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UN Performance Problems UN Management Accountability Struggles Where is the Rule of Law? Inadequate UN Oversight Recent Developments
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Would it be a low blow to compare the United Nations to the scandal-ridden
-- increasingly global
governance processes involve all major types of social organizations, not
just nation-states; -- the literature
indicates that good governance issues for both multinational corporations
and international organizations reveal many similarities (see the archive
subsections on corporate and on other multilateral organizations' problems
under the section on UN Management Accountability
Struggles section;
-- and several years
ago the executive heads of all the UN system organizations retitled their
joint body the much grander and very businesslike "Chief Executives
Board", after years of operation under the pedestrian old title of
"Administrative Committee on Coordination". The critical factor,
however, is that both profit and non-profit organizations use funds
entrusted to them by outsiders, and are, or certainly should be, fully
transparent and accountable to them for their performance. The dangers of the basic
misperception of organizations "on a pedestal" like the United Nations is
very nicely stated in a 2004 public administration
article: "The halo that appears to
float over non-profit institutions - providing them with an aura
of altruism - distracts attention from the basic fact that non-profits
are, first and foremost, economic institutions …
[An expert observes that to
improve non-profits' management one must] view them as economic
institutions with … charitable missions …
Managers of non-profit
institutions understand that the organizations' survival depends on the
managers' ability to secure a generous constituency.
… The perception that non-profit
organizations are small, fragile and non-threatening enterprises …
conceals their actual size, power, and competitive determination. [Their mythology and
self-portrayal as solely altruistic] … misinform the public and
allow them … to ensure a continued flow of salary and benefits for their
managers and the preservation of the managers' power and status. … [People need] … to realize that …
the rule of caveat emptor applies even more importantly to transactions
with non-profits than with marketplace transactions. Typically, [in the] … marketplace,
one receives something in return [but, with non-profits] …
individuals conduct transactions … based entirely on faith. Such transactions are lamentable
when one party is talking altruism but seeking self-interest. Who will protect generous - and
gullible - donors?" Barry
D. Friedman, "How non-profit organizations fight off competition: Who will
protect non-profit donors?", PA Times (USA), May 2004, pp.
5-6. As
this archive makes clear, the present- day UN is no longer just the old
New York and Geneva "talk shop," although that is still a dominant
feature. The UN makes great
efforts to appear "small, fragile, and non-threatening" (as discussed
in "Poor little UN"
under Other Major Problems
in the next subsection), but it has in fact expanded into a complex,
multi-billion dollar organization whose loose and vague operations
worldwide risk grave waste of resources, missed opportunities, and
misplaced public and donor trust. In fact, the UN performance
problems already discussed, and the other major problems discussed in the
next subsection, seems to have much in common with the massive governance
and oversight failures at Enron which emerged in the global media during
2001 and 2002 (and have continued for some other major corporations in
almost all parts of the world ever since). Of
course, UN defenders will argue, Enron is a business corporation, and the
UN is "not a business." But
when one reads the above quote from Friedman, and the following material,
the two organizations' accountability situations seem more and more alike,
with the exception that Enron's scandal has exploded, while the UN's
remains under cover and -- most important of all -- outside the law (so
far): "The breakdown in
checks and balances encompassed [Enron's, the UN's?] auditors,
lawyers, and directors … it extended to
groups monitoring [it] from the outside. "… the questions extend
to the political influence wielded by [Enron, the UN?]. But increasingly the focus has
turned to the entire framework of legislation, regulation and
self-governance in which it operated. [Enron's, the
UN's] failure seems sure to bring not just legislative changes but
also sweeping reviews … of how to assure
that investors, employees, and other constituencies can have faith in what
[Enron, the UN?] tell them.
This was a massive failure in the governance system." Richard W. Stevenson, and Jeff Gerth, "Collapse of Enron
exposes 'regulatory black hole",
International Herald Tribune, January 21, 2002.
"It's the scariest type of scandal: a total system failure. Executives, lenders, auditors, and
regulators all managed to look the other way while the company [Enron, the
UN] ran amok." Allan Sloan, "Enron's failed power play",
Newsweek, January 21, 2002, pp. 32 37. In
1995 an article had profiled the UN's then top manager, Joseph Connor, a
veteran accountant who took on the thankless effort to "impose fiscal
sanity on an organization [the UN] tottering on the brink of insolvency",
thanks to the refusal of member countries, and especially the United
States to pay their dues.
"I've never seen
anything so precariously balanced at this scale,' he said … 'There's no capital and no
reserves.' At Price Waterhouse, Mr. Connor
handled the books for … blue chip companies. The United Nations, by contrast,
'is the type of company that we wouldn't have accepted as a client,' he
said with a smile. He called his job a juggling act
… 'In the textbooks it's called a
Ponzi scheme: use current cash to pay past bills,' said Mr. Connor, who
did not hide his distaste.
