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Why Corporate Governance Reforms don't translate to UN Boards

4 February 2024

By Katja Hemmerich

a large bunch of red balloons with one blue balloon just above them with the UN logo.

This month our spotlight is on the Joint Inspection Unit’s (JIU) review of governance and oversight effectiveness of the Executive Boards of UNDP/UNFPA/UNOPS, UNICEF and UNWomen. The review was requested last year by the New York-based Boards following the UNOPS S3i scandal to identify areas for possible improvement in their governance and oversight roles. The JIU issued its report in January and it has implications not only for the New York-based Boards but also the UN General Assembly, the Economic and Social Council and other UN Boards reporting to them, as well as the Advisory Committee on Administrative and Budgetary Questions (ACABQ).

Many of the JIU recommendations relate to clarifying and codifying roles and responsibilities of the Boards and their relationship to these other bodies. Such recommendations entail some direct risks related to negotiating agreement on specific responsibilities, in particular when General Assembly agreement is needed. But there are bigger unanticipated risks of undermining multilateralism and the legitimacy of Boards and the UN organizations they oversee if they report is taken at face value.

The JIU review assumes that UN Executive Boards can and should apply the same governance standards and principles as corporate boards. But it fails to acknowledge that UN Executive Boards are made up of representatives of member states, as opposed to independent subject matter experts and corporate management, as is the case in the private sector. Some of the shortcomings identified by the JIU reflect necessary political compromises, and changing those without understanding that context can therefore inadvertently exacerbate multilateral tensions. Using the the JIU recommendation that UN Executive Boards assess the performance of UN Executive Heads as an example, our spotlight outlines why UN Executive Boards are different than corporate boards and the risks of applying corporate governance reforms to the UN in the absence of understanding these differences. We then propose some ways to mitigate those risks.

Why are UN Boards inherently different than Corporate Boards?

The JIU report contains a list of 20 reference documents on governance and oversight used to develop the benchmarks used in their review of the Executive Boards of UNDP/UNFPA/UNOPS, UNICEF and UNWomen. Fifteen of those references are exclusively related to corporate governance in the private sector. Only one is specifically related to good governance in the public sector. As explained in the report, boards across all economic sectors are facing increasing skepticism about board quality and are under pressure to demonstrate how Board members are fulfilling their roles effectively and transparently. The reference documents aim to capture best practices in this regard, presumably also with the underlying recognition that the UN is also facing challenges related to trust and transparency. While there are contextual similarities, there are fundamental differences between the responsibilities of an individual Board member in the corporate sector and the delegates sitting on UN Executive Boards. Applying the same standards without adjusting for these different roles is risky.

UN Boards are made up of member states. Their delegates therefore have an obligation to represent their national interest and they get their direction from their national capitals. Part of that national interest generally includes ensuring UN organizations are effective in exercising their mandates and UN Board members act accordingly. But that may not always be the case, and there may be instances where national interests do not align with the organizational priorities and needs of the UN entity which they oversee. As a similar review for the WFP Executive Board noted:

“The Board Members have a challenging role as they are member state representatives but also act as the members of the governing body of an international humanitarian organization. It is very difficult to balance those two roles as some decisions can be difficult to engage or agree on for a Member State due to the country’s position on the relevant issue.” -  WFP Governance Review, para. 62

On corporate boards, individual members have an obligation of ‘undivided loyalty’ to the company. This means they have a formal responsibility to act in the best interest of the company and its shareholders. In some jurisdictions this is an explicit legal requirement, and it is a core of all the corporate governance standards referenced by the JIU. As outlined in the Harvard Law School publication cited in the JIU report:

“Director independence is critical to effective corporate governance, and providing objective independent judgment that represents the interests of all shareholders is at the core of the board’s oversight function.” - Business Roundtable, “Principles of corporate governance”, Harvard Law School Forum on Corporate Governance, 8 September 2016

