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AFRICAN DEVELOPMENT BANK

Comparative Study of Board Processes, Procedures and Practices (BPPPs)

IDEV, African Development Bank

Inception Report

1. Introduction

The Independent Development Evaluation (IDEV) of the African Development Bank (the Bank)

has retained the services of a consulting firm to prepare a synthesis of experiences and lessons that

the Bank could learn from other international organizations, regarding Board processes,

procedures, and practices and the extent to which they contribute to the effectiveness and

efficiency of the Board of Executive Directors (the Board) in fulfilling its mandate. The synthesis

is intended primarily as a fact-finding, comparative study leading to the identification of lessons

and good practices. In view of the sensitivity of the topic and the experience it requires, the study

will be conducted under the leadership and overall guidance of the Head of IDEV. The

background, methodology, key deliverables and timeline are presented in this Inception Report.

2. Background

The International Bank for Reconstruction and Development (IBRD) was the first multilateral

development finance institution (DFI) to be established in 1944. Its governance structure evolved

out of the discussions at Bretton Woods and responded to the realities of the day. While there have

been some innovations in the almost 70 years since, its governance remains fundamentally the

same. Some of the DFIs that have been set up since largely replicated this structure, e.g., the Asian

Development Bank (AsDB). Others followed a different pattern driven by a different ownership

structure, e.g., the Development Bank of Latin America (CAF). The African Development Bank

started with one ownership (and hence governance) structure but then transitioned to a different

one. See Figure 1 for a timeline of the establishment of DFIs.

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Figure 1: DFI Establishment Timeline

The DFIs that have been set up recently, the Asian Infrastructure Investment Bank (AIIB) and the

New Development Bank (NDB, commonly referred to as the BRICS Bank), have sought to draw

on the experience of the other institutions and adapted accordingly. There have also been a number

of reflections on the matter of DFI governance over these years. It is timely for AfDB to take stock

of the changes that have taken place and learn from past and ongoing reflections with a view to

identifying lessons and good practices toward improving its own governance.

3. Objective and Scope

The primary objective of the study is to draw out lessons and good practices emerging from other

DFIs and from relevant reviews and evaluations for the information of and consideration by the

Bank’s Board. As discussed further below, IDEV will adapt the more specific objectives to what

is deemed to be the most relevant and useful to the Bank’s Board.

The study will cover Board policies, procedures, practices and processes and, importantly, their

impact on the Board’s effectiveness and efficiency. Specifically, the study will address the

following topics:

Corporate Governance

o Balance of roles and responsibilities as delegated between Board of Governors, and

Board of Executive Directors and Management regarding oversight, supervision

and executive actions and decisions of organization. Will address the following

components:

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Clarity of agreement on organizational objectives, targets, strategies and

resources (HR and financial)

Adequacy and timeliness of information flows on implementation and

results

Trust and confidence between management and Board

Appointment of senior management

Project threshold criteria

o Composition of the Board including the structure of shareholding and how it is

represented at the Board, such as through a ‘constituency’ system

Accountability

o Mechanisms by which the Board of Executive Directors, as delegated by the Board

of Governors, exercises its role to hold Management accountable for the

responsibility it has delegated to delivery of strategy and objectives. Will address

the following:

Extent accountability is addressed in the Articles of Agreement

Existence and effectiveness of mechanisms to hold management

accountable for the delivery of objectives, strategies and implementation.

Possible mechanisms include:

Dashboards

Corporate Scorecards

Results Measurement Frameworks

Annual reports

Evaluations

Budgets

Quarterly reports

Effectiveness in managing accountability

o Board’s accountability to and interaction with Governors/Council and respective

capitals including: mechanisms to assess the Board’s effectiveness and efficiency,

Board self-evaluation, Key Performance Indicators (KPIs), and transparency

Board Operations

o Two concepts (a) Effectiveness, which relates to relevance and timeliness of setting

of strategic goals; and (b) efficiency, which relates principally to the resources cost

and time of the Board and an entity to acquit itself of its responsibilities. Will

address: Board of EDs (process of appointment, terms, dean, chairperson)

Constituency office size, number of advisors, budget

Agenda Process (clarity, timing)

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Committees (frequency, processes, chair, terms of reference, number,

secretariat support, summaries)

Meeting Functioning (frequency, processes, chair, summaries, speaking

times, written statements)

Board document package

Decision-making process and monitoring

Continuity-coherence-clarity

Informal within Board to develop affinity groups and facilitate consensus

Consensus building between Board and management

Support to the Board

o Role of Board Secretariat

o Board Handbook and Manual on Working Procedures

o Board Induction Process

o Terms of Reference and Job Descriptions

o Document preparation and translations

o Board Retreats

o Handover process for EDs and Committees

o Training for Executive Directors (e.g., chairing and on substantive issues)

o Lexicon

o Budget and size of Board and Secretariat

o Use of technology

While the study will center on the Board of Directors, it will cover the interface and interaction of

the Board of Directors with the Board of Governors.

