Wolfowitz to Resign from World Bank
JEANNINE AVERSA / AP / Hartford Courant 17may2007
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World Bank President Paul Wolfowitz will resign at the end of June, he and the bank said late Thursday, ending his long fight to survive pressure for his ouster over the generous compensation he arranged for his girlfriend.
His departure ends a two-year run at the development bank that was marked by controversy from the start, given his previous role as a major architect of the Iraq war when he served as the No. 2 official at the Pentagon.
"He assured us that he acted ethically and in good faith in what he believed were the best interests of the institution and we accept that," the board said in its announcement of Wolfowitz's resignation.
Wolfowitz was all but forced out, however, by the finding of a special bank panel that he violated conflict-of-interest rules in his handling of the 2005 pay package of bank employee Shaha Riza.
The controversy, which gripped the bank for a month, was seen as a growing liability that threatened to tarnish the poverty-fighting institution's reputation and hobble its ability to persuade countries around the world to contribute billions of dollars to provide financial assistance to poor nations.
By tradition, the World Bank has been run by an American. The Bush administration keenly wanted to keep that decades-old practice firmly intact as the board dealt with Wolfowitz's fate. The United States is the bank's largest shareholder and its biggest financial contributor.
The White House said it would have a new candidate to announce soon, allowing for an orderly transition.
Earlier Thursday, President Bush had seemed resigned to the likelihood that Wolfowitz would lose his job over the conflict-of-interest charges. "I regret that it's come to this," Bush said.
In its statement, the bank's board said it was clear that a number of people had erred in reviewing Riza's pay package.
Wolfowitz, who had fought the pressure to resign for weeks, had sought a recognition from the bank that he did not bear sole responsibility for the matter. In his own statement Thursday, Wolfowitz said he was pleased that the board "accepted my assurance that I acted ethically and in good faith in what I believed were the best interests of the institution, including protecting the rights of a valued staff member."
Now, he said, it was in the best interest of the board that its mission "be carried forward under new leadership."
The board's statement made no mention of any financial arrangements related to Wolfowitz's departure, nor did it speak to Riza's future.
As a result of the controversy, the board pledged to review the World Bank's ethics policies, noting that "the bank's systems did not prove robust to the strain under which they were placed."
Wolfowitz waged a vigorous battle to save his job and maintained he had acted in good faith.
European nations had led the charge for Wolfowitz to resign. Those calls were backed by many on the bank's staff, former bank officials, aid groups and some Democratic politicians.
Until near the end, the Bush administration had professed support for Wolfowitz. But in a shift on Tuesday, the White House indicated for the first time it was open to his departure. It was the same day Wolfowitz made a last-ditch plea to save his job before the board.
Among those mentioned as a possible replacement for Wolfowitz are former Deputy Secretary of State Robert Zoellick, who was Bush's former trade chief, Robert Kimmitt, the No. 2 at the Treasury Department; Treasury Secretary Henry Paulson; former Republican Congressman Jim Leach and Sen. Richard Lugar, R-Ind., and Stanley Fischer, who once worked at the International Monetary Fund and is now with the Bank of Israel.
Paulson, who will work with the president on finding a successor to Wolfowitz, said: "I will consult my colleagues around the world as we search for a leader."
Riza worked for the bank before Wolfowitz took over as president in June 2005. She was moved to the State Department to avoid a conflict of interest but stayed on the bank's payroll. Her salary went from close to $133,000 to $180,000. With subsequent raises, it eventually rose to $193,590. The panel concluded that the salary increase Riza received "at Mr. Wolfowitz's direction was in excess of the range" allowed under bank rules.
Wolfowitz "placed himself in a conflict of interest situation" when he became involved in the terms and details of Riza's assignment and pay package and "he should have withdrawn from any decision-making in the matter," the panel said. Under Wolfowitz's contract as well as the code of conduct for board officials, he was required to avoid any conflict of interest, the report said.
The panel acknowledged that the informal advice Wolfowitz received from the bank's ethics committee "was not a model of clarity."
