Jack Welch for the president of the World Bank (updated)

autora/ice cronomy

    Ok, first of all, this post is both in English (1st part) and Croatian (2nd) (Added on Saturday) For my Croatian readers if you don’t want to read in english just scroll down and read in croatian. I decided to do it this way because I want to put my 2 cents about the WB and Wolfowitz and more about the issue beyond the artificially created scandal, not just write about the news. I don’t think Bozo the Clown is really the right choice for what is primarily a management crisis. A good place to follow the latest developments in the news and blogs together is Sphere website. Later, I write in Croatian to explain a bit more and broaden the news about the World Bank & Wolfowitz case, as the Croatian media coverage about it is lacking any detail or plain dumb. So the context of both is different.

    Jack Welch was in Zagreb, Croatia this week at the Adris Business Forum, the largest such forum in South-Eastern Europe, giving his usual pep talk and spreading management wisdom among “new” and eager Croatian managers. Tough luck if you don’t speak Croatian (or Serbian & Bosnian I guess) as all the coverage of the event is in Croatian, I didn’t find anything in English. There are some pictures you can check out (if you care that much). Among the bits of wisdom he “handed out” is telling the audience they are in “big shit” after he asked them if they think they can get support from banks for their ideas and the response was negative. The causation can run both ways here I guess.

    Now, that got me thinking what I wanted to say about WB case and why Mr. Welch should run it, if only for a year. I know, it’s a far fetched idea in some way, it won’t happen, we need someone to fight poverty, to know something about it, to be liked, to be a diplomat (Tony Blair maybe) and the entrenched bureaucratic interests within the Bank would raise hell to prevent another tough manager to come in. But exactly because of that, Welch should step in and “clean the house” for its own sake. In my view, this whole ouster of Wolfowitz from the WB is politically motivated by the staff (that tried to ambush him) and the board to get rid of a strong minded, if not always pleasant, manager, that threatened their interests. I take the WSJ‘s view here, not FT’s.

    Furthermore, the odium towards the “architect of the Iraq war” and as someone coming from the Bush administration, was obvious. Yes, it “was about” the stain on governance that Wolfowitz conduct in the matter of Shaha Riza left, about the Bank’s credibility and its ability to raise funds in the future. But, in the end, the board – composed of representatives from donor nations – exonerated him and acknowledged that he acted “ethically and in good faith.” So what was the point of the whole thing? Mr. Wolfowitz did ask to recuse himself from all matters regarding the the staff member Shaha Riza, but after that the Ethics Committee “ordered him” to dictate the terms of Riza’s compensation for leaving the bank so it can use it against him later. It does seem like an ambush, doesn’t it? The flap with Ms. Riza, not techincally of Mr. Wolfowitz making, was overblown and in the end used to oust the president. Graciously, they allowed him to resign without any condemnation of him behavior. Now, the WB board admits that “a number of mistakes were made by a number of individuals in handling the matter under consideration” so a review of procedures is necessary and hopefully coming. Timeline of the political lynch, from WSJ, can be found at the bottom.

    Well, now after the “victory” they admit there were serious procedural mistakes and the staff internal interests were exposed (“dirty laundry was aired” as David Wessel puts it) it should also be acknowledged the internal system and operations should be fixed and cleaned, and for good. Hey, they brought it on themselves by making a “5th degree” out of this flap. Lack of transparency and murky procedures in similar cases (the case of Mr. Scholar reported by Bret Stephens), inner bickering and bureaucratic interests, have all been exposed, in aggregate undermining the credibility of the Bank far more than Mr. Wolfowitz’s “controversy.” As the Economist states, another war of attrition is out of the question, especially now when the donors have to “put out” for the coming fiscal year. So, let’s fix the management crisis and clean the place up. Polish its image now by getting rid of more than just the president, he is not the cause of Bank’s woes. Economists there should know that, they study cause and effect of poverty and foreign aid, respectively, every day. In the immediate term the priority should be to clean the World Bank’s image and fix its current credibility. Get the gears going again by “letting go” some of the 8,600 not motivated (or not properly so) staffers, others that are in a conflict of interest situation, and others that are plagued by corruption allegations. Mr. Wolfowitz in fact was the one that put emphasis on the anti-corruption campaign, including the staff members at the Bank as well. I am sure that is not the majority of staff at the WB, but they still didn’t like it and wanted to turn it against him. Maybe they just took too strongly after prof. Joseph Stiglitz’s, previously the chief economist at the WB, proclivity to accuse people of corruption. (He accused an outstanding economist and individual Stanley Fischer, then at IMF, of corruption and further through his book Globalisation and its Discontents the whole IMF for lack of competence, prompting Ken Rogoff to defense.)

