The president of the World Bank has one asset: his credibility. The Bank’s capacity to make a difference lies not in its money and ideas but in its ability to be the world’s voice for development. This includes, as Paul Wolfowitz, the current president, has insisted, being the voice for good governance. Recent revelations have, however, demonstrated such serious failures that the Bank’s moral authority is endangered. If the president stays, it risks becoming an object not of respect, but of scorn, and its campaign in favour of good governance not a believable struggle, but blatant hypocrisy.
It is important to understand what is not at issue here. It is not Mr Wolfowitz’s unpopularity, even though his role as an architect of the Iraq war made him disliked from the start. It is not failures of management, even though his reliance on a group of outside appointees made him mistrusted by many inside and outside the Bank. It is not disagreements over development doctrine, where some convergence of views has occurred. It is not a romantic relationship with a subordinate, itself hardly a rarity in today’s world.
The issue is whether the failures of corporate governance are serious enough to damage the Bank’s moral authority. In a world where curtailing corruption and improving governance have become central to the practice of development, the world’s premier development institution must, like Caesar’s wife, stand above suspicion.
What then is the story? When Mr Wolfowitz became president of the World Bank he also became the boss of his girlfriend, Shaha Riza. To resolve this situation – inconsistent, rightly, with Bank rules – Ms Riza was seconded to the US State Department.
So far, then, so unproblematic. Yet, it is alleged, the terms of the appointment, which appear astonishingly generous, violate a number of Bank protocols. Worse, it now appears Mr Wolfowitz personally directed the Bank’s head of human resources to offer his girlfriend these exceptional terms. Worse still, this has come out after misleading claims by a senior official that the ethics committee of the board, in consultation with the general counsel, approved the agreement.
What then do we see here? The answer is: an apparent violation of Bank rules; favouritism that borders on nepotism; and a possible cover-up. It is true Mr Wolfowitz and Ms Riza were put in a difficult position. Even so, what has come out would be bad in any institution. In an institution that spear-heads the cause of good governance in the developing world, it is lethal.
The World Bank has moved from being a self-proclaimed exemplar of best practice in corporate governance to an example of shoddiness. As long as Mr Wolfowitz stays, this can be neither repaired nor forgotten, be it outside the Bank or inside it. In the interests of the Bank itself, he should resign. If he does not, the board must ask him to go.