The G20 is hailed as the new premier forum for international economic co-operation: the G7 has served its time. But while bringing 20 countries to the global table may look democratic, is it an efficient way to decide anything?
The logistics of 20 prime ministers or presidents, 20 finance ministers and 20 central bankers — plus their large entourages — travelling to London or Pittsburgh or wherever the circus pitches next are enormous, especially when protestors seek to disrupt the proceedings. But how can so many people express their voice at such a large forum — and how can they reach agreement?
The optimal size of decision-making groups is a subject that affects the very top of the corporate sector as well as global politics.
Banking group HSBC has 21 directors plus a company secretary and boardroom adviser, for instance. If each speaks for three minutes on any item it would take more than an hour to discuss that one agenda point. How long does it take simply to decide who wants tea and who coffee? One has to assume some people say nothing on some issues but are there directors who say nothing on everything? Directors who fly in from America or Asia must wonder if their journey was necessary.
The HSBC board has been larger but Barclays and Lloyds, like BP, get by on 15 directors and nationalised Royal Bank of Scotland has only 11 — perhaps because, having cleared out the old regime, it has had trouble recruiting new members.
Much of the boardroom inflation stems from the demand for companies to have a majority of non-executive directors. Some achieved that by removing executives from the board; others simply recruited extra independent directors to achieve the balance. Of HSBC’s 21 directors, 15 are non-exec. But as boards expand they risk not only being too unwieldy to work but of appointing token representatives of different groups, especially geographical business zones.
The G7 or G20 groups are completely geographical of course, and that is part of their problem. Four similar European members — Germany, France, Italy and the UK — comprised a majority of the G7.
Canada is there – despite it being outside the global top-seven for gross domestic product, population or even land mass – with Japan and the US.
It makes sense to bring China, Brazil and India into the club by transferring the G7’s powers to the 10-year-old G20. Russia, the on-off member of the G8, is firmly inside too, along with Saudi Arabia, Turkey and the European Central bank, which counts as the twentieth “country”.
G20 will aim not only for global financial stability but international conformity on issues such as accounting standards. But can so many diverse countries deliver? The existing G30 has failed to make an impact and the danger is the G20 will divide into factions, agreeing common issues but ignoring key matters on which they differ.
Whether at board meetings or summits, there are times when a little dictatorship can be better at making decisions than a broad democracy.
