To: NGOs & Governance Team

 

 

Date: Feb. 25, 2007

 

 

(1)   In my mind, I tend to divide the literature on governance into three primary bodies:

 

a.      The nation/state governance literature has been driven by political scientists and by multilateral institutions like World Bank and focuses heavily on anti-corruption, democracy, rule of law, etc.

                                                    i.     I have found that the national governance literature is quite helpful---and even essential---because the procurement of large infrastructure projects is usually governed in whole or in part by a national or state level government, and thus the project governance framework must tightly interface with the legal, regulatory and project delivery framework within the host country/state, and the project governance framework must also be designed to handle ongoing political dynamics and instability, and to provide the kinds of transparency and accountability that are deemed necessary by politicians and other state actors.

 

b.      The corporate governance literature is a recent outgrowth of the Enron and WorldCom accounting scandals in the 1990s and focuses heavily on transparency, accountability, disclosure, separation of corporate control and ownership, etc.

                                                    i.     The piece by Schleifer and Vishney offers a nice survey of the thinking around the concept of corporate governance, pre-Enron;

                                                   ii.     The "governance of project management" piece was published earlier this year and offers a set of practical guidelines to help companies that are in the project business comply with the corporate governance requirements imposed on them by Sarbanes-Oxley (and its UK equivalent);

                                                  iii.     FYI... when you talk to Rick Burt about governance, he immediately thinks about the topic from a corporate governance perspective (he wrote a 80 page internal document for Bechtel on corporate governance before he left).

 

c.      The project governance literature is relatively uncharted territory

                                                    i.     In my mind, when I think of "project governance" I think of the process of structuring and managing all of the relationships/interactions between all stakeholders who are party to the project (government, sponsor, suppliers, indigenous peoples, etc.); I think of four main classes of relationships with the special project company:

1.      Government-- these relationships must comply with the standards for national governance noted above;

2.      Shareholders -- these relationships must comply with the corporate governance standards noted above;

3.      Community -- these relationships ought to comply with the various kinds of "rights, empowerment, participation, equity" concerns noted by Gili Drori;

4.      Vendors, sub-contractors, suppliers -- these relationships ought to be governed by contractual relations that suit the properties of the particular transaction (uncertainty, asset specificity, frequency) a la Oliver Williamson;

                                                   ii.     The piece by Antonio Vives presents a contingency framework of how to "rough-in" an appropriate set of "financial relationships" between all of the parties given a set of local host country conditions;

                                                  iii.     The piece by Miller 2005, I don't remember exactly how he comes at "project governance" but I do remember his ideas were quite good;

                                                 iv.     The UN piece on the governance of PPPs presents project governance almost from the perspective of "national governance" --- really they are promoting the idea of having a unit within the government with the capacity, transparency, accountability, etc. to use the PPP procurement mechanism in a way that best serves the public good;

                                                   v.     There are also a few pieces that come at governance from a narrower transaction cost economics perspective a la Williamson (these fit with item c.i.4 above);

 

(2)   Then, in addition, there are several other seemingly "random papers" that do not fit my organizing framework that take unique --- but helpful --- views of governance that may also serve as threads in our tapestry:

a.      The wonderful book chapter by Hult and Walcott that Dick Scott passed out last year, looks at 7 different archetypical governance mechanisms (hierarchical, collegial-competitive, collegial-mediative, collegial-consensual, adversarial, adjudicative, market, etc.) in organizations and how each (a) assigns authority for decisions; (b) reduces conflict, (c) reduces uncertainty; etc. (this paper is outstanding!)

b.      I don't quite know what to do with Gili Drori's very thoughtful paper --- it adds yet another dimension to the framework that I have laid out above. She argues that governance has three different objectives (see Figure 4.5):

                                                    i.     Participatory actorhood (rights, empowerment, participation, equity)

                                                   ii.     Transparency/accountability

                                                  iii.     Management progress (corruption/capacity/standards/efficiency)

 

(3)   As a conclusion to writing this memo, to try and organize these many disparate literatures, I am imagining that the feasible space of governance could be characterizes as a 3 x 3 x 7 matrix of ACTORS versus GOVERNANCE OBJECTIVES versus GOVERNANCE MECHANISMS.

a.      The three actors are (1) states, (2) corporations, (3) special project companies.

b.      The three objectives are as per Gili Drori above.

c.      The 7 structures are as per the Hult and Walcott chapter.

I don't know... this starts to get pretty complex? It is not an easy subject to get ones arms around. I'd be curious to hear how others think of this at our meeting tomorrow.