Tag Archives: Principal-Agent Problem

EITI’s Governance Structure – Helpful or Harmful?

Christina Toepell, MAAPPS // May 2, 2015

The FIFA scandals of the past weeks have shown that certain governance structures are detrimental to organizational processes. Luckily, EITI is far away from these scenarios, but its international and national governance structure might also serve as a cause for some of its challenges. On the top governance level, EITI international is providing recommendations and implementation guidelines to the country offices. On the national level, a multi stakeholder group (MSG) consists of mining companies, government officials and civil society initiatives. It is supposed to gather in general assemblies to inform on the progress of the national EITI office, current measures taken by all participating groups and communicate new initiatives.

Setting up this particular governance structure for EITI was important to foster international acceptance of the standard and support its acceptance of all stakeholders. EITI international’s relative detachment of the national offices is relevant and needed to include local specificities while still enforcing fair and equal measures across all member countries. The governance structure of having a multi stakeholder group is important when trying to integrate an organized measurement of control into the EITI structure of the country. The MSG further allows all partners to be equally involved and guarantees a shared feeling of responsibility for the success of the project.

This governance structure, however, inevitably leads to a lack of ownership, which Bulgan also mentioned in her post on the relevance of EITI. The international EITI secretariat provides hard requirements but leaves full independence in implementation. In Mongolia, the EITI secretariat consists of three members. These agents are working on combining the requests and requirements of at least four parties: Mining companies, government officials, civil society groups and EITI international. Personal conversations have revealed that national coordinators often spend more time on harmonizing these different mindsets, opinions and incentives than working on true progress for EITI. If the MSG as a “principal” cannot agree on feeling shared responsibility and the EITI national office is a mere “agent”, where is the sense of ownership that brings EITI forward?

The differing incentives of individuals lead to internal governance deadlock. Our meeting with the MSG in Ulaanbaatar exposed diverted civil society ideas with representatives sometimes showing higher interests in opposing each other than interacting on a positive basis. Proposed progress of EITI in certain aspects might raise strong opposition, which then leads to a compromise consisting of no progress at all.

The question remains, what governance structure would be more ideal? Where is the Mongolian optimum in the trade-off between an inclusive EITI process and real progress for mining transparency? Should there be a stronger sense of ownership by the EITI office? A clearer mandate for the EITI national office with simultaneous implementation of an increased importance on the MSG control mechanism might be a first approach.