To be selected as as corporate board member, candidates need to demonstrate actual and perceived independence. In the UN context, Board members are often selected because they represent certain regions and particular interests, for example as a donor country or a recipient country, in an effort to maintain a multilateral political balance in decision-making. These are two very different starting points when considering board composition and responsibilities, and these divergences permeate across the two board structures and functions. In corporate settings, members' technical and managerial expertise is a factor in their selection to the board. In the UN system, individual delegates' expertise in finance, risk management, budgeting, human resources or oversight is not a primary consideration when a member state is elected to a Board, and it’s at the discretion of the member state to bring such experts to particular meetings or committees. UN management is never part of the Executive Board and can influence decisions but is not an actual decision-maker. Corporate executives are also Board members (albeit not independent ones and should therefore be a minority on the Board). Corporate board processes are intended to harmonize and align approaches between management, the Board and the shareholders. Corporate board processes and best practices, therefore, have a different purpose and include different inputs than multilateral UN Board processes.

The implementation risks of performance assessment by UN Boards

This doesn’t mean that corporate governance standards are completely irrelevant in the UN context. Rather there is a need to consider whether the purpose of particular corporate governance standards is in line with the multilateral logic of the related UN governance process before adopting that corporate standard. To demonstrate this, we examine the JIU’s recommendation that UN Executive Boards assess the performance of Executive Heads of UN entities because there is a general expectation that corporate boards are involved in the selection, performance assessment and renewal or termination of CEOs (JIU, para. 23).

The recommendation, like the corporate standard from which it is derived, presumes that performance is the primary factor in determining whether an executive leader’s contract is renewed or terminated. Yet, as independent research has demonstrated with a comprehensive review of leadership performance of 238 civilian and military leaders in UN peacekeeping from 1978 to 2017, political considerations often outweigh performance when retaining senior leaders in the UN system. This is particularly evident in the case of powerful member states:

“Leaders from large troop contributors or permanent members of the Security Council are more likely to endure in post, and they may also be partly shielded from the effects of poor mission performance.” -  M. Lundgren et al. “Politics or Performance? Leadership Accountability in UN Peacekeeping”, 2022

If UN Boards establish a mechanism to assess the performance of an Executive Head but this assessment is subjugated to political considerations by the Secretary-General during contract renewal, it will only add to the increasing mistrust between member states and UN senior management. This risk is particularly acute for organizations that have historically prioritized political considerations in their selection of Executive Heads, such as UNICEF which is always headed by an American and UNDP, which has always been led by someone from a Western country with one exception (Kemal Dervis from 2005-2009). If performance is assessed as poor, especially for multiple Executive Heads from the Global North but selections continue to prioritize that region, it will only further exacerbate tensions with the Global South and undermine legitimacy of the selection and performance management processes and the UN as a whole.

Because Boards also set the tone at the top, these contradictions in performance management at the Executive level are likely to trickle down to staff and undermine accountability across the organization. It will be particularly hard for an Executive Head whose selection or renewal was obviously determined by political considerations rather than performance to engage his or her managers and staff to in genuine performance management processes. Perceptions that performance management in the UN is a ‘check the box’ exercise are likely to get worse. At an organizational level, it creates a widening gap between what the organization says it on accountability and what it actually does, i.e. potentially ignoring accountability for Executive Heads. While all organizations have to manage this organizational hypocrisy, it is a particular problem for many international organizations set up by and for member states but with charters and values focused on beneficiaries and the world at large. As one recent study of this phenomenon and its consequences has highlighted:

"IOs [international organizations] often say one thing and do another, and these contradictory discursive and operational practices have a number of broader effects, including reduced legitimacy perceptions by external audiences, resistance to reform, and decreased risk aversion.” - Sarah von Billerbek, “Mirror, Mirror On the Wall:” Self-Legitimation by International Organizations", 2020

Thus, implementation of the JIU recommendation on Boards assessing performance of Executive Heads without consideration of the political context risks undermining transparency, legitimacy and accountability of UN organizations and Boards and further exacerbating tensions in the multilateral system.

