| Date | 01 November 2019 |
| DOI | http://doi.org/10.1111/1758-5899.12766 |
| Published date | 01 November 2019 |
On the AIIB’s Non-resident Board: Strategic
Trade-offs, Roles and Responsibilities
Camillo von M€
uller and Elke Baumann
Federal Ministry of Finance
Abstract
The AIIB’s non-resident Board of Directors has drawn a lot of attention among experts and in the literature, although it is not
an unprecedented feature among the existing international financial institutions. A non-resident Board setting has implications
for how the respective Board undertakes its role and responsibilities. This essay analyses the characteristics of the AIIB’s non-
resident board in regard to four roles or functions as defined in the literature on Board evaluation (Martinez-Diaz 2008), that
is, the roles of strategic thinker, political counterweight, performance police, and democratic forum. AIIB’s Board of Directors is
particularly apt to perform the role of a strategic thinker, while taking on the other roles to different degrees of effectiveness.
More than seventy ‘years ago delegates from around the
world were gathering on Wilmington Island in Savannah,
Georgia, to celebrate the baptism of the Bretton Woods
twins, the International Monetary Fund ... and the World
Bank’(King, 2006). At the meeting:
the main issue that divided the Americans and the
British was the role of Executive Directors. [John
Maynard] Keynes argued that the Fund should be
under the control of the Managing Director with
oversight carried out by part-time Executive Direc-
tors ... The main function of the Executive Direc-
tors was not to manage the Fund, but to act as an
essential link between the Managing Director and
the national treasuries and central banks from
which they were drawn. (King, 2006)
In contrast, ‘the US representatives [had] urged that the
directors and alternates would have to be available at all
times for quick decisions, and that they could develop the
information and judgment needed for the business through
board discussions’(Bitterman, 1971 in Lichtenstein, 2018b).
The discussions in Bretton Woods and Savannah marked
beginning points in the governance of international financial
institutions (Lichtenstein, 2018a). The founding of the World
Bank (IBRD) was followed by initiations of other multilateral
development banks (MDBs), among others the European
Investment Bank (EIB, in 1957), the Inter-American Develop-
ment Bank (IADB, in 1959), the African Development Bank
(AfDB, in 1963), the Asian Development Bank (ADB, in 1965),
the European Bank for Reconstruction and Development
(EBRD, in 1990), the New Development Bank (NDB, in 2014),
and the Asian Infrastructure Investment Bank (AIIB, in 2015).
At AfDB, ADB, EBRD, IADB and IBRD, the Boards of Directors
are resident, ‘with the Directors, Alternates and constituency
staff based at the bank’s headquarters and frequent meet-
ings (sometimes twice a week at the World Bank Group,
and usually twice a month at EBRD)’(Lichtenstein, 2018b).
Yet, ‘looking across the MDB world ... the pattern is more
varied’(Lichtenstein, 2018b). In addition to EIB, ‘other inter-
national financial institutions ... have functioned for dec-
ades with non-resident Board mechanisms’(Lichtenstein,
2018b). These institutions include the:
Council of Europe Development Bank, the Andean
Development Bank (CAF), Caribbean Development
Bank, Nordic Investment Bank, Islamic Development
Bank, Black Sea Trade and Development Bank, the
International Fund for Agricultural Development,
and most recently, the European Stability Mecha-
nism and the New Development Bank. (Lichten-
stein, 2018b)
Similarly, the latest addition to the MDB family, the Asian
Infrastructure Investment Bank (AIIB), is governed by a non-
resident board.
Paraphrasing an observation by former Governor of Bank
of England Mervin King (2006), the successful operations
and governance of institutions with non-resident boards
confirm in retrospect that Keynes’s above-quoted position
was sound. Prizzon and Engen (2018) even note that ‘only
the legacy RDBs [regional development banks], the World
Bank and two Latin American sub-regional banks have resi-
dent boards’, and that ‘most banks have non-resident
boards of directors’. The observation that there is no uni-
form governance model which determines how members
(principals) have delegated powers to multilateral institu-
tions as agents in the global economy raises ‘an opportunity
to return to first principles and ask some basic questions’
(King, 2006) such as how to assess the various approaches
toward governance that persist within the MDB world.
From this vantage, the set-up and recent experiences of
the AIIB represent a particularly interesting case for assess-
ing how the non-resident Board of Directors (BoD) of the
AIIB is functioning in terms of roles and responsibilities, and
the relative effectiveness or utility of the non-resident Board
Global Policy (2019) 10:4 doi: 10.1111/1758-5899.12766 ©2019 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 10 . Issue 4 . November 2019 587
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