Still, the entire episode involving Wolfowitz's handling of the pay package "underscores that there is a crisis in the leadership of the bank," the panel said.
Before taking over the bank nearly two years ago, Wolfowitz was the No. 2 official at the Pentagon and played a lead role in mapping the U.S.-led war in Iraq.
Bush tapped Wolfowitz for the job, a move that was approved by the bank's board even though Europeans didn't like him because of his role in the Iraq war.
The 185-nation World Bank, created in 1945 to rebuild Europe after World War II, provides more than $20 billion a year for projects such as building dams and roads, bolstering education and fighting disease. The bank's centerpiece program offers interest-free loans to the poorest countries.
The bank's staff association, which had called for Wolfowitz to step down, said in a statement: "Mr. Wolfowitz has finally done the necessary thing by resigning. He has damaged the institution and continues to damage it every day that he remains as its president."
source: 17may2007
Wolfowitz to Resign From World Bank
STEVEN R. WEISMAN / New York Times 17may2007
WASHINGTON — May 17 — Paul D. Wolfowitz this evening ended weeks of furor over charges of favoritism toward a bank employee who is his female companion and announced his resignation as president of the World Bank, effective June 30.
The bank board backed away from threats to force Mr. Wolfowitz to resign for violating his contract, as a special investigative committee had concluded, and instead accepted his claim that his actions were honorably intended.
The resignation brought a dramatic conclusion to two days of negotiations between Mr. Wolfowitz and the bank board, which went along with his demands for an exoneration of the charges that he had broken ethics and governance rules in arranging for a generous pay and promotion package for Shaha Ali Riza, his girlfriend, in 2005.
“He assured us that he acted ethically and in good faith in what he believed were the best interests of the institution, and we accept that,” the board’s directors said. “We also accept that others involved acted ethically and in good faith.”
In a carefully negotiated statement, the board praised Mr. Wolfowitz for his two years of service at the bank, and especially for his work in arranging for debt relief and pressing for more assistance to poor countries, especially in Africa, and also combating corruption, which was Mr. Wolfowitz’s signature issue.
Mr. Wolfowitz said he was grateful for the directors’ decision and, referring to the bank’s mission of helping the world’s poor, added: “Now it is necessary to find a way to move forward. To do that I have concluded that it is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership.”
Earlier today, President Bush expressing regrets about the pending downfall of Mr. Wolfowitz during a news conference with Prime Minister Tony Blair, who was paying his last official visit to the White House before leaving office this summer.
“First of all, I believe all parties in this matter have acted in good faith,” Mr. Bush said in response to a question, employing language similar to that the World Bank later used in its statement.
“I regret that its come to this,” the president added. “I admire Paul Wolfowitz. I admire his heart, and I particularly admired his focus on helping the poor.”
Mr. Wolfowitz had previously been an architect of the Iraq war while serving as a deputy defense secretary in the first Bush term.
Mr. Wolfowitz’s desire to stay on at the bank through the end of June was attributed by bank officials to him wanting to show that he still had sufficient confidence of the board to manage the banks affairs, and to represent it at international meetings, despite the allegations of misconduct.
Some bank officials said the bank staff had signaled to the board that they wanted Mr. Wolfowitz to leave out of fear that he might retaliate against his critics.
Bank officials briefed on the mood of the board said the anger and impatience of the World Bank’s staff was a major factor in the negotiations with Mr. Wolfowitz.
The board’s 24 members represent countries or groups of countries. It does not have a chairman. Instead it has a “dean,” who holds his job by virtue of seniority, and who does not have the authority to act on the board’s behalf.
The dean, Eckhardt Deutscher, of Germany, was a known advocate of ousting Mr. Wolfowitz and adopting the special committee’s conclusions that he had violated bank rules.
source: 17may2007
Statements on the Resignation Of Wolfowitz
From the World Bank
17 May 2007
Statement of Executive Directors
Over the last three days we have considered carefully the report of the ad hoc group, the associated documents, and the submissions and presentations of Mr. Wolfowitz. Our deliberations were greatly assisted by our discussion with Mr Wolfowitz. He assured us that he acted ethically and in good faith in what he believed were the best interests of the institution, and we accept that. We also accept that others involved acted ethically and in good faith.