Mitigating risks when implementing UN Board reforms

Understanding the political nature of UN governance processes and the multiple layers of potentially competing loyalties of UN Board members does also help to identify possible measures that Boards can consider to mitigate the risks. We highlight some options, both in relation to the performance assessment recommendation and more generally. This list is not exhaustive and further deliberations by practitioners and researchers are likely to come up with other practical suggestions.

As the JIU report points out, corporate boards are generally involve in the selection, renewal and termination decisions of CEOs, as well as their performance assessment. Involvement in all of these processes at the same level creates a kind of self-reinforcing accountability, i.e. a Board that selects a CEO because it agrees that person is qualified is more likely to provide a fair and objective performance assessment so as not to undermine their selection decision or conversely ensure they have a strong case for termination or non-renewal. Accordingly, when considering the adoption and implementation of the JIU performance assessment recommendation, UN Executive Boards may also want to consider clarifying their role and involvement in selection and renewal processes for Executive Heads.

A useful tool in considering different options is the UN Association of the UK's 2023 report on the appointment of the Secretary-General and other Executive Heads, which also includes useful legislative references on this issue from the UN system. Recommendation 8 about eliminating ring fencing of selections for certain countries would complement the JIU recommendation on assessing performance and help mitigate its risks.

“Ringfencing - the widespread practice of appointing individuals from specific states to specific roles - damages the credibility of the United Nations, severely limits the pool of talent available, and fuels ongoing resentments from many nations that the organisation only represents powerful states. It is also in clear contravention both of the general provisions of the UN Charter for international civil servants to be geographically diverse and answerable to no nation, and specific decisions of the General Assembly, such as the call in 46/232 that ‘as a general rule, no national of a Member State should succeed a national of that State in a senior post.’” - Ben Donaldson, “The appointment of the UN Secretary- General and other executive heads: opportunities for reform”, UNA-UK, June 2023

The UNA-UK's recommendation 9 to increase transparency on term length and renewal processes could be another option to consider, and potentially less controversial than eliminating ringfencing in some organizations. Committing to transparently publish term lengths of Executive Heads, when renewal considerations start and specifically how a UN Board's performance assessment figures into that renewal process when adopting the JIU recommendations could help mitigate risks and strengthen legitimacy of these processes.

More generally, risks arising from any or all of the JIU recommendations can potentially be mitigated by considering where UN Boards could reasonably establish some of the independence inherent to corporate board members, or at least reduce the potential conflicts of interest. The WFP Governance Review, for example, recommended that all WFP Board members be subject to a ‘cooling off’ period after serving on the Board, during which they cannot be employed by WFP. This doesn’t negate the dual loyalties that delegates have with respect to their capitals and the UN organization they oversee, but it does eliminate the possibility of their conduct being governed by personal career ambitions. The WFP Governance Review (which we've previously summarized) also recommends establishing a code of conduct for its Board members. One tool it recommends to help develop such a code of conduct are the Global Ethics and Integrity Benchmarks, which highlight the importance of understanding and acknowledging potential conflicts of interest of board members and other leaders. More transparency around the dual role of Board members rather than pretending it does not exist could help foster a better understanding of how UN governance works, both for insiders and external audiences.

Another risk mitigation measure to consider is in the configuration of committees proposed by the JIU to allow for more effective review of technical documents like budgets, financial statements and audit reports. Identifying and selecting specific delegates to these on the basis of their qualifications and expertise could help in increasing the quality of reviews of technical documents and the recommendations they make to the full UN Board. Allowing the full UN Board or the Bureau to review the CVs of the experts proposed by an individual member state would create greater transparency and allow the Board to ensure that it has the right mix of expertise across the committee. Even greater independence of these committee experts could be created by having the relevant member state formally second the technical expert to the committee with a reporting line to the Board President for the term of their secondment.

These are just several options to consider and further discussion amongst member states is needed and would likely identify additional risk mitigation measures that could reinforce the intended aim of more effective UN governance and oversight. Real results will not be achieved, however, if reform efforts are predicated on false assumptions that UN Boards are the same as corporate boards.


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