Track Record: Lessons from IFC's Corporate Governance Experience

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6IFC Advisory Services in Sustainable Business
A Brief History of IFC’s CorporateGovernance Advisory ServicesThe breakup of the Soviet Union in the 1990s led tothe birth of a raft of newly independent republics.However, the rocky transition from central economiccontrol to market economies during that periodmade IFC investment in private enterprises next toimpossible in any of the new republics. Rather than siton the sidelines and watch, IFC made a bold decision:to assist in the development of market economies byhelping these new governments re-organize and sell offnon-functional or inefficient state-owned enterprisesto private entities. The end goal of this strategy wasfuture IFC investment in the private sectors that wehelped to create. Along the way, we developed a viablemodel for corporate governance projects that has beensuccessfully replicated—with refinements along theway—throughout the region and beyond.In the newly independent republics of the formerSoviet Union, the key players didn’t understand allthat they didn’t know about corporate governance. Assuch, IFC’s early corporate governance advisory servicesefforts were, in effect, experiments in heighteningawareness about the role and importance of corporategovernance in these countries.Starting first in Ukraine, and then moving throughoutthe region, we designed projects that reached awide range of key parties, including companies,governments, academic institutions, and the media.Our efforts sought to educate these parties on thevalue of good corporate governance and create strongdemand for our corporate governance advisory services.The approaches used have been tested and refinedover the course of more than a decade, resulting inthe development of a flexible and adaptable corporategovernance donor-funded project model. The modelhas been replicated—with strong results—in otherregions where IFC is active, with specifics customizedto fit local conditions.This work has helped strengthen general businessenvironments to encourage more private sectordevelopment. In addition, improvements in corporategovernance have helped companies that are preparing toseek outside capital to enhance their performance andgain increased access to financing sources.In the meantime, events on the world stage—andthe coincidences of timing—continue to elevate theimportance of corporate governance. Following IFC’sinitial advisory work as new market-based economiesin former Soviet republics came into being, the Enronscandal of the early 2000s brought renewed scrutinyon corporate governance practices in the West. Morerecently, in the aftermath of the global financial crisis,there has been renewed focus on corporate governancelapses that may have contributed to the meltdown. Andnow, change is sweeping across the Middle East andNorth Africa, bringing with it the potential to addresscorporate governance challenges in ways that can helpstrengthen economies and expand the private sector.Such events highlight the fact that there is no realend point to good corporate governance: as marketconditions change, as new financial instruments arecreated, and as technology enables ever-evolving waysof doing business, there will be an on-going need toadapt corporate governance practices—as well as publicpolicies—to keep pace. The project model we havedeveloped is well suited for such a dynamic: within astandardized structure, the content can be altered andadapted to address current and future challenges.This book is a compilation of our experiences fromyears of work on corporate governance, and offersSmartLessons on what we have learned. The bookprovides practical guidance on what to do and whatpitfalls to avoid from the people who know the work thebest: IFC’s corporate governance advisory services staff,who collectively have designed and implemented projectsin more than 50 countries and counting since 1992.Lessons from IFC’s Corporate Governance Experience 1
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Track Record: Lessons from IFC's Corporate Governance Experience

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