At the same time, it is clear from this material that a number of mistakes were made by a number of individuals in handling the matter under consideration, and that the Bank's systems did not prove robust to the strain under which they were placed. One conclusion we draw from this is the need to review the governance framework of the World Bank Group, including the role as well as procedural and other aspects of the Ethics Committee. The Executive Directors acknowledge Mr. Wolfowitz's decision to resign as President of the World Bank Group, effective end of the fiscal year (June 30, 2007). The Board will start the nomination process for a new President immediately.
We are grateful to Mr. Wolfowitz for his service at the Bank. Much has been achieved in the last two years, including the Multilateral Debt Relief Initiative, the Clean Energy Investment Framework, the Africa Action Plan, and the Avian Flu Initiative. 2006 was a record year for IDA lending, especially in Africa. The Bank has launched emergency action programmes in Liberia, the Democratic Republic of the Congo and the Central African Republic, and played a key role in the Lebanon and Afghanistan donors conference. In March, after an unprecedented global consultation process, we adopted a new strategy for the Bank's work on Governance and Anti-Corruption.
And we have new strategies for Rapid Response in Fragile States, for the Health Sector and for the Financial Sector. We thank Mr Wolfowitz for his leadership and for championing the Bank's work across so many areas.
It is regrettable that these achievements have been overshadowed by recent events. Mr Wolfowitz has stressed his deep support for and attachment to the World Bank and his responsibility, as its President, to act at all stages in the best interests of the institution. This sense of duty and responsibility has led him to his announcement today. We thank him for this and underscore our appreciation for his commitment to development and his continuing support for the World Bank and its mission.
Statement of Paul Wolfowitz
I am pleased that after reviewing all the evidence the Executive Directors of the World Bank Group have accepted my assurance that I acted ethically and in good faith in what I believed were the best interests of the institution, including protecting the rights of a valued staff member.
The poorest people of the world, especially in Sub-Saharan Africa deserve the very best that we can deliver. Now it is necessary to find a way to move forward.
To do that, I have concluded that it is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership. Therefore, I am announcing today that I will resign as President of the World Bank Group effective at the end of the fiscal year (June 30, 2007).
The World Bank Group is a critical institution with a noble mission, that of enabling the world's poor — and particularly the more than a billion men, women and children who struggle to survive on less than a dollar a day — to escape the shackles of poverty. I have had the privilege of visiting World Bank Group staff and programs in some 25 developing countries in the last two years. I've had a chance to see with my own eyes and hear with my own ears how eager people are to work hard if they have a chance for a good job, how excited children are to have a chance for the first time to go to school, and how willing parents are to sacrifice so that their children can have a better future.
It has been truly inspirational to be able to help them achieve their goals and it is a privilege for all of us in the World Bank Group to have a chance, every day that we come to work, to make a difference in the lives of those who are less fortunate. I am grateful to have enjoyed that privilege for nearly two years and I am proud of what we have accomplished together as a team.
- We provided record levels of support last year to the poorest countries of
the world, $9.5 billion, through the International Development Agency (IDA)
and we are headed to a new record this year. Half of that support is going
to Sub-Saharan African countries, also setting new records;
- We are further increasing support to the poorest countries through the
Multilateral Debt Relief Initiative completed last year which canceled $38
billion of debt owed by the HIPC countries to IDA, along with specific
commitments by the IDA donors to provide additional support to make up for
the lost reflows to IDA on a dollar-for-dollar basis;
- And last year we transferred a record amount of Bank Group income, $950
million, to IDA, including the first-ever transfer from the IFC to IDA; We
have not only increased the quantity of resources available to the poorest
countries through IDA, we are also making those resources more effective,
and we are providing greater assurance to donors that they are being used
properly:
- By helping developing countries strengthen systems of governance and
supporting their efforts to fight corruption and to recover stolen assets;
- By placing greater emphasis on measuring the results our support is
producing, although much more work needs to be done in this area; and
- By strengthening cooperation among donors, and particularly among the
Multilateral Development Banks in such areas as fighting corruption and
averting unsustainable debt burdens;
- We have also strengthened our work significantly in a number of important
specific sectors, particularly:
- Infrastructure — which was a major concern of the Finance Ministers from
Africa when I first met with them two years ago;
- Combating malaria, a preventable disease that is killing 3,000 people a
day, most of them children and most of them in Sub-Saharan Africa. In the
last 18 months we have approved over $360 million in assistance for
anti-malaria programs compared to $50 million in the first five years of
this decade.
