Trouble at the World Bank

Sunday, April 22, 2007

THE EXECUTIVE directors of the World Bank initiated an "urgent" review Friday of the imbroglio surrounding bank President Paul D. Wolfowitz and the salary increases he arranged for his girlfriend, a bank employee. Such a review is overdue. We hope it provides a full assessment of the facts and puts some of the overheated rhetoric about this controversy into a fairer and calmer context.

The allegations against Mr. Wolfowitz, which have angered many bank employees, are by now familiar. After arriving at the bank in the summer of 2005, he arranged a generous employment package for his companion, Shaha Riza, then a senior communications officer at the bank with expertise in Middle East affairs. These terms mandated a salary increase from $132,660 to $193,590, assigned her to a job outside the bank and laid out a path to further promotion and raises. This has been characterized as an underhanded deal that undermines Mr. Wolfowitz's campaign against corruption in poor countries applying for World Bank aid.

Unfortunately, that thumbnail sketch omits some highly relevant facts. It was Mr. Wolfowitz who, before taking over at the bank, called the potential conflict of interest to the attention of the bank's ethics committee. He asked to be recused from any personnel decisions involving Ms. Riza. The committee agreed that a conflict existed, but it said that could probably be solved only by Ms. Riza leaving the bank, either permanently or on loan to another agency. The committee also told Mr. Wolfowitz that, if she chose to go elsewhere, Ms. Riza should be given a raise because she already had been short-listed for a promotion. So when Mr. Wolfowitz dictated her new terms of employment he was responding in part to the committee's instructions. Further raises were intended to be equal to what she might have earned had she stayed at the bank, responding to the committee's advice that she receive "compensation to offset negative career impact" from her reassignment.

Was the package nonetheless too generous, even by cushy World Bank standards? The executive directors should answer that question. But there's a relevant fact here, too. The ethics panel reviewed the situation again a half-year later, in February 2006, after receiving an anonymous complaint from a bank employee precisely on the issue of excessive pay. Once again it found, "on the basis of a careful review," that the allegations "do not appear to pose ethical issues appropriate for further consideration by the Committee."

What has changed in the intervening 14 months? That would be another question that we hope the review will answer. It's encouraging that the executive directors called for a review of bank procedures and standards, which will presumably range beyond the actions of the president.

Our view is that Mr. Wolfowitz should have insisted on recusing himself, the ethics committee notwithstanding, and should have taken no part in shaping the terms of Ms. Riza's package. He also showed poor judgment in awarding a quarter-million-dollar salary to the press secretary he brought with him. He may conclude that he can no longer be an effective leader of the bank -- that a bank president intending to make corruption his signature issue had to be above any reproach. Before any such decisions are made, though, we hope the executive directors will lay out all the facts, and not just those that suit Mr. Wolfowitz's detractors.

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