17 May 2007
PRESS RELEASE: World Bank housecleaning has only just begun. Wolfowitz's resignation is the first step to broader governance overhauls at the institution.
PRESS RELEASE
MAY 17, 2007
CONTACT:
Bruce Jenkins, Policy Director, Bank Information Center: 202-329-6875
World Bank housecleaning has only just begun
Wolfowitz resignation first step to broader governance overhaul
The scandal surrounding Paul Wolfowitz has exposed systemic problems in the way the World Bank is run. While his resignation is a step in the right direction, one must ask: How did a senior Pentagon official in charge of orchestrating a disastrous war become the leader of the world’s premier development institution in the first place, and why did the Bank’s Board of Directors fail to adequately oversee the actions of the institution’s chief executive?
Governance of the World Bank remains cloaked in secrecy, follows undemocratic procedures, and is unduly influenced by its largest members. The recent furor around Mr. Wolfowitz’s actions calls into stark relief the need for the Bank to swallow its own medicine and to structurally adjust how it is governed or risk deepening its crisis of legitimacy.
First, the United States and Europe must release their archaic stranglehold over leadership selection at the World Bank and International Monetary Fund. They share the blame – and thus the shame – for abuses of presidential power in the Bank. “Mr. Wolfowitz was put in place by an ‘old boys club’ system devised in the 1940s,” Bank Information Center Policy Director Bruce Jenkins stated. “The US names the head of the Bank. Hence, the Bank’s president is not fully accountable to the institution’s Board. And the Bank’s president is seen as an agent of US geopolitical interests. The Bank must step into the 21st century and adopt open, competitive procedures for selecting its leader based on merit, not discriminating on the basis of national origin.”
Secondly, the Bank’s Board of Directors is plagued by a distorted power structure through which the largest nations retain the majority of the voting power. “The Bank’s shareholders should move to strengthen representation of borrowing countries at the World Bank, building on the diverse proposals presented by the Bank, member governments, and outside observers,” Jenkins stated. “For example, governance at the Bank could be significantly improved by instituting double-majority voting for important decisions, including selection (and dismissal) of the Bank’s president.”
Finally, Bank decision-making must be more transparent, at the highest levels and throughout the institution. The Bank’s Board of Directors operates behind closed doors – not an acceptable standard for a public institution. Revelations of nepotism and patronage at the highest levels in the Bank come as little surprise to the institution’s critics, who have long deplored the secrecy that reigns in the Bank’s boardroom. Indeed, the Board’s inefficacy in dealing with the Wolfowitz situation only fueled the recent crisis. “Transparency is a critical factor in strengthening accountability of decision-makers, something the Bank promotes to its clients. Yet citizens around the globe have no way of knowing how their governments are representing their interests at this leading intergovernmental institution. It is scandalous in this day and age,” Jenkins stated. “Public disclosure of Board deliberations is an important first step.”
Wolfowitz’s resignation might provide some immediate satisfaction to his adversaries within and outside of the Bank. However, the Bank’s integrity and effectiveness will remain under constant threat until its operations and practices become more transparent, accountable and truly representative of the global public whom the institution ostensibly serves.
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