4.4 Safeguards for government representatives on SIF boards

• To avoid the risk of politicization, public sponsors should ideally delegate the board nomination process to an independent nomination committee, or a recognized global recruitment firm, which identifies the pool of candidates. A SIF’s board nomination process can itself become an avenue for considerable political influence and the formation of political alliances within the SIF. Lack of integrity in the process could result in a board member’s being beholden to the public sponsor (or specific parties within the public sponsor), instead of acting with independence toward achieving the

SIF mandate. The risk of political interference in the nomination process is likely to increase if a ministry or other high office of a public sponsor leads the process. To reduce political influence in the nomination process, the search for qualified individuals should be conducted within a structured and transparent nomination process led by an independent nomination committee, as a subset of the SIF board,24 or by a reputed international recruitment firm (see box 4.4). For example, NSIA has a nomination committee to select board members, but this committee is led by the Minister of

Finance (in consultation with the National Economic Council), which can reduce the potential for complete independence. The nomination process is strengthened if it is well-documented, with both the advertisement of board positions and the names of board nominees made available to the public (World Bank 2014). After selection, board appointments should be conducted in a timely manner and the public sponsor must disclose results to the public (World Bank 2014). • Board members should be selected on the basis of clearly outlined criteria, with an emphasis on professional experience and fit and proper assessments.

BOX 4.4

Safeguards for government representatives on SIF boards

Safeguards for the appointment of government representatives to the board of a strategic investment fund (SIF) may be formalized in the SIF’s founding law or in its articles of association, and may include the following:

• The appointment to a SIF board should be made only when no conflict of interest will arise. • The appointment should be made on the basis of the relevant skills. • The appointment should be made in the person’s own right, and the delegation of the role to other officials should be prohibited. • The appointee should be responsible for maintaining the same skills and governance competencies as other directors. • The appointee should be subject to the same performance evaluation as other directors, including removal if deemed necessary. • The appointee should share the same liabilities and reputational risks as other directors. • The appointee should be subject to the same terms of appointment as other directors. • The appointee should not be made chair or deputy chair.

Additionally, consistent with practice for stateowned enterprises in many members and nonmembers of the Organisation for Economic Co-operation and Development, SIFs could prohibit ministers and other political appointees from serving on the board.

Source: World Bank 2014.