An IMF Run By Two Managing Directors Instead Of One

The selection of a new Managing Director of the International Monetary Fund has become contentious because some of the world’s largest emerging nations believe the organization’s next leader should come from one of their countries. The MD responsibilities are straightforward enough– he or she “shall be chief of the operating staff of the Fund and shall conduct, under the direction of the Executive Board, the ordinary business of the Fund. Subject to the general control of the Executive Board, he shall be responsible for the organization, appointment, and dismissal of the staff of the Fund.”

There is no reason that the job could not be filled by two or three people. Co-CEO structures have worked for decades for private companies such as Goldman Sachs Group (NYSE: GS), which has used the structure on and off for years.  They are common in Hollywood as well.

The IMF management structure would not have to be altered much to accommodate two or three Managing Directors. Currently, the MD works with a First Deputy Managing Director and two other Deputy Managing Directors. The IMF has twenty members on its Executive Board. The agency has 187 member countries.

So far, the front-runner for the IMF job is French Finance Minister Christine Lagarde. Most observers believe that she will eventually have the votes to become Managing Director. The fact that she is a woman is in her favor in the eyes of many members. The Dominique Strauss-Kahn scandal has helped strengthen that argument. A European has usually held the position in the past. One argument that this should remain the same is the credit crisis in the EU.

There are many IMF members , especially the BRICS, which believe that their increased economic power and increasing contributions to the fund mean that one of their candidates should lead the IMF. Mexico’s central bank governor, Agustin Carstens, is considered an alternative to Lagarde. International Monetary Fund Acting Managing Director John Lipsky, an American, may be a dark horse candidate, although he may be no more acceptable to developing nations than a European. He has also said he plans to retire this summer. Israel’s central bank chief, Stanley Fischer, may seek the nomination. Fisher is 67, two years older that the IMF charter allows as the maximum age for a new  MD. The Executive Committee might waive the age limit. Former South African Finance Minister Trevor Manuel  is rumored to be seeking the nomination as well.

Lagarde is considered a good politician but not a first-rate economist. Fisher is, although it is hard to imagine that the BRIC countries would support him because he is neither an European nor one of their own. Each of the other candidates will be presented by their supporters as a combination of diplomat, politician and economist. It may not be clear for years which of these attributes is most critical.

Many observers and IMF members are concerned that the fight to determine the next IMF Managing Director could leave developing nations bitter. The IMF is increasingly dependent on their contributions.

A decision to create  two or three Managing Director jobs would be revolutionary. But, the IMF is already in uncharted waters. It is involved in the rescue of Greece, Portugal and Ireland. The unity of the IMF would be damaged if the BRICS turn their backs on that process.

The primary argument against multiple IMF Managing Directors is that no one is in charge when more than one person is. That is unquestionably a threat to the success of a new structure. So is a revolt within the ranks of the nations who are agency members. One argument favoring the appointment to two or three co-MDs is that the Executive Board is supposed to work closely with the MD. The relationship may need to become very close given the current economic turmoil in the world. The board would have to help determine the strengths of co-MDs and work to make certain they complement one another. It is not unusual in power-sharing arrangements that one person is a better administrator and another a better technician. Any Managing Director needs those skills at least.

The IMF is in trouble, because of the EU credit crisis, the change in the balance of power between the old developed nations and the rapidly growing developing ones, and finally because of the departure of Strauss-Kahn, who was a critical bridge between the financial haves and have-nots. The selection of one Managing Director would be the easiest short-term solution. It keeps a core IMF tradition. But the agency can settle what is probably the most divisive matter among its members now and what is likely to be in the future by appointing two or three people to chart its future course.

Douglas A. McIntyre