Paul Wolfowitz World Bank Scandal
Paul Wolfowitz’s tenure as president of the International Bank of Reconstruction and Development (better known as the World Bank) appears about to end after a scandal over preferential treatment of his girlfriend. The bank’s staff association and the Financial Times are calling for his resignation, which I suspect will coon be forthcoming.
AP’s Jeannine Aversa has the basic details:
At issue are the generous compensation and pay raises of a bank employee, Shaha Riza, who has dated Wolfowitz. She was given an assignment at the State Department in September 2005, shortly after he became bank president. “In hindsight I wish I had trusted my original instincts and kept myself out of the negotiations,” Wolfowitz said. “I made a mistake, for which I am sorry.”
The World Bank Group Staff Association is demanding that Wolfowitz step down. “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,” the association said Thursday. “He must act honorably and resign.”
The FT editorial board agrees.
The president of the World Bank has one asset: his credibility. The Bank’s capacity to make a difference lies not in its money and ideas but in its ability to be the world’s voice for development. This includes, as Paul Wolfowitz, the current president, has insisted, being the voice for good governance. Recent revelations have, however, demonstrated such serious failures that the Bank’s moral authority is endangered. If the president stays, it risks becoming an object not of respect, but of scorn, and its campaign in favour of good governance not a believable struggle, but blatant hypocrisy.
It is important to understand what is not at issue here. It is not Mr Wolfowitz’s unpopularity, even though his role as an architect of the Iraq war made him disliked from the start. It is not failures of management, even though his reliance on a group of outside appointees made him mistrusted by many inside and outside the Bank. It is not disagreements over development doctrine, where some convergence of views has occurred. It is not a romantic relationship with a subordinate, itself hardly a rarity in today’s world.
The issue is whether the failures of corporate governance are serious enough to damage the Bank’s moral authority. In a world where curtailing corruption and improving governance have become central to the practice of development, the world’s premier development institution must, like Caesar’s wife, stand above suspicion.
What then do we see here? The answer is: an apparent violation of Bank rules; favouritism that borders on nepotism; and a possible cover-up. It is true Mr Wolfowitz and Ms Riza were put in a difficult position. Even so, what has come out would be bad in any institution. In an institution that spear-heads the cause of good governance in the developing world, it is lethal.
The World Bank has moved from being a self-proclaimed exemplar of best practice in corporate governance to an example of shoddiness. As long as Mr Wolfowitz stays, this can be neither repaired nor forgotten, be it outside the Bank or inside it. In the interests of the Bank itself, he should resign. If he does not, the board must ask him to go.
It’s hard to disagree.
Wolfowitz may well have made an honest mistake here. My guess is that Riza is extraordinarily bright and capable and she may well have been worthy of both the position to which she was assigned and the salary she was paid. Still, Wolfowitz should have had enough judgment to have those decisions made by an independent body–or better yet, persuaded his girlfriend to seek employment in the private sector to remove all doubt of impropriety. Wolfowitz is a smart man with years of experience at the highest levels of public policy making. He simply should have known better.