Governance
|
87
Ownership responsibilities Ownership responsibilities of the SIF public sponsor extend from analysis and planning before the SIF’s establishment, through the SIF’s operational phase, and to its closure. These responsibilities outlined in the constitutional documents of the SIF must focus on core rights, akin to those of shareholders of corporations, without infringing on day-to-day management of the SIF. Ownership functions should be limited to (1) defining the mandate and objectives of the fund; (2) capitalizing the fund and defining the withdrawal policy from the fund; (3) appointing a board of directors using a merit-based and transparent process; (4) overseeing the fund’s operations and ensuring compliance with applicable laws, regulations, and corporate governance standards; and (5) monitoring and evaluating performance in line with the mandate of the fund and based on a defined framework (see table 4.2 for details). These responsibilities are essentially the same whether the public sponsor is the government or a development finance institution. One of the key governance functions of the SIF public sponsor is to ensure that the SIF mandate is clearly crafted and factors in the requirement that the SIF not crowd out private capital. The public sponsor typically achieves this clarity of mandate by investing in feasibility studies (discussed in chapter 2), which
TABLE 4.2
Public sponsor ownership functions in a SIF
OWNERSHIP FUNCTION
ROLES AND RESPONSIBILITIES
Planning stage
• Commission preliminary studies and feasibility studies. • Determine the SIF’s structure and governance arrangements.
Mandate
• Define the fund’s mandate after consultation with stakeholders. • Establish broad outcomes that the fund is expected to achieve within this mandate, and agree to these outcomes with the SIF’s board. • Monitor implementation of the mandate and objectives of the fund.
Macroeconomy
• Ensure consistency of SIF operations with macroeconomic, fiscal, and financial sector policy.a
Investment policy and strategy
• Approve the investment policy, with advice from the investment committee (or board).
Board
• Ensure public sector representation on the SIF’s board (if needed).
• Set the risk parameters of the SIF, in accordance with the risk tolerance of the political bodies that are the ultimate stewards of the SIF’s assets (see Al-Hassan et al. 2013).
• Appoint board of directors using a merit-based and transparent process (the board appoints the CEO and the investment committee). • Oversee the board’s activities, and ensure the SIF’s compliance with applicable laws, regulations, and standards. Capital
• Allocate capital to the SIF from the government budget or other sources, subject to parliamentary approval.a • Set clear rules on dividend payments to the state and capital withdrawals, subject to parliamentary oversight.a • Approve SIF borrowing, if the SIF is permitted to borrow or otherwise assume liabilities on behalf of the state.
Management
• Establish the criteria and process for the selection and appointment of the CEO, who is then appointed by the board.
Documentation
• Determine the SIF’s disclosure policy, in compliance with applicable laws.
Source: World Bank. Note: CEO = chief executive officer; SIF = strategic investment fund. a. Most relevant for public capital SIFs solely owned by the government.
