14 May 2007
The committee has been investigating whether World Bank President Paul Wolfowitz inappropriately arranged for salary raises and promotions for his former girlfriend, Shaha Ali Riza. Also: links to a new letter from 37 World Bank Country Directors calling for quick resolution of the crisis.
Read the report and annexes on the World Bank website, and comments on worldbankpresident.org. The committee released a draft of the report to Wolfowitz last week; he was given until last Friday May 11 to respond. The Board will meet with Wolfowitz on Tuesday May 15 to discuss the report and recommendations.
The report contains the following recommendations for the Executive Directors:
- [Consider] whether Mr. Wolfowitz will be able to provide the leadership needed to ensure that the Bank continues to operate to the fullest extent possible in achieving its mandate. (52)
- To undertake a review of the governance framework of the World Bank Group with the aim of ensuring that it is capable of effectively dealing with the challenges raised for the institution. (52)
The ad-hoc committee reached the following conclusions:
Question 1: Whether the facts show the violation of any staff rule.
Answer: The Group concludes that the Code of Conduct and Staff Rules 3.01 ["Standards of Professional Conduct", 5.02 ["External Service"] and 6.01 were violated. (46)
Staff Rule 3.01, "Standards of Professional Conduct".
- The Group concludes that by becoming involved in the terms of Ms. Riza's external assignment and directing the Vice President of Human Resources ("VPHR") to agree to specific terms that went beyond the informal advice given by the Ethics Committee, Mr. Wolfowitz engaged in a de facto conflict of interest... (47)
Staff Rules 6.01, "Compensation" and 3.01, "Standards of Professional Increase".
- [On] Promotion Increase: ...The salary increase Ms. Riza received at Mr. Wolfowitz's direction was in excess of the range established by Rule 6.01. A promotion increase outside the permissible range was never envisaged in the informal advice provided by the Ethics Committee...In directing such a salary increase, Mr. Wolfowitz also acted in a manner that was inconsistent with the obligation to avoid conflict of interest situations imposed by Staff Rule 3.01. (47)
- [On] Subsequent Pay Increase: The Group concludes that the size of the future salary increases Mr. Wolfowitz directed the VPHR to agree to are in excess of the annual salary adjustments for staff on external service provided by Staff Rule 6.01...The annual salary adjustment agreed with Ms. Riza at Mr. Wolfowitz's direction are in excess of the amounts provided by Staff Rule 6.01. Mr. Wolfowitz's involvement in establishing the amount of future salary adjustments was also a violation of the conflict of interest provision of Staff Rule 3.01 (47)
- [On] Staff Rules 5.02, "External Service" and 3.01, "Standards of Professional Conduct": The Group found no basis in the external service rule or elsewhere for the provisions in the agreement with Ms. Riza for external assignment that assure her consideration for promotion to level I and even level J... (48)
Question 2: Whether the facts show a violation of terms of the contract of the President of the World Bank.
Answer: The provisions (para 3) in Mr. Wolfowitz's contract requiring that he adhere to the Code of Conduct for Board Officials and that he avoid any conflict of interest, real or apparent, were violated. (48)
The Group identified two provisions warranting special attention in this regard. One requires Mr. Wolfowitz to avoid any conflict of interest, real or apparent. The other requires him to adhere to the standards set forth in the Code of Conduct for Board Officials and to observe the standards of ethical conduct applicable to staff members of the Bank, where these reflect a stricter standard (48) ... The Group concludes that these important provisions of the contract were not observed ... (49)
The Group also has concern over the decision by Mr. Wolfowitz not to consult with the Bank's General Counsel of any other member of the Bank's Legal Vice Presidency on matters that had the potential to expose the World Bank to legal and reputational hazard ... (49)
Question 3: Whether the facts show a violation by the President of the obligation imposed by his contract, to "avoid any conflict of interest, real or apparent."
Answer: The Group concludes that Mr. Wolfowitz's involvement in determining the terms of Ms. Riza's external assignment constituted a conflict of interest, as discussed above...
...The Group also concludes that by excluding the General Counsel and other members of the Legal Vice Presidency from involvement in the matter, Mr. Wolfowitz places his own personal interests in opposition to the interests of the institution. In so doing he undermined the legal safeguards the institution had in place to protect itself from the harm it has unfortunately come to experience. (50)
Question 4: Whether, based on the totality of circumstances, including any reputational damage that may have been done to the institution as a result of the matters under review, any changes would appear to be necessary to the governance framework to enable the World Bank to continue to operate to the fullest extent possible in achieving its chartered objectives.
Answer: The Group concludes that based on the totality of circumstances, changes need to be made to the governance framework to ensure that the World Bank continues to operate to the fullest extent possible in achieving its chartered objectives.
...The Group is of the view that this matter has had a dramatic negative effect on the reputation and credibility of the World Bank Group... While some comments have cast a positive light on the World Bank Group and its current leadership, most comments, including communications from former and current Governors of the Bank, distinguishes academics and representatives of other stakeholders, such as nongovernmental organizations, have raised serious questions about the Bank's governance, its reputation and its ability to carry out its mandate... (50)
The Group underscores that there is a crisis in the leadership of the Bank... The current situation has generated a crisis not only in the management ranks, but across the institution.... (51)
The ability of staff, particularly those working in borrowing countries, to interact with their counterparts and the institution's ability to convene partners, is eroding... (51)
In particular, the Group believes there is a need to review the role as well as procedural and other aspects of the Ethics Committee. In addition, the Group underscores that serious consideration be given to issues regarding internal and overall governance of the institution. This should encompass issues relating to the demarcation of the respective responsibilities of the President and the Executive Directors... (51)
Conclusions and recommendations direct quotes from the actual document.
Also newly posted on worldbankpresident.org, a letter signed by thirty-seven World Bank country directors calling on "the Board and the President to resolve the crisis quickly in a way that demonstrates the Bank's commitment to the highest standards of integrity and accountability."