Do global financial institutions suffer from a "democratic deficit"? 中国足彩网 Minister Pravin Gordhan recently suggested that the election of an American, Jim Yong Kim, as the new president of the World Bank is evidence of a "democratic deficit" in the global financial institutions. This followed the failure of respected Nigerian 中国足彩网 Minister Ngozi Okonjo-Iweala and former Colombian finance minister Jose Antonio Ocampo, to be elected, despite having the support of most developing nations.

Jim Yong Kim's election continues the tradition that all presidents of the World Bank since its founding in 1944 have been US citizens. All the leaders of the International Monetary Fund (IMF) have been Europeans. Whether this implicit sharing of the leadership of the World Bank and the IMF by the US and Europe constitutes a "democratic deficit" depends on how membership of those organisations is defined.

In the United Nations (UN), membership is made up by individual countries. Developing countries have used their numerical dominance to ensure that five of the eight secretaries-general of the UN since 1946 were drawn from their number.

Presumably, developing countries believe a secretary-general from their ranks better represents their interests than one from the developed world. It should be noted, however, that this view is not always shared. Several prominent developing countries reportedly broke ranks by supporting the candidacy of Jim Yong Kim as World Bank president.

Even the UN is not as democratic as its members may desire. While all members are nominally equal, some are more equal than others. The five permanent members (France, Britain, the US, China and Russia) have veto powers in the key decision-making body, the s ecurity c ouncil. This veto power is currently being used by Russia and China to prevent action against Syria and Sudan for alleged human rights abuses.

Unlike the UN, the IMF and World Bank, like private companies, have shareholders. The voting power of its individual members is determined by their financial contribution to the organisations' capital bases. This contribution (termed a quota) is determined mainly by each country's share of global gross domestic product (GDP). With greater contributions comes greater share ownership. It is these shares that are voted, rather than individual country membership.

Thus the richer countries dominate the voting power of the IMF and World Bank, with the US having 15,9% of overall shareholding and Japan 6,8%. SA has less than 1% of the votes. As a result, the US and Europe are able to work in concert to ensure that their nominees head both institutions.

Voting in companies works in the same way as it does at the IMF and World Bank, in what is known as "shareholder democracy". Each share in a company has the same voting weight and the number of shares each shareholder owns determines their number of votes. It would be considered unfair for a shareholder owning, say, 30% of the issued share capital to have no more say in its running than the owner of a single share.

Nonetheless, small shareholders enjoy special rights in listed companies to ensure their interests are protected against dominant shareholders. This includes the right to ask questions at the company's annual general meeting. Many activists and nongovernmental organisations buy single shares to ensure their views are expressed at company annual meetings and as a result are often able to influence important decisions.

Minority shareholders are also protected against financial discrimination by majority shareholders. Anyone seeking to gain control of a company by buying shares must, once they pass a defined threshold (usually 30%-35%), make an offer to buy all the remaining shares. They must be at the highest price they paid for shares over a recent period.

Controlling shareholders are also prevented from taking commercial decisions that benefit themselves relative to minority shareholders. Protecting minorities is part of the duty of company directors, who may face legal action if they fail to fulfil these duties.

Democracy in companies and financial institutions is therefore a complex arrangement. Even in democratic political systems all votes do not always enjoy equal impact. In the US, for example, each state elects two senators, giving far greater weight to the senatorial votes of citizens in less populous states than the more populous. This is because the US constitution tries to protect the rights of states as well as citizens.

The voting dominance of the rich countries over the global financial institutions is weakening as China's and India's share of global economic activity increases. This is accompanied by growing contributions to the share capital of the IMF and World Bank and therefore increased votes. Since 2008 the shareholding of developed economies has fallen nearly five percentage points. It will fall further as the developed economies stagnate and developing countries grow rapidly.

Hopefully, suitability for the job will one day be more important than nationality. In the meantime, it is probably fortunate that, with Europe in crisis, the current MD of the IMF is former French finance minister Christine Lagarde. Jim Yong Kim, born in South Korea, has spent his career in healthcare in developing countries. His commitment to the poor cannot be doubted.

• Professor Gavin Keeton is with the economics department at Rhodes University.

This article was published on the Business Day website.