Elegantes Telefax - JAV der TUB - TU Berlin

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(Kapur 2002). The gentlemen’s agreement mentioned above on the United States
government proposing a US national as the candidate for the president of the World
Bank should be added as an additional source of the dominance of the US among
the principals.
The concept of multiple principals, introduced to the governance of the World Bank
by Nielson and Tierney (2003), tries to capture the special relationship between the
World Bank and US institutions. They see the US President and Congress as additional
principals (in addition to the collective principal represented by the two Boards),
creating a situation for the agent where he has to deal with the collective principal
and other principals. The US President and Congress interact more directly and not
only via the Board of Executive Directors with the World Bank as they can influence
the World Bank separately via the nomination process of the President and via the
budgetary competence, having “numerous formal sources of authority that allow it to
unilaterally recontract with the World Bank” (Nielson and Tierney 2003, 256).
As an established MDB, the World Bank has been granted considerable discretion.
The use of rules as an approach to control the World Bank by the principals has
been limited as an instrument. Kapur (2002) classifies the autonomy of the World
Bank management in day to day operations as a central quality during its foundation
when it was a lending institution to governments for infrastructure projects. What he
categorizes as major changes, the inclusion of the International Development Association
(IDA) in 1960 and the introduction of sectoral adjustment lending in 1980 can
be classified as additional tasks. Here, the inclusion of IDA changed the control
mechanism by establishing the budgetary control mechanism of tax financing although
in a milder form by making the decision only every three years. This task was
added by the principals against the Bank’s management while the introduction of
structural adjustment lending was initiated by the President against a reluctant Board
of Executive Directors (Mosley et al 1991). The introduction of policy-based lending
did not change the rules of control by the collective principal, but the relationship between
the World Bank as the principal and the borrowing countries as its agents. The
use of conditionality as the controlling instrument of policy-based lending created
new incentives problems.
Adding more tasks, like adding products to the portfolio of a private corporation
changes the internal structure of the organization, the necessary skills of its personnel
and the incentive structure. In addition to the three major products, providing
capital markets based loans for physical infrastructure projects, giving tax based
subsidized loans and grants to poorer countries and the policy based lending for sectors
and structural adjustment based on a broader evaluation process than private
banks, the World Bank provides research and monitoring to its shareholders and the