- Here, too, we are emphasizing quality as well as quantity, pressing the
development of a "malaria scorecard" to track results and
effectively coordinate the work of the many donors so that gaps can be
identified and filled.
- Some of the work which has been most inspiring to me has been the Bank
Group's response to countries emerging from conflict, countries with new
leadership which urgently need assistance to consolidate peace and jumpstart
recovery:
- We have responded with unprecedented speed to help fragile states with new
leadership, such as Liberia, the Central African Republic and the Democratic
Republic of the Congo;
- We have adopted a new Rapid Response and Fragile States policy to enable
us to move faster in situations with new opportunity and to encourage more
of our staff to work in fragile states.
- We have helped lead successful donor conferences for many post-conflict
countries, including Afghanistan, Lebanon and Liberia.
Our work is important, however, to more than just the poorest countries. Indeed, the majority of the world's poor live in the more successful developing countries, our partners in middle income countries, which borrow from the IBRD.
- These countries still seek help to deal with their large challenges to
fight poverty and preserve their environment, but the World Bank Group needs
to be increasingly innovative and flexible if we are to be useful to these
countries which are already highly sophisticated and have access to many
other sources of funds. To do that we developed a new "Middle Income
Country Strategy" last year and we are working hard on implementing it.
Some of our most important work has been strengthening the development of the private sector, which is the most important source of the growth and jobs that people need to escape poverty:
- The International Finance Corporation, which works with the private
sector, has been setting impressive records, including $8 billion in new
commitments this year.
- What should inspire us even more than the numbers is the greatly increased
emphasis the IFC is placing on the development impact of their work and on
expansion into "frontier markets." Indeed, Africa is the fastest
growing region for IFC work — a five-fold increase in five years — and
the IFC has greatly expanded its field staff in Africa.
- Perhaps most of all, I am proud of the innovative work the IFC is doing,
through the "Doing Business" report, to help developing countries
identify the obstacles to private sector growth and I have been delighted at
how eager many governments have been to remove those obstacles once we help
identify them.
This is not an exhaustive description of the work of the World Bank Group — or even just the part that I have been involved in — but I need to mention one more thing: the importance of the World Bank partnership with the developed countries to promote sustainable global development: - The Bank helps rich countries carry out their obligation and their
interest to help the world's poor.
- We support the interest of the developed countries to mobilize global
resources for common purposes, such as containing the spread of Avian flu —
where the Bank has played a leadership role — or to preserving the
planet's environmental heritage, as we are doing in Brazil and the DRC, by
supporting Amazon Basin and Congo River Basin initiatives.
- Most important of all has been the Bank's development of the Clean Energy Investment Framework which we were first asked to do by the Gleneagles Summit of the G-8 in July 2005. As the world mobilizes resources to diversify energy sources, reduce carbon emissions, avoid deforestation and help countries deal with the effects of climate change, most of those resources have to come from the developed countries. The most productive place to invest them will often be in developing countries. The World Bank Group has been and continues to be in a unique position to facilitate those investment flows and the Global Environment Facility and the Clean Energy Investment Framework form the foundation on which the Bank Group can build.
All of that work — and much more — is only possible because of the dedicated efforts of very hard-working staff. I am particularly impressed by our staff in country offices, including remarkable local staff members, many of whom face daily risks to their health and security in order to help the poor whom we strive to serve. They too have been treated unfairly by much of the press coverage of the past weeks and they deserve better. I hope that can happen now.
I have made many strong appointments both from inside and outside the Bank of which I am personally proud. My Senior Management Team is an exceptional group of talented managers and devoted international public servants who it has been an honor to have as friends and colleagues.
But, I am particularly proud to have appointed two African women as Vice-Presidents in key positions, each of them a former cabinet minister with real world experience in solving problems in democratically elected Sub-Saharan governments. Only when African voices with African experiences are fully empowered at the Bank, will the Bank be seen as a center for solutions in that part of the world. We need senior leaders who have real-world experience in tackling the toughest challenges in the poorest countries.
I am also grateful for the dedicated professionalism of the many staff throughout the World Bank Group who have stayed focused on their work during the recent controversy. In the month of April alone, they delivered nearly $1 billion of support for Africa, an innovative new strategy for Bank work in the health sector, and a strategy for Bank Group support for financial sector work in developing countries, and much more. I am particularly grateful to the entire staff of the President's office who have given me such strong professional support throughout the last two years and particularly during the last month.
It is inspiring to work with people like those and I will miss them.
Finally, I want to say a special word of thanks to the many people inside and outside the Bank who have publicly or privately expressed their support for me and asked me to stay. One of the most moving was a phone call I received from the democratically elected President of a Sub-Saharan African country. It was a private call so I will not quote him by name. But he thanked me for doing so much, in his words, to make the World Bank an institution "that listens, that cares, that understands and that takes action." If that is true, and if I have "touched the hearts of Africans," as he told me, then the last two years have been worth it.
I hope I can continue working with him and with the many other Africans, official and non-official, who have been such an inspiration to me — although I will have to find other ways to do so. They are the ones who have convinced me that Africa has a real chance to turn a corner and join the progress that we have seen in many other parts of the developing world in recent decades. It is those Africans who are stepping up — often at great personal sacrifice and even risk, to bring peace, good governance and sound policies to their countries that are the reason for hope. They deserve all the support that the World Bank Group can give them and I hope they get it.
The next President will have my full support. Hopefully the difficulties of the last few weeks can actually strengthen the Bank by identifying some of the areas of governance and human resource management where reform is needed.
Change should not be feared, it is something to welcome. It is the key to keeping this important institution relevant and effective in the future and meeting the needs of the world's poor, and of humanity as a whole.
Statement of the World Bank Group Staff Association
While Mr. Wolfowitz has finally done the necessary thing by resigning, he has damaged the institution and continues to damage it every day that he remains as its President. He cannot continue to be the face of the World Bank. He has demeaned the Bank, insulted the staff, diminished its clients, and dragged this institution through the mud. He put his own interests before those of the institution. In making a statement of gratitude to Mr. Wolfowitz, the Board has done the same. They have attempted to save his face and in so doing have destroyed that of the institution that they are entrusted to protect.
The World Bank Group needs to rebuild its credibility immediately, regain its focus and devote its full attention to its clients. This cannot be done while Mr. Wolfowitz remains in his position as President.
Wolfowitz Quits World Bank
as U.S. Relents
NEIL KING JR. and GREG HITT
Wall Street Journal 18may2007
WASHINGTON — Unable to overcome charges of ethical misconduct, Paul Wolfowitz resigned as World Bank president yesterday within hours of getting a final White House signal that he should abandon a fierce battle save to his job.
Mr. Wolfowitz will leave the poverty-fighting agency June 30, brought down by allegations that he misused his position to secure a big pay-and-promotion package for his girlfriend, longtime bank employee Shaha Riza. Public disclosure of his actions provoked international calls that he resign and touched off a much larger debate about his management style and priorities as president.
President Bush intends to name a successor quickly at the multilateral bank, which is traditionally led by an American. "The president will have a candidate to announce soon, allowing for an orderly transition that will have the World Bank refocused on its mission," White House spokesman Tony Fratto said. He said Mr. Bush still supported Mr. Wolfowitz. "We would have preferred that he stay at the bank, but the president reluctantly accepts his decision."