The study will equally cover the Board’s relationship and interactions with the President and senior

management particularly in the context of discussions at the Board and its committees. In view of

their important role, the study will pay specific attention to the functioning of the committees.

Finally, the study will pay specific attention to the role played by the Secretariat in supporting the

Board.

With respect to the organizations to be included in the study, there are a number of comparators

from which to choose. The principal focus would be on the Bank itself and other DFIs. IDEV will

use three DFIs that are most similar to the Bank – The Asian Development Bank (AsDB), IBRD,

and the Inter-American Development Bank (IDB)—as the core group of comparators. The IMF,

which has carried out a relatively comprehensive evaluation of its governance, is also proposed to

be included.

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In addition, other comparators will be included to focus on specific aspects. For example, the

review would specifically review any “innovations” introduced by the most recent entrant (AIIB).

The Development Bank of Latin America (CAF) would be included to address the topics of a

different shareholding structure (borrowers only) and a non-resident Board.

4. Approach and Methodology

The comparison will be grounded in a systematic review of a wide range of Board-related

documents. It will also draw on reviews of literature and past assessments of Board policies and

practices carried out by the DFIs themselves or by interested think-tanks and organizations.

Importantly, IDEV will aim to draw out lessons based on practical examples of other

organizations, rather than abstract, theoretical principles. As part of the Board processes and

practices are typically embedded in the institution’s memory and principals' tacit knowledge rather

than fully documented, IDEV will go beyond the review of relevant documents and seek to capture

the views of both past and present Board members and senior managers. Accordingly, the study

will rely heavily on interviews with Board members, staff of the secretariats that support the

Boards, and with the Presidents and senior managers who interact frequently with the Board.

IDEV will provide the Board with the opportunity to shape the questions and issues they would

like to address in the context of this comparative study.

The study is being carried out in three phases:

Inception Phase. The Inception Phase began with an extensive document and literature review.

The documents include, for a number of comparator DFIs: (i) Articles of Incorporation and

Charters; (ii) Codes of Board Conduct; (iii) Board Work Programs and Agendas; (iv) Board

Regulations; (v) Annual Reports and (vi) Terms of Reference of the different Board Committees.

With respect to the AfDB, the documents also include: (vii) Board Rolling Agendas; (viii) Board

Provisional Agendas and (ix) Board Meeting Highlights. The literature review has covered the

Independent Evaluation of the Governance of the IMF and a number of reviews and reflections on

DFI Boards carried out by the institutions themselves or by think-tanks and academics. The

Bibliography is included as Annex 1.

The Inception phase has also entailed a set of initial interviews with members of the Bank’s Board

and the Boards of the selected comparators. These early discussions helped to clarify the types of

questions of most interest for the Bank’s Board, and to “test” the design of the interviews to be

carried out in the next phase (see Annex 2).

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Data gathering Phase. The second phase, while continuing the document review, will focus on

interviews with Board members, and also the Board’s counterparts – the President and senior

managers. The interviewees will include the “Deans” of the Boards and the Chairs of key

committees, at both the Bank and comparators. One key support area to the Boards are Board

Secretariats. They are expected to be an important source on procedural information, as well as

metrics on frequency of Board meetings, issues discussed, and other matters relevant to the study.

The team will work both with the Secretariats’ websites and with key personnel to obtain this

information. The team will also gather information on other areas reporting to the Boards—

typically Evaluation Departments and Inspection Mechanisms. The study will not delve into these

functions in themselves, but rather seek to reflect how and to what extent they support the Boards

in discharging their duties.

Finally, the team will gather information about the Boards’ interaction with their Boards of

Governors, including in the context of their annual meetings.

