Wolfowitz Walks, Leaving Pressing Problems
July 19, 2007
Inter Press Service
By: Emad Mekay
WASHINGTON – The resignation of World Bank president Paul Wolfowitz has emboldened critics of the institution’s governance structure, who are clamoring for an overhaul of not only the bank but its sister organization, the International Monetary Fund (IMF).
Wolfowitz, who has been fending off accusations of favoritism and nepotism at the Washington-based institution, will resign effective June 30, the first president of the institution ever to be forced out.
"The executive directors acknowledge Wolfowitz’ decision to resign as president of the World Bank Group, effective end of thefiscal year (June 30, 2007)," the 24 bank directors, who ran the institution’s day-to-day affairs with Wolfowitz during his two-year tenure, said in a statement late Thursday.
The directors appear to have given Wolfowitz the graceful exit he has been fighting for and accepted, though not so warmly, his request that he resign in return for their acknowledgement that he was not the only person at fault in the controversy.
In their statement, the directors said that the episode, which started seven weeks ago with leaks revealing that Wolfowitz had engineered a generous promotion and salary increase for his girlfriend, fellow bank employee Shaha Riza, that did not conform to bank regulations, showed that the bank’s governance system needed urgent repair.
Many outside observers agreed. "The scandal surrounding Paul Wolfowitz has exposed systemic problems in the way the World Bank is run," said Bruce Jenkins of the Bank Information Center, an independent watchdog group in Washington.
Despite his initial public apology, Wolfowitz has lately maintained that the bank’s ethics committee also erred by not being clear in its directions and guidelines.
"One conclusion we draw from this is the need to review the governance framework of the World Bank Group, including the role as well as procedural and other aspects of the ethics committee," said the directors. "It is clear from this material that a number of mistakes were made by a number of individuals in handling the matter under consideration, and that the bank’s systems did not prove robust to the strain under which they were placed."
The directors said they would continue discussion on arrangements for the interim period as well as the governance issues. They also said they will start the nomination process for a new president immediately.
In his own statement, Wolfowitz, 63, who came to the bank from the Pentagon in June 2005, said he was pleased the directors had consented that he "acted ethically and in good faith". He also sided with the directors in calling for reform of the bank’s governance system.
"Hopefully the difficulties of the last few weeks can actually strengthen the bank by identifying some of the areas of governance and human-resource management where reform is needed," Wolfowitz said in a lengthy statement, in which he reviewed his work during his two-year tenure.
Wolfowitz became entangled in controversy seven weeks ago after World Bank whistleblowers leaked to the Washington-based non-governmental organization Government Accountability Project (GAP) several documents that showed Wolfowitz pushing a high pay raise in a secondment deal to the US State Department for his girlfriend, which he claimed did not violate the bank’s code on conflicts of interest.
The following days and weeks saw Wolfowitz, once the high-riding No 2 man at the Defense Department and a leading architect of the ill-fated Iraq war, trying to cover up the controversy before eventually making a humiliating public admission that he had made a "mistake".
Calls from the bank’s staff, senior management and officials from across the world poured down on the bank for Wolfowitz to quit. The nepotism charges added fuel to an internal simmering revolt over the conduct of his close aides and the more-than-generous pay they were getting.
The World Bank, which critics have long accused of getting away with harmful policies and practices in developing nations away from the gaze of the media, now received unprecedented media attention because of the evolving controversy. "
There was no way Wolfowitz could have continued on as World Bank president. He and his associates have been caught repeatedly misleading bank staff and the media. His credibility was shot," said Dylan Blaylock of GAP.
The resignation announcement quickly rekindled calls for fixing the "real problem" at the World Bank – namely its governance structure. "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?" said Jenkins.
"The recent furor around Mr Wolfowitz’ 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."
Since the World Bank was established in the 1940s, the US government has designated its president without consulting other member nations, while European governments designated the managing director of the IMF.
"After 63 years it is time to have open, merit-based selection of these leaders," said Jo Marie Griesgraber, executive director of the New Rules for Global Finance Coalition. "The Wolfowitz scandal is but a natural consequence of the ‘old boys’ club’ way in which the World Bank and IMF have been governed. It provides an opportunity to end the anti-democratic behavior of the world’s great democracies, whereby the US president names the World Bank president and a small coterie of European finance ministers name the IMF managing director," she said.
The international development group Oxfam, which had quickly joined in the call for Wolfowitz’ ouster, said the next move falls on the shoulders of the rich nations that control the World Bank – the United States and European nations.
"The US and other rich countries must now show that they are serious about good governance by allowing the next head of the bank to be appointed based on merit through an open, accountable process," said Bernice Romero, advocacy director of Oxfam International. (Inter Press Service)