For all the vitriol of the past several weeks, both Mr. Wolfowitz and the bank's board issued complimentary statements last evening. The board released a conciliatory statement that came very close to the exoneration Mr. Wolfowitz sought when he entered negotiations over his potential departure. The board said "a number of mistakes were made by a number of individuals." It also acknowledged that changes had to be made to the "governance framework of the World Bank Group," a nod to a shared blame within the lender that both the U.S. and Mr. Wolfowitz wanted.
The board's statement cited a long roster of achievements during Mr. Wolfowitz's two-year tenure, a list that closely corresponded to his own accounting. "We thank Mr. Wolfowitz for his leadership and for championing the Bank's work across so many areas," the statement said.
Mr. Wolfowitz, in turn, said he was pleased the board "accepted my assurance that I acted ethically and in good faith in what I believed were the best interests of the institution, including protecting the rights of a valued staff member." He said he was stepping down because it was "in the best interests of those whom this institution serves for that mission to be carried forward under new leadership."
A possible list of candidates for that new leadership emerged quickly yesterday. Some names thought to be on the short list are former Deputy Secretary of State Robert Zoellick and current Deputy Treasury Secretary Robert Kimmitt. Another name is that of former Senate Majority Leader Bill Frist, a Tennessee Republican.
Mr. Wolfowitz came to the poverty-fighting institution from his post as the No. 2 at the Pentagon, where he helped plan the Iraq war. Mr. Wolfowitz looked forward to getting a fresh start, and the chance to lead the bank took him away from a war that had become increasingly chaotic and bloody. But his reputation from the war cast a cloud over his tenure from the start.
Since taking office in June 2005, Mr. Wolfowitz alienated the bank's tradition-bound bureaucracy by relying on a coterie of forceful, sometimes brash aides with ties to the Bush administration. Among other things, he gave them free rein to challenge career staffers and insert themselves into daily policy.
He also battled the bank's influential board, which represents the institution's 185 members, especially over a campaign to curb corruption. Critics saw his approach as a threat to the bank's core mission of alleviating poverty, contending that cutting off funds to corrupt countries would only hurt the poor there more.
Mr. Wolfowitz fought hard for his job after the scandal broke last month. But his chances dimmed this week when a report by a subcommittee of the bank's board found he violated the bank's ethics rules and said the controversy had damaged bank credibility.
Mr. Wolfowitz's final days became an effort to bow out gracefully, beginning talks Wednesday on a possible exit. By yesterday morning his fate looked certain when a clearly pained Mr. Bush appeared to concede Mr. Wolfowitz was on his way out. "I regret that it's come to this," said Mr. Bush, who had previously offered strong endorsements.
Hours later, Mr. Wolfowitz and the board issued their statements.
As World Bank officials drafted the statement yesterday, there was heavy Bush administration input on Mr. Wolfowitz's behalf. The administration insisted the bank essentially clear Mr. Wolfowitz of wrongdoing and give him until the end of June to leave. Those six weeks also let the White House have time to find a successor. Treasury Secretary Henry Paulson will lead the search, saying he will have consultations "around the world."
Mr. Wolfowitz will have limited responsibilities during his final weeks and won't be allowed to make major decisions, the bank said. Even so, the bank's Staff Association, which represents bank workers and stirred up opposition to Mr. Wolfowitz, condemned the arrangement. "He cannot continue to be the face of the World Bank," the association said.
Development groups yesterday repeated demands that Washington consider non-American candidates. There was even talk within the bank's board yesterday of offering an independent nominee instead of having the U.S. pick. That possibility would likely gain traction only if the U.S. pursues a candidate with weak support abroad.
U.S. officials made clear the White House intends to assert tradition in picking the bank's 11th president since it was founded in the late 1940s. A European normally leads the bank's sister agency, the IMF.
The resignation saved the bank from having to stage an open vote on Mr. Wolfowitz's leadership. The past month has brought unprecedented strains to the institution, and a vote threatened a deep rift in the board.
