World Bank steps up pressure on Wolfowitz

Krishna Guha

The World Bank’s executive board on Friday ratcheted up the pressure on Paul Wolfowitz to step down as president by simultaneously promising swift action on the Shaha Riza controversy and broadening the scope of its investigations to include other issues as well.

The board, which is made up of directors representing shareholder governments including the US, instructed a subcommittee of seven directors to “consider immediately arrangements made for the secondment of the staff member closely associated with the president”.

The decision came after a marathon 10-hour session that ended at about 1am on Friday.

Mr Wolfowitz is in trouble following revelations that he ordered the bank’s head of human resources to give Ms Riza, his girlfriend at the time, a large pay rise as part of a secondment package.

The board said the subcommittee should consider whether the arrangements for Ms Riza violated the staff rules, the bank’s code of conduct, the president’s own contract and “conflict of interest, ethical, reputational and other relevant standards”.

The promise of swift action is not necessarily bad news for Mr Wolfowitz, who has been pushing for a quick resolution of the Riza controversy. If the board vindicates him or fails to produce a clear ruling, he will claim the question has been dealt with and the bank should move on.

But if the board finds that Mr Wolfowitz’s conduct violated one or other of the rules, codes and ethical norms it laid out, it would further undermine his hopes of remaining in office.

Moreover, the board sent an unmistakable signal to Mr Wolfowitz that its investigation of him and his officials will not end with its judgment on the Riza secondment.

It said other issues “will need to be addressed, including the various public communications made by the bank on the matter and issues around employment contracts made in the office of the president”.

Many directors want Mr Wolfowitz to understand there is no prospect of the board agreeing to a quick fix that would let him get on with running the bank.

The board expressed “great concern” about the current turmoil within the bank, where Graeme Wheeler, one of Mr Wolfowitz’s two deputies, called on him to resign on Wednesday. The overwhelming majority of managers and staff have sided with Mr Wheeler.

European governments are more determined than ever to get Mr Wolfowitz out.

A formal vote of no confidence, though, is out of the question while the White House stands by him.

The US has not retreated an inch from its statement that it has “full confidence” in Mr Wolfowitz. But in a sign that it is not completely indifferent to the fate of the bank, a White House spokesman said this week that the board should think about the “long-term effectiveness of the institution”.

Mr Wolfowitz’s office issued a statement saying he “welcomes the decision of the board to move forward and resolve this very important issue.  He looks forward to implementing the recommendations of the board”.

Copyright The Financial Times Limited 2007

RSS TrackBack URL

Translate: