What is the ‘Gentleman’s Agreement’?

The so-called gentleman’s agreement is yet another pillar of an undemocratic governance system. Leadership selection at the World Bank and IMF is subject to a historic ‘gentleman’s agreement’, which has ensured that the IMF managing director has always been European and the World Bank president is a US national. This agreement dates back to the creation of the institutions, when membership was limited to 45 states and when European powers still retained large colonies. Once the US nominates a candidate for Bank president, Europe uses its large voting rights on the Board to ensure the US candidate is picked in exchange for the US in turn supporting a European nominee for IMF managing director. In return, Europeans select their preferred candidate – the majority of whom have been French nationals – and await the seal of approval from the US.

The appointment of David Malpass, the US-nominated candidate, in April 2019 to the position of World Bank president demonstrated that the ‘gentleman’s agreement’ is alive and well. Despite over 150 civil society organisations and individuals calling on the Board to live up to its commitment to an open, transparent and merit-based process – which was echoed by the demands by the Bank’s own staff association – Malpass was appointed president. The only other candidate put forward was Ziad Hayek, who was nominated by the Lebanese Government, but who subsequently withdrew, citing that this was due to pressure from “other governments”.

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We are back! As Lagarde announces surprise departure, time’s up for the ‘gentleman’s agreement’

Christine Lagarde announced on 16 July that she had submitted her resignation as IMF managing director, effective 12 September, following her nomination for the Presidency of the European Central Bank. David Lipton, the former deputy managing director, has assumed the position of acting managing director in the interim period.

In her resignation letter, Lagarde noted, “On July 2, 2019, the European Council proposed to nominate me to the position of President of the European Central Bank. I had agonized over this proposal during the previous 48 hours and eventually decided to accept.” Interestingly, the letter further noted that, “On the other hand (!) I realize that there is no perfect time to go. The work left to be done is challenging and I know that the Board, Staff, and Management will have their hands full.”

According to the IMF’s Articles of Agreement, the Managing Director, “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.” 

An end to the ‘gentleman’s agreement’? Don’t hold your breath

Leadership selection at the World Bank and IMF is subject to a historic (and archaic) ‘gentleman’s agreement’, which has ensured that, over the past 75 years, the IMF managing director has always been European and the World Bank president is a US citizen. This agreement harks back to the creation of the institutions, when membership was limited to 45 states and when European powers still retained colonies.