In his resignation statement, Mr. Wolfowitz described wistfully — and at length — the bank's work in Africa. When Mr. Wolfowitz took office two years ago, he pledged to make Africa the bank's No. 1 priority, and he said yesterday that if he has "touched the hearts of Africans...then the last two years have been worth it."
p.A3
World Bank Group Staff Association
1818 H Street, N.W., Washington, D.C., 20433, U.S.A
Telephone (202) 473-9000, Fax (202) 522-2025, staffassociation@worldbank.org
Staff Association Remarks
April 12, 2007
Colleagues,
I had hoped to come before you today to report that the Board had fulfilled its promise to thoroughly investigate the alleged abuse of office by the President. As I wrote to the Dean of the Board last Friday:
“I have heard from many staff expressing their appreciation that the Board is taking staff concerns seriously and is looking into the matter. This is a painful issue for everyone and we trust that the Board will resolve it in a way that preserves the Bank's integrity and its ability to be effective in its mission.”
Unfortunately, some members of the Board have expressed to me their lack of confidence that the Board as a whole will fulfill its fiduciary obligations in this matter. Therefore, on behalf of all World Bank Group stakeholders, the Staff Association demands that the Board release all of the documents that it has collected in this case, which we have confirmed to include:
1. A dated memorandum from the President to the HR Vice President instructing him to agree on the following terms for Ms. Riza’s external assignment (in spite of the obvious conflict of interest). In addition to those facts already released in the press:
(a) an automatic annual SRI commensurate with an overall performance rating of “Outstanding” for the period she is away;
(b) promotion upon her return to Level GI or GH, depending on the length of her external service, subject to review of her performance by a panel whose membership would be mutually agreed by HR and Ms. Riza.
2. The actual negotiated contract formalizing these terms – it is understood that there was no representation by the Bank’s legal counsel permitted in the negotiations on this agreement, despite the participation of Ms. Riza’s attorney;
3. Testimony by:
(a) the former Chair of the Ethics Committee, Ad Melkert, denying that the Ethics Committee directed, saw or agreed with the negotiated terms;
(b) the former General Counsel, Roberto Danino, to the effect that he had advised the President and the Ethics Committee of appropriate and fair terms for Ms. Riza’s reassignment, that these terms were rejected and that he was barred by the President from the actual negotiations;
(c) the Vice President of HR, Xavier Coll, on the instructions he was given to carry out.
It therefore seems impossible for the institution to move forward with any sense of purpose under the present leadership, especially in our endeavor to assist governments and their people in improving their own governance.
Given the results of this inquiry:
1. The President must acknowledge that his conduct has compromised the integrity and effectiveness of the World Bank Group and has destroyed the staff’s trust in his leadership. He must act honorably and resign.
2. The Board must act in accordance with its fiduciary responsibility as the guardians of the World Bank Group and take the lead in launching a global, merit-based search for a new president who can restore the Bank’s integrity and regain the trust of the IDA 15 donors.
3. The Board and Senior Management must ensure that strong Whistleblower Protections are in place, supported by a robust and effective Conflict Resolution System so that this never happens again.
Alison Cave
Chair
World Bank Group Staff Association
Girlfriend Salaries for Everyone at World Bank
AMITY SHALES / Bloomberg 26apr2007
The number that triggered the attacks on World Bank President Paul Wolfowitz was $193,590.
The figure represented the salary he endorsed for his girlfriend, communications adviser Shaha Riza. Even though Wolfowitz did try to recuse himself from decisions about Riza, colleagues have turned against him so violently that both his anti-corruption campaign and his career at the bank are now on hold. Yesterday, the European Parliament called for his resignation.
Some observers will tell you the Wolfowitz flap is about Democrats and their allies in the blue states — including the one known as the U.K. — trying to bring down another neocon friend of U.S. President George W. Bush.
This fracas is also, just as the bank staff say, about company pay.
A closer look at bank pay suggests the trouble here isn't that Riza gets a ``girlfriend'' salary, a mysterious wage not quite tethered to market reality. It is that World Bank staffers also do — and almost all without spending a minute alone with the bank's embattled president.
The World Bank has an administrative budget of $1 billion a year. It employs more than 10,000 people. Thousands of others consult.
