A special board committee found that he broke the Bank’s ethics rules to advance the financial well-being of his girlfriend —not an admirable position to be in when you head the institution involved and claim to be a champion of higher standards of ethics and governance around the world. An avalanche of powerful stakeholder nations and groups demanded his resignation. Former executives of the body wrote a joint letter to the Financial Times which called upon him to step aside for the good of the organization. Yet when it came to dealing with World Bank chairman Paul D. Wolfowitz, the Bank’s board adopted a demeanor more resembling a fledgling new regime negotiating the terms of abdication for a dethroned monarch than a governing body that supervises the CEO. It was, to say the least, unbecoming. A board is supposed to hire and monitor the conduct of a CEO. When that conduct is wanting, because of ethical shortcomings or misjudgment, it is the duty of the board to act with strength and conviction. This is a fundamental principle of sound governance without which no public institution can long function.
Faced with pressure from Mr. Wolfowitz’s lawyer, Robert S. Bennett, the World Bank’s board decided to rewrite history and back away from its findings that Mr. Wolfowitz violated the Bank’s ethics rules. In doing so, it not only demeaned itself in adopting language that was substantially inconsistent with its previous report, but it also opened the door to its own credibility now being challenged. Can the Bank’s word be trusted? Does it mean what it says? Or can an unpleasant truth be ameliorated by a lawyer’s bombast and clever negotiation? The dictators of the world, for whom the Bank’s push toward principles of transparency, ethics and improved governance is about as welcomed as a visit from Senator Paul Sarbanes in most North American boardrooms, will no doubt be taking cues from how the board approached the problem in dealing with one of its own.
Some will argue the Bank finally got rid of Mr. Wolfowitz, so what’s the problem? One can be glad that the Bank will have new leadership. But an ends-justifies-the-means approach to institutional decision-making by a body with the power and influence of the Work Bank is a slippery slope upon which many a despot and shady actor would like to glide. We will not be joining them. It would have been better for the Bank to have stood by its findings, privately advise Mr. Wolfowitz that his conduct had damaged the institution and his ability to lead it and demand that he step aside —or remove him from office if he did not. Leaders who violate ethical standards and bring discredit to their organizations do not generally get to dictate the terms by which they will relinquish their positions.
We will have further comments about some steps that should be taken to bring the Bank’s own governance practices into line with 21st century realities. For now, it is clear that the board took too long to act, was too indecisive about asserting itself and permitted a passage of time and events that brought needless ill will and a troubling erosion in its moral authority, which makes the World Bank board’s mishandling of Paul Wolfowitz’s departure the Outrage of the Week.