French Finance Minister Christine Lagarde emerged as the leading contender to replace Dominique Strauss-Kahn at the International Monetary Fund as developing nations failed to unite behind a candidate.
U.S. Treasury Secretary Timothy F. Geithner called for the quick appointment of a new managing director yesterday while the Obama administration avoided backing any one person.
“We want to see an open process that leads to a prompt succession,” Geithner said in a statement. John Lipsky, the Washington-based IMF’s acting managing director, “will provide able and experienced leadership to the fund at this critical time for the global economy,” Geithner said.
European officials moved to maintain control over the institution that approved a record $91.7 billion in emergency loans last year and provides a third of the euro-region’s bailout packages. Italy and Sweden backed Lagarde, and Handelsblatt newspaper reported that the German government is preparing to support her.
But it’s clear what process:
It is therefore critical that, in the coming weeks, the IMF Executive Board finalise and publicise a process that would be used, should Mr. Strauss-Kahn be forced to resign. Specifically, the post of Managing Director should be open to all nationalities, with candidates assessed on the basis of transparent job qualifications.
It should also involve an internationally balanced committee to evaluate applicants and put forward 2-3 finalists for Executive Board consideration, and the final choice should emerge from a fair vote of the Board.
The first problem with this is that Strauss-Kahn will and should resign much sooner than that. But that problem isn’t insurmountable: he should just say that Lipsky is the new interim managing director, and that one of Lipsky’s main jobs will be to put together a transparent, qualifications-based process for choosing his permanent successor.
More generally, the international community can no more ignore a candidate’s nationality when it comes to running the IMF than can FIFA when it comes to choosing a referee for the World Cup final. Since it’s the board and shareholders who are going to be choosing the IMF’s next managing director, it’s the board and shareholders who are going to be nominating candidates. And when a country nominates a candidate, that candidate is always going to be considered a partisan of that country.
Five-Year Tenure
Strauss-Kahn’s five-year term had 17 months remaining. In past successions, managing directors were appointed to fresh five-year tenures.
Strauss-Kahn earned an annual salary of $441,980 after taxes as of July 2009, plus an expense allowance of $79,120, also tax-free. The allowance would enable him to maintain “a scale of living appropriate to your position as managing director,” according to his contract. In addition, he could be reimbursed for “reasonable” entertainment expenses as well as first-class travel.
Under the IMF’s rules, its executive board selects the managing director and any member can make a nomination. Prior to appointing Strauss-Kahn in 2007, the board said candidates must have a “distinguished record in economic policy-making at senior levels” and “demonstrated the managerial and diplomatic skills needed to lead a global institution.”
The 2007 nomination period ran from early July to the end of August. The board then met with each candidate and sought to make its choice through consensus rather than majority vote. The appointment was made three months to the date after the resignation of Rodrigo de Rato.
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