    That is why I think the legendary Jack Welch can do the job, in a year. He won’t loose sleep over firing some people, he does it for their own good and it would ultimately be for the greater good. Plus, he is an American that President Bush can pick and thus keep with the tradition. He is also not political as far as I know, so political dogfighting can be avoided. After that one year of management and organizational clean-up, have a transparent process of electing the president, based on merit, as Ken Rogoff says. A reformed management structure and properly functioning and credible World Bank is an asset to the developed world in the fight against poverty. This one now is a laughable “asset” in the eyes of countries that can get the funding from capital markets or even China. If the World Bank is to be the champion of the West in the war on poverty, U.S. won’t take its money elsewhere, because it needs to strengthen the institution in the face of coming competition for aid. But, just the money won’t do much good. Ashraf Ghani says for The Economist “The bank has a set rhythm and who masters it, runs the bank.” Unless that working rhythm and house culture, of which the current management and staff is the master, is changed don’t expect Bank’s woes to end soon enough. That is my 2 cents. 😉 Now, for my Croatian readers…


    Drugi dio malo na Hrvatskom. Prvo sam na engleskom pisao kako ja mislim bi trebalo očistiti i vratiti bar malo sjaja Svjetskoj Banci. Prvo sam htio htio pregledati po našim medijima što se piše i kako se piše o ovome. U Srijedu je Večernjakov WashingtonRocks (Bojan Klima) pisao o trenutnim događanjima u SB. Ostalo, nije baš puno, čini se da je Jutarnji jedini napisao više i imao konstantnu seriju članaka. Pohvalno, pošto se ne radi o vijestima u Hrvatskoj. No naravno, ja ću kritizirati. Samo zato što je Jutarnji jedini koji je pisao više o tom “skandalu” ne znači da je i pisao ispravno. Čak štoviše, monopol obično umanjuje vrijednost usluge. 😉

    “Promaklo” se stranim medijima pa kako ne bi našim, poznatim po šlampavom izvještavanju ili prepisivanju od Hine, što se to sve dogodilo. Kao što Jutarnji prenosi a ne slaže se sa time, WSJ ispravno kaže da se NE radi o Wolfowitzovoj etici već pikiranje na određene događaje kako bi se stvorio skandal i uklonilo nepoželjnog predsjednika, što od Europskih zemalja a što od zaposlenika Svjetske banke. U članku 13. Trav. Jutarnji prenosi da je Wolfowitz”premještaj Rize dogovorio kako bi izbjegao sukob interesa te da je za to dobio dopuštenje Odbora izvršnih direktora, direktora etičkog odbora te direktora ljudskih resursa. No preksinoć se ispričao.” Prvo, ništa nije dogovoreno, a predsjednik se ispričao tek za nevjerovanje svojim instinktima, vjerovao je da neće biti problema pošto mu je Etički Odbor dao zeleno svijetlo, iako se tome protivio, da riješi pitanje promocije Shaha Rize. Riza je bila u Svjetskoj Banci 8 godina i bila je na listi za promociju i prije nego je gosp. Wolfowitz postavljen za predsjednika. Taj isti dan, 13.4. Svjetska Banka (nadalje SB) je pustila u javnost dokument u “slučaj” Wolfowitzove etičnosti. Na ovim stranicama SBe možete pročitati citate iz dokumenta kao i dobiti čitav dokument (i druge ako vas baš zanima, sumnjam da će netko to čitati u sitne sate). No citati bi trebali biti dovoljni za sagledati stvar sa bolje i činjenično ispravnije prespektive, za razliku od šlampave Jutarnjeg Lista.

     Za razliku od novinara Jutarnjeg Viktora Vresnika koji slijepo optužuje i danas piše: “Kao više nego odličan povod zahtjevima za njegovu smjenu …. poslužila je afera koja je izbila nakon što je netko od više rangiranih službenika Banke, navodno anonimnim pismom, upozorio direktore institucije da je predsjednik Banke zabrljao koristeći osobni utjecaj, autoritet koji mu daje predsjednička pozicija i svoje odlične veze čvrsto ukorijenjenog washingtonskog političkog insajdera kako bi intimnoj prijateljici osigurao ogromnu financijsku povišicu. To je u razvijenom svijetu dovoljan razlog za ostavku.”

    Gosp. Wolfowiz je tražio prvo i prvenstveno da se ispriča ili povuče (pravni termin je recuse, a ja Hrvatsku riječ nisam pronašao) iz svih poslovanja i bavljenja vezana sa njegovom djevojkom Shaha Rizom, pošto predstavlja konflikt interesa. Citiram odvjetnika SB Robert Danino u to vrijeme “Prvo, htio bi priznati da je gosp. Wolfowitz objavio Odboru, kroz vas, da ima postojeću vezu sa zaposlenicom Banke i da on predlože rješavanje konflikta interesa, vezano uz Kadrovsko Pravilo 3.01, Paragraf 4.02, povlačenjem iz svih osobnih i profesionalnih kontakata vezanih uz člana kadra.” (zaposlenicu Banke Shahu Rizu) Da je ostalo na ovome čitave priče ne bi ni bilo. No naravno, Odbro za Etiku je rekao da ipak postoji, unatoč otovorenom priznanju, konflikt interesa i odredio da se gospođica Riza mora ukloniti