… [many member states] show little
interest in [cutting outdated] … projects. And executives at the United
Nations lack the sort of management skills taken for granted in private
business. 'In my first year at Price
Waterhouse, I was reviewed five times,' Mr. Connor said. 'Here that doesn't happen. The United Nations [evaluates] …
every three years, which Mr. Connor described as
'ridiculous.' [His predecessor in 1992 and 1993,
Dick Thornburgh,] remains pessimistic. 'Its an impossible job if the
leadership … is not commited to reform', he said in an interview. 'I think there is an obvious
devotion to the status quo at the upper levels of the U.N.'
" Christopher S. Wren, "The U.N.'s master juggler: An accountant
copes with deadbeats and bad debt," New York Times, December 8,
1995.
Mr.
Connor appears to have done a remarkable job in keeping the UN afloat
until the United States finally paid its arrears and the financial crisis
eased in the late 1990s. As
the latter part of the above quotation indicates, however, the real UN
problem seems to lie with the entrenched UN management culture and its
worldwide programme operations, with its disregard for expenditure
control, lack of good financial management at the operating level, weak
oversight, and lack of real commitment to reform and management
accountability. In
fact, both Enron and the UN have operations scattered all over the globe.
Both have very complex "off the books" partnerships with others (in the
case of the UN, its dominant "extrabudgetary" programmes). Both have a
strong public relations operation but weak financial management, reporting
and transparency (see the archive subsections on Non-implementation of the
resolution and UN management system reform
attempts .) Both have many insiders profiting
from insider games (the UN barons and cronies), weak auditors (the UN's
OIOS and the JIU), Secretariat legal units which malfunction and ignore
problems and propriety, poor audit committee functioning (the UN has no
audit committee at all for the $6 to $10 billion it spends each year), and
a weak and compliant board of directors (the UN's General Assembly). And both are, not surprisingly,
major accountability failures. There
was and is quite appropriate concern that Enron is just the tip of the
corporate iceberg, and that the same accountability, management oversight,
transparency, and reporting failures and patterns may soon crop up in more
and more multinational corporations worldwide (and they certainly occur in
governments as well). Eric Pfanner, "Investor
beware: The next Enron may be lurking in Europe or Japan",
International Herald Tribune,
January 26-27, 2002, Louis Lavelle, "Enron: How
governance rules failed", Business Week Europe, January 21, 2002, p.
38, "The twister hits: Nothing
about Enron's demise was surprising, nor is what must be done", The
Economist, January
19th, 2002, pp. 63-65. Bethany McClean, "Why Enron
went bust: Start with arrogance. Add greed, deceit
…",
Fortune European edition, December 24, 2001, pp.
53-58. "Why a few Enrons would do
Europe good", Business Week Europe, December 24, 2001, p.
18. "Post-Enron lessons",
editorial, The Washington Post, December 5,
2001. "Enron board agreed to fateful moves, inquiry shows", International Herald Tribune, January 22, 2002. "Restoring trust in
corporate America: Why CEO's must speak up: How institutional investors
are pushing reform: Special report", Business Week Europe, June
24, 2002, pp. 37-46. "Mirrors at the funhouse:
Accounting at Enron", International Herald Tribune, December 15,
2001. "Enron board agreed to fateful
moves, inquiry shows", International Herald Tribune, January 22,
2002.
Already, prescriptions to combat
these grave failures are available. They could apply equally well to the
UN situation: -- enact self-regulation with teeth
(for the UN, Member States should make sure they finally begin to "watch
the watchdogs"); -- bar consulting to audit clients
(not only the OIOS, but the JIU has become far too cozy with management
and playing with more abstract programme and policy issues rather than
concentrating on firmly assessing performance against objectives, ensuring
"proper use of funds", and uncovering wrongdoing); -- mandate rotation of (all the "old
boy" relationships and archaic practices of the UN external "expert"
oversight bodies other than the auditors, who do rotate): the other groups
urgently need fresh, and professional, blood); -- impose more "forensic auditing"
(as above, develop a strong fraud deterrence programme, rather than just
routine management audits or UN-style ad hoc
investigations); -- limit auditors' moves to companies
(reduce the cronyism and flow between diplomatic missions in New York and
UN external "expert" oversight bodies); -- clean up the accounting
rules (finally get a proper handle on all the complex UN fund flows,
programmes, and operations for a transparent picture of events and
results).
"Accounting in crisis: Special
report", Business Week, European edition, January 28, 2001,
pp. 38-55, and especially "Reform is urgent. Here's what needs to be
done", pp. 49-54, "Mirrors at the funhouse:
Accounting at Enron", International Herald Tribune, December 15,
2001, "Lawyers lining up to dissect
collapse", International Herald Tribune, December 5,
2001, "Q&A: If you violate the law,
you will pay for it", Business Week, December 24, 2001, p.
35, and Allen Sloan, "The Enron effect: As the
accounting scandal spreads…. Will
anything really change",
Newsweek, January 28, 2002.
