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Most major decisions at the World Bank are made by its Board of Executive Directors. While some countries enjoy the opportunity to serve on this powerful body, most countries rarely, if ever, get that chance. This gives rise to the question: Does board membership lead to higher funding from the World Bank's two main development financing institutions, the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Empirical analysis shows that developing countries serving on the board can expect more than double the funding from the IBRD as countries not on the board. In absolute terms, countries on the board receive an average $60 million "bonus" in IBRD loans, an amount that rises in years when IBRD loans are in high demand, particularly for countries in the most influential seats. This effect is more likely driven by informal rules and norms in the boardroom than by the power of the vote itself. No significant effect is found in IDA funding. These results point to challenges of global governance through representative institutions.

ABSTRACTManuscript Type: ConceptualResearch Question/Issue: This paper extends the theory of bundles of corporate governance mechanisms to address agency issues within the Anglo‐Saxon system of corporate governance. The focus of our study is to detail the role of firm performance as a key determinant of how the governance mechanisms of monitoring and incentive alignment serve as complements or substitutes in addressing agency issues. Previous research has looked at these mechanisms in isolation from each other, with limited regard for the contingencies of firm performance and external monitoring. We propose that it is best to look at these mechanisms as a bundle of mechanisms to protect shareholder interests, and that firm performance is a key determinant of the composition of this bundle.Research Findings/Insights: We introduce firm performance as a critical contingency that heightens shareholders' concerns over governance issues as they seek to retain control over adverse selection and moral hazard problems. We propose that when firms are performing poorly, outside monitoring by institutional investors can complement internal monitoring by boards of directors.Theoretical/Academic Implications: We examine governance bundles under both agency and stewardship theoretical lenses to tie together previous empirical research and advance theory. In specifying the role of firm performance in determining the mix of mechanisms within the governance bundle, we reconcile prior disparate findings as to whether or not these governance mechanisms act in a complementary or substitutable fashion.Practitioner/Policy Implications: The conceptualization of these governance mechanisms has practitioner merit in analyzing the challenges that board members face managing agency conflicts through the mix of governance mechanisms, given different levels of firm performance. Our research also shows that, under conditions of poor performance, shareholders can provide effective external monitoring that can improve the overall governance effectiveness of the firm.

The article explores the relation between the functional differentiation of society and the transformation of public governance. Based on the analysis of functional differentiation provided by Niklas Luhmann, the article interprets functional differentiation as the historical constitution of the basic and encompassing governance traditions in modern society, defined by the governance mediums of so‐called function systems and the various programmes and scripts developed in relation to such mediums. It is argued that such an analysis provides an empirical alternative to the distinction between state, market and networks and the underlying macro‐sociology of state, market and civil society widely used in governance research. Based on this analysis, the article argues that government organizations have increasingly developed strategies and instruments of steering and coordination that rely on the mediums, programmes and scripts of various function systems. In contrast to increased use of networks in public governance, widely held to constitute the most important transformation of public governance at the level of organizations, the appropriation of new mediums and programmes pertains to the relation between government organizations and the governance traditions comprised by function systems. Thus, the article elaborates changes in this relationship in more detail with respect to political and legal function systems, as well as in terms of the economic system, science and the family.

"Erfolgreiche Entwicklung setzt Good Governance voraus. Dies wird von IWF und OECD, von VN und EU seit langem betont. Dass Bad Governance dagegen eine ernsthafte globale Herausforderung ist, hat die Welt spätestens am 11. September 2001 erkannt. Indes lässt sich keiner der beiden Begriffe klar und einheitlich definieren. Während Good Governance etwa auf die Dynamik und Güte politischer Prozesse der Entscheidungsfindung, die Zivilgesellschaft sowie die vom Volkssouverän übertragene Macht verweist, steht Bad Governance u.a. für schlechte Regierungsführung und negative Performance in der politischen Entscheidungsfindung, eine gestörte Interaktion zwischen staatlichen und nichtstaatlichen Akteuren sowie die mangelnde Berücksichtigung vorstaatlicher Strukturen. Länder mit wirtschaftspolitischer Bonität, soliden rechtlichen Rahmenbedingungen, transparenter Verwaltung und effizienter Korruptionskontrolle stehen solchen gegenüber, die als schwierige Partnerschaften oder poor performers, als failed, fragile oder crisis states von sich reden machen. Sicher ist ein Engagement in Ländern der erstgenannten Gruppe einfacher als eines in solchen der zweitgenannten. Doch sollte die Stabilisierung gerade der schwierigen Partner ein sowohl deutsches als auch internationales Anliegen sein. Der kommende G8-Gipfel in Heiligendamm und sein afrikanischer Schwerpunkt stellen hier gewiss eine wertvolle Chance dar." (Autorenreferat)

What does good governance exactly mean? Should it be promoted in order to enhance democracy? Or to create markets? Should we look only at formal institutions or also at civil society? Beyond the technical definitions lies a much more complex political debate, involving notions that are usually not considered by politicians and policy makers.