It doesn't publish current salaries. But according to the 2006 annual report, a senior professional, or ``G'' level employee, starts at $92,230 and can go up to $167,860, a little more than the $165,200 for a member of the 110th Congress. A manager, or ``H'' level staffer, can make $226,650. This was the category for which Riza was on the shortlist.
In Line Pay
Some 1,000 employees are in the H range. So the portrayal of Riza as someone receiving unheard-of compensation is inaccurate.
The next salary level, ``I,'' includes directors or senior advisers, who earn as much as $268,560. There are more than 200 of these, and they supervise many others. Wolfowitz stirred ire by bringing two allies into the bank at salaries of, reportedly, $240,000 and $250,000. He may have taken a misstep in the execution, but the ``I'' data suggest those pay levels weren't out of line.
Move up a tier to the 25 or so professionals, the ``J'' level employees, or vice presidents. Top salary: $289,540. Senior vice presidents and managing directors who have made it to the ``K'' class received as much as $311,000. The president's pay, when you include expenses, lands in the mid-$400,000 range.
Life for Locals
In other words, Wolfowitz is paid like the U.S. president, a foundation head, or a not-very-good securities analyst.
Income alone hardly tells this compensation story. When the bank was established in 1944, non-American employees were exempted from U.S. income and Social Security levies. Some three- quarters of the bank's employees aren't American. Those who are also get a break on federal taxes — they are worse off than the non-Americans, but better off than those outside the bank.
Compare that with life for the locals. Allowing for a $375,000, 30-year fixed-rate mortgage, a spouse, and real-estate taxes of $4,000 a year, a non-bank American resident of Washington would need to earn $350,000 to net $225,000, the top for ``H'' level bank employees. A married New Yorker would need $364,000.
And the tax break isn't all. The World Bank budget has historically included private-school tuition reimbursements, though it is cutting back.
Then there is the bank's surreal job security. Of the six regional vice presidents, four joined before 1981. Gold-plated pensions complete this picture — tax-free again. What's more, almost 1,000 retired employees have consulting agreements with the bank, sometimes lavish, that come on top of the pension.
Try to Justify
Staffers might try to justify their compensation by arguing that they are more akin to Wall Streeters than to Agriculture Department paper pushers. They could note that the administrative budget comes out of profits from the bank's investments, so what the bank pays is its own business.
But these arguments don't hold. Most World Bank jobs are closer to non-profit than for-profit work — the kind of jobs that would pay five figures.
While the bank is backed by callable capital from its member governments, those nations in turn are backed by the goodwill of the citizen taxpayers. If the world's taxpayers evaluated the bank's salaries, they would deem them askew. The only reason the World Bank can compensate as it does is that it falls between jurisdictions. If no one is looking at World Bank pay, no one is monitoring other aspects of the bank's work sufficiently either.
Diversion Tactic
Hence the ferocity of the criticism — this crowd of loyal lifers thinks that by training the spotlight on Wolfowitz's perks, or Riza's, they can keep it off their own. Hence the critics' attacks on Suzanne Rich Folsom, the head of the bank's Department of Institutional Integrity. Folsom, an ethics lawyer, is in charge of investigating corruption in bank projects abroad and to look into possible wrongdoing by staff at home.
Of course Folsom's probes might show that bank performance is optimal. But the staffers fear that they won't, and they are probably right.
Maybe the staff's salaries should come down. Maybe the quality of their work needs to improve. Maybe crooks and laggards should leave and others should be paid still more. Maybe the bank staff should start paying U.S. taxes. Maybe the whole gray area between for-profit and not-for-profit needs adjustment. In any case, the old corporate rule holds yet again: When salaries seem odd, something is out of balance — just not always in the way you think.
(Amity Shlaes, a visiting senior fellow at the Council on Foreign Relations, is a Bloomberg News columnist. The opinions expressed are her own.)
To contact the writer of this column: Amity Shlaes at ashlaes@bloomberg.net .
Last Updated: April 26, 2007 04:00 EDT
source: 17may2007
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