Analysis and Report preparation phase. The final phase will be that of analysis of the data and

preparation of the report. The study team will seek to have a session to share early findings with

the Bank’s Board. It is important to highlight that the report will not make formal

recommendations, but will identify from within the synthesis of good practice, those elements that

may warrant consideration by the Board. The way forward will be led by the Bank’s Board itself,

with full support from IDEV staff as necessary.

Methodology. As explained above, the study will rely on a range of methods:

Document review

This study will involve an extensive review of Bank documents in addition to those

from selected comparator organizations. For each selected comparator, the documents

to be reviewed will include, where available, the following:

o Articles of Agreement

o Code of Conduct for Executive Directors

o Rules of Procedure for Executive Directors

o Annual Reports

o Board of Directors’ Manuals and Handbooks

o Board of Directors’ Orientation Materials

o Board Committee Terms of Reference

o Board Committee Rules of Procedure

The following documents specific to the Bank also will be reviewed:

o AfDB Board Rolling Agendas

o AfDB Board Provisional Agendas

o AfDB Board Meeting Highlights

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Relevant data and information drawn from the documents and files will be captured

systematically in an assessment template based on the key questions and indicators

found in Table 1.

Literature review

Literature related to the Board processes and practices and general corporate

governance at comparator organizations will also be reviewed, including independent

evaluations of these institutions’ Board processes. The evaluation will also include a

review of relevant literature from other institutions such as think tanks, academics, and

other organizations. A preliminary list of the literature to be consulted by the

assessment team is provided in Annex 1.

Semi-structured interviews

Internally at the Bank, semi-structured interviews will be conducted with selected

Executive Directors, Alternate Directors, advisors, and senior managers. Externally,

interviewees will include a sample of Executive Directors from the selected comparator

institutions. The Corporate Secretariats will be interviewed at the Bank and at the

selected comparators institutions. The interviews topics will cover the shareholding

structure, role of the Board, operations of the Board, topics related specifically to the

Executive Directors, and Board accountability. The interview template can be found in

Annex 2.

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Table 1: Evaluation Matrix Topic Key Questions to be “answered” Sub-questions/ Indicators etc. Sources of information

Co

rpora

te G

ov

ern

ance

What is the practice re balance of roles and responsibilities as

delegated between Board of Governors, Board of Executive Directors

and Management regarding oversight, supervision and executive

actions and decisions of organization?

Clarity of agreement on organizational objectives, targets,

strategies and resources (HR and financial)

Adequacy and timeliness of information flows on

implementation and results

Trust and confidence between management and Board

Appointment of senior management

Project threshold criteria

Review of

Documents, Agenda,

Minutes, Resolutions

Interviews with

comparator EDs and

senior managers

Interviews with Bank

EDs and staff What is the situation re “segmentation/division” among shareholders?

What are the pros and cons of the current situation?

Shareholder structure: regional vs non-regional; borrowers vs

non-borrowers

What is the practice re fostering openness to new shareholders? Clauses in articles that constrain entry

Support for openness

Examples of opening up” (e.g., CAF? AIIB). How is it

accomplished?

What is the relative experience of boards of various sizes?

Acc

ou

nta

bil

ity

What is the practice re mechanisms by which the Board of Executive

Directors holds Management accountable?

Extent accountability is addressed in the Articles of

Agreement

Existence and effectiveness of mechanisms to hold

management accountable for the delivery of objectives,

strategies and implementation

Effectiveness in managing accountability

Document review

Interviews with EDs

and Senior Managers

of AfDB and

comparators

What is the practice re Board accountability to and interaction with

Governors/Council and respective capitals?

Mechanisms to assess the Board’s effectiveness and

efficiency

Key Performance Indicators (KPIs

What are the good practices for institutionalized process of board self-

evaluation?

Adequate formal evaluation mechanism for the Board as

whole

What are the good practices of disclosure process? Transparency/length of time before documents are made

public

Bo

ard

Op

erat

ion

s

What are the “good” practices re:

a. Terms of Reference of EDs

b. Qualification Requirements

c. Code of Conduct/Ethics

Are there job descriptions for EDs? Are the descriptions

clear?

Are there mechanisms to correct/compensate for gaps in

experiences/qualifications/skills of EDs?

Satisfaction with the clarity of the language of the Board code

of conduct?

What are the good practices of clear process for dealing with

ethics violations at the Board level?