Actually,
in IO Watch's opinion, the still-hidden UN accountability scandals may be
worse than those at Enron. For one thing, the UN is misusing obligatory
contributions of worldwide taxpayers' money, while Enron's worldwide
investors were at least cautioned that investment involves risk, and they
had the discretionary freedom to avoid it. Most
importantly, while Enron and the UN both have the same geographic
framework (headquarters in the United States plus numerous overseas
operations), in the Enron case there is and will continue to be intense
governmental and media investigation in the United States. Quite bluntly, "people will go to
jail." If the UN continues to
be totally free of any such pressure, however, its pampered senior
officials will carry on forever
with their entrenched
immunity and impunity, because the legal issues will never even be raised
or serious sanctions considered. If
the UN continues to protect its wayward senior officials from public
oversight and legal scrutiny in the new millennium, it only encourages even more destructive behavior and damage
to its programmes and reputation.
In addition, the UN has a long tradition of blaming Member States
for its troubles, as discussed in various subsections of the Other Major Problems
section which follows, and particularly for the
UN-administered Iraq oil-for-food
programme discussed there. Yet the insights of Shirley
Hazzard, offered years ago, still seem to apply whenever the Secretariat
gets into trouble: "Accountability, that source of
institutional health, had been excluded from United Nations experience;
and, along with it, indivisibly, the stimulus of direct public engagement
and response. 'It is not a
United Nations Organization',
Aleksander Solzhenitsyn was to say, in his Nobel address of 1972,
'but a United Governments Organization.' In offering itself as the
mere creature of its member governments, the United Nations system entered
a state of arrested moral development, marked by the habitual emblems of
immaturity: demands for approval,
and incapacity for individual or collective
self-questioning." Shirley Hazzard, "Breaking
Faith: I", The New Yorker, September 25, 1989, pp. 63-99,
[76].
As
a semi-final and somewhat humorous, but not irrelevant note, the ominous
implications of one other major and pending UN development should be
added, as described in the three following quotes: Somewhere … I once read an article
listing '25 ways to tell that a company is about to go bankrupt.' Along with the building of a new
corporate headquarters, I seem to remember that … large, expensive,
self-congratulatory social functions …. were considered one of the surest
signs of impending collapse.
It that is so, the United Nation's 50th anniversary celebrations
are worth a closer look. Secretary-General Butros
Butros-Ghali said that [despite new challenges] the UN has not been given
the resources required. Unfortunately, [he] was only half
right in his analysis of the UN's financial predicament. …. While it is true that the UN is
approaching bankruptcy, …. what the UN needs is to stop frittering its
resources on programmes and departments that are unnecessary, unimportant,
and extravagantly wasteful. If the 166 world leaders ….
gathered in New York this week want to see [the UN] last another 50 years,
perhaps they should stop preening for the cameras and … return to the UN's
core business and put an end to 50 years of wasteful diversification."
Anne
Applebaum, "What a waste --
and not just the birthday party", The Spectator (UK), October
24, 1995.
"The check is not in the mail but
a U.N. official lobbied President Bush for a $1 billion interest-free loan
so the United Nations could renovate its crumbling headquarters that marks
the Manhattan skyline. …. Completed in 1952, the distinctive
glass skyscraper has water dripping through its roof, toxic asbestos lining the ceiling tiles,
no sprinklers in case of fire and erratic heating and cooling systems.
…. The new plan calls for building a
30-story office tower in a nearby park that would house staff during the
renovation and then become a permanent home for U.N. agencies now renting
space in other buildings. An interest-free loan would enable
the 191 nations in the world body to finance the project over 25 to 30
years …." Evelyn Leopold, " UN lobbies for $1 billion loan to fix glass tower", Reuters, July 14, 2003. [Note: the UN physical building is indeed a mess, but it is worth noting that this major project seeks to double the size of UN headquarters as two skyscrapers, even as the UN complains of its many severe staffing cuts of the past decade.]
"Most of the 3,600 people who work
at UN headquarters will be relocating temporarily in 2007 to a new $330
million, 35-story building to be constructed one block south … The master
plan to gut and refurbish the emptied headquarters complex -- subject to
approval of a $1.2 billion loan proposed in President George W. Bush's
2005 budget -- is to finish in time for staff to return in
2012." Warren
Hogue, "The UN's home is aging, but not gracefully", International
Herald Tribune, April 23, 2004.
There is also a much
more serious new development to cite in this Enron versus the UN
comparison. In July 2004,
after exhaustive multi-year investigations by a large Federal legal task
force in the United States, and after intermediate criminal charges had
already been filed against some 30 people, the former top executives of
Enron were also arrested and charged with multiple counts of financial
fraud, which cost tens of billions of dollars to investors and put
thousands of employees out of work.
Floyd Norris, "Bringing down the symbol of Enron: Goal seen as not letting Lay escape", International Herald Tribune, July 9, 2004, Kurt Eichenwald and Christine Hauser, "Former Enron chief is charged: Lay turns himself in and is released on $500,000 bail", International Herald Tribune, July 9, 2004, and Simon Romero, "Once a hunter, company has become a 'carcass'", International Herald Tribune, July 9, 2004.
Meanwhile, major and multiple investigations have now been launched and
may run for several years, in the UN-administered Iraq oil-for-food
programme , as discussed in the Other Major Problems
subsection which follows. The rest of the story, and particularly that of
accountability and sanctions, remains to be told in both the Enron and the
UN cases. |
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