Short End of the Stick at the World Bank

Last Updated Apr 21, 2009 12:58 PM EDT

Recent research out of Harvard shows that even organizations devoted to helping poor and developing countries -- in this case the World Bank -- can suffer organizational biases that improve the chances of more powerful nations receiving funding over the less powerful.

It's a call for all organizations to review their own governance procedures for favoritism to some stakeholders over others.

The study by Harvard Law School student Ashwin Kaja and Harvard Business School professor Eric Werker found that the 24 countries serving on the Board of Executive Directors benefit their own interests by voting themselves what works out to be a doubling of loan and grant monies while they serve on the Board. Looked at another way, the remaining 162 member countries receive fewer resources to improve the lives of their constituents, even though the Board is supposed to represent their interests as well.

As Werker tells HBS Working Knowledge in Misgovernance at the World Bank:

"We found that developing countries can expect around a $60 million bonus in the years they serve on the Executive Board. This is a substantial amount, equivalent to a major port renovation or a system of new rural roads."
Interestingly, the actions of the Board appears less to do with Directors exploiting their power as it does the "insider culture of the boardroom," according to the researchers. This insider bias is reinforced by the fact that a majority of member countries never have a chance to serve on the Board -- they are permanently on the short end of the development stick.

The researchers plan to provide their findings to World Bank officials for reaction.

So next time you wonder why groups or projects inside your own organization continue to receive backing when facts suggest those resources should be going elsewhere, look at the relationships among decision makers and plan your strategy from what you learn.

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.