What are the good practices in terms of comprehensiveness of

Code of Conduct?

Review of Terms of

Reference of EDs,

Articles of

Agreement, Codes of

Conduct

Interviews with EDs

and Managers to

understand practices

Board Agendas,

Minutes

Lessons re Tenure (term, renewal), practice re rotation/growth from

advisor to alternate to ED (and back)?

What is the selection/election process?

What is the renewal/removal process?

How to change the number of Board members?

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Topic Key Questions to be “answered” Sub-questions/ Indicators etc. Sources of information

How long is the term?

What is the mechanism for rotation/growth?

What is the process re selection and duties of Deans and

Chairpersons?

Terms

Duties

Training

What is the relative experience with varying constituency office

sizes, numbers of advisors, and budgets?

Constituency sizes

Number of Advisors

Budget

What are the “good” practices re selection of advisors and staff? The role played by EDs in choosing their staff

What is “good” practice re agenda setting process? Who is responsible for setting the agenda?

Clarity of agenda

Volatility of agenda

What is “good” practice re meeting functioning? Frequency of meetings

Processes

Chairperson

Summaries

Speaking Times

Written statements

Board document package

What is good practice re the distribution of Board time allocated to

different discussions?

Is the Board’s involvement adequate?

Board discussion time on policies/strategies and projects

What is good practice for decision making and monitoring? Voting-process innovations

Special procedures in decision making (e.g. for lending)/

Criteria

Mechanisms to monitor decisions

What is the contribution of the committees to Board effectiveness and

efficiency?

What is practice re committees:

o Frequency

o Processes

o Chairs

o Terms of Reference

o Number of committees

o Secretariat support

o Summaries

What is good practice re consensus building among Board members

and between the Board and management?

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Topic Key Questions to be “answered” Sub-questions/ Indicators etc. Sources of information S

upp

ort

What is the value-added by Secretariat support?

What is the value-added by orientation activities and materials?

Role of Board Secretariat

Board Handbook and Manual on Working Procedures

Board Induction Process

Terms of Reference and Job Descriptions

Document preparation and translations

Board Retreats

Handover process for EDs and Committees

Training for Executive Directors (e.g., chairing and on

substantive issues)

Lexicon

Budget and size of Board and Secretariat

Document review

Interviews with EDs and

Senior Managers of AfDB

and comparators

What are some innovations that have improved effectiveness?

How has the advance in ICT impacted Board operations?

Use of technology

The use of boardroom time

Meeting Minutes writing process (Reporting of minority

views)

What is good practice for shareholding structure innovation?

Decision making and Follow up process

Evaluation mechanism

Approaches of the Board to support EDs (retreat, orientation,

etc.)

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5. Management

The assignment will be overseen and the consultant team led by the Head of IDEV. The Team

leader will guide the conduct of interviews with Board members and senior managers, ensure that

draft reports are peer-reviewed and feedback taken into account, and organize early and subsequent

briefings of the Bank’s Board.

6. Timeframe

The assignment was begun at the end of November 2016, and will last through June 2017. As

shown in Table 2, the draft report is to be delivered in early-June 2017, and the final report in late-

July 2017.

Table 2: Timeframe

Reports Due/Activities

November 28 - June 30

Nov

28 December January February March April May June

Document Review

Initial Interviews

Inception Report

Continuing Interviews

Preparation of Draft Report

Draft Final Report

Review and Feedback

Preparation of Final Report

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Annex 1: Bibliography

Documents

Agreement Establishing. African Development Bank. Amended July 5, 2002.

Agreement Establishing. Asian Development Bank. Amended December 31, 1994.

Agreement Establishing. Inter-American Development Bank. Amended July 31, 1995.

Articles of Agreement. International Bank for Reconstruction and Development. Amended

June 27, 2012

Code of Conduct. African Development Bank. Amended June 28, 2007.

Code of Conduct. Asian Development Bank. Adopted April 19, 2001.

Code of Conduct. Inter-American Development Bank. Amended April 28, 2009.

Code of Conduct for Board Officials. International Bank for Reconstruction and

Development. Adopted November 1, 2007

Literature

Calice, P. 2013. African Development Finance Institutions: Unlocking the Potential.

Working Paper Series No. 174 African Development Bank, Tunis. Tunisia. 1-40.

