Surely the IMF won't agree to this governance structure?

The Icelandic government has decided to pass a new law and advertise for a Central Bank Governor who must be a professional economist.  At the same time the government has approved that the politically appointed Chairman of the Board of  “new” Landsbanki will also “temporarily” resume the position of the CEO, a decision that will last well beyond the term of the government.  This is an example of putting double standards into practise.  It was hoped that the Left Green party would usher in professional and democratice working practises.  Unfortunately not.  The approach to governance and recruitment for public bodies is exactly the same as as the previous government.  The recent appointment to the Student Loan Board (LIN) is a case in proof where right wing politicians were substituted for new left wing ones.

Iceland has now become a textbook example of the danger of politically motivated appointments to top public offices.  Foreign commentators are astounded over the incompetence and lack of reform.  But stubbornly all political parties in Iceland cling on to an old illogical system that has served their parties well in the past.  For instance, what logic lies behind the decision to advertise for professional people at the Central Bank but not the commercial banks?


Enough is enough, one might say.  But wait!  The government has now requested advice from the IMF about governance reform at the Central Bank.  This would be sensible and credible if not for the fact that at the same time the government is riding roughshod over corporate governance at the new state-owned commercial banks which are being restructured with the help of the IMF.  One of the first decisions of the new government was to approve the combining of the positions of the Chairman and the CEO of  “new” Landsbanki in the hands of one politically appointed individual who is supported by a politically appointed Board with no independent Directors.  This can hardly be called best practice.  By this action the government has put too much power in the hand of one individual with limited checks and balances.  The reasoning for this action by the government is that the new banks do not have fully capitalised balance sheets as of yet.  But that should not have prevented the government from appointing a professional interim CEO or Chairman?

It is difficult to see how the IMF can lend its name to a bank restructuring programme without an internationally accepted corporate governance structure.  At a minimun the IMF should demand that the positions of CEO and Chairman be separated immediately and that at least 2 independent directors be appointed to the Boards of the new banks.   The government has put the IMF in an awkward position by its conflicting actions.  It will be interesting to see how the IMF is going to untangle this mess.

The sooner the Icelandic political parties recognize that public appointments and promotions have to be governed by professional and independent standards the better.  The current situation is no longer tenable and risks seriously delaying and undermining the vital restructuring needed to restore economic life in Iceland.  There is a tendency in Iceland to institutionalize problems and solutions for political expedience.  This has, no doubt, contributed to the awful mess in which the country now finds itself.  People are part of the problem and therefore people are part of the solution.  This is a lesson Iceland needs to learn and learn fast.

Athugasemdir

[Friðrik Hansen Guðmundsson, 10.2.2009 kl. 22:32]

This is new, writing here on this website mbl.is in English. This opens for others oustside Iceland to particapate.