Claessens, S. 2006. Corporate Governance and Development. The World Bank Research

Observer, Vol. 21, No. 1, pp. 91-122. http://www.jstor.org/stable/40282344

Di Benedetta, P., Lieberman, I., Ard, L. 2015. Corporate governance in microfinance

institutions. World Bank Group.

Griffith-Jones, S. Governance of the World Bank. 1-17.

Lamandy, R., 2008. Governance of the International Monetary Fund. Independent Evaluation

Office. 1-53.

Martinez-Diaz, L. 2008. Executive Boards in International Organizations: Lessons for

Strengthening IMF Governance. Independent Evaluation Office of the International

Monetary Fund.

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Annex 2: Interview Template

Venue and date:

Interviewer(s):

Interviewee:

(1) Role of Interviewee

a) Executive Director

b) Alternate

c) Advisor/Counsellor (IDB)

d) Senior Manager

(2) Nationality/country represented

(3) Years of experience in the current position/role

a) 2 years or less

b) Between 2 to 5 years

c) Between 5 to 10 years

d) More than 10 years

(4) Past Boards of other MDBs/IFIs, or Corporate Boards that once served

(5) Whether or not had worked at these institutions in a staff/managerial capacity

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A. Interview Questions

1. Do you think the shareholding structure has an impact on the effectiveness of the Board?

-- In what way? (Strategic choices, representation, etc.)

-- Any views on bringing on board new members: process, implication?

-- Is size and issue for effectiveness/efficiency? If so what are alternatives?

2. What is your view of the value-added by the Board of Governors (BoG)?

-- What is your view on the Frequency of Board of Governors meeting?

View of

Frequency of

BoG Meetings

(Current 1/yr)

Too

frequent

Somewhat

more than

enough

About right

Somewhat

less than

enough

Very

infrequent

3. Does the Board have adequate mechanisms in place to hold management accountable for

its performance?

-- How effectively is it used?

-- How would you improve it?

-- The above applies to “Management”; are there adequate established mechanisms to hold

“Senior Management” accountable (EXC/EVP, MDs, COO, CGs)

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4. What is your perception of the “division of responsibility” between the Board and

Management? How do you assess the balance and clarity between the Board playing an

oversight/supervisory role and taking on executive responsibilities?

-- Delegation?

What are your views regarding the following specific items?

Board’s role with respect

to approval of: Essential

Board could

be less

engaged

Consultation

would be

adequate

Could be

Fully

delegated

Policies

Corporate strategies

Country strategies

Sector strategies

Budget

Projects

Small grants

Organizational changes

Process re comments in

advance

Senior appointments

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5. Which aspects of Board operations have an important bearing on its effectiveness and on

its efficiency?

Such as:

Knowledge of the issues and the history

Preparing for meetings

Quality of Discussion

Summary: clarity of decisions/signals (A Lexicon?)

Residence/non-residence, Size of Board,

Balance of time spent on different issues,

Frequency of meetings, Time spent in Board meetings,

Process re comments in advance, Time limits for oral comments,

Committees –number, composition, process,

Support of Secretariat

Orientation, Retreats, country visits

-- In what way does it work/not work?

-- Are you familiar with other comparators of good practice worth signaling?

Do you find we have the right number/structure of Board Committees to be effective and

efficient? Why/not?

Which of the Board Committees do you see as adding the most value? The least value? Why?

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6. What are the most important factors relating to individual Executive

Directors/Alternates/Advisors in terms of their impact on the Board’s effectiveness?

ToR/Job description

Qualifications and experience

Selection/election process (especially in case of multi-country/constituency system)

On-boarding, orientation, retreats

Term/tenure,

“System” of “growth” from Advisor to Alternate to ED,

Code of Conduct/Ethics

Cooling off period

-- What else?

-- Is there an Evaluation mechanism?

7. Are there in your view adequate mechanisms in place (used?) to assess the Board’s

effectiveness and efficiency?

-- e.g. Do you conduct periodic surveys?

-- ED only Retreats?

-- What would you regard as relevant indicators (KPIs) to measure the effectiveness and

efficiency of the Board?

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8. What are noteworthy innovations in the above areas?

-- How has the advance in information and communication technology impacted Board

operations?

-- Other?

9. Are there any other aspects that you would like to emphasize or issues that you want to

highlight? (Important, especially for those who have (a) experiences with other IFI Boards;

(b) worked in staff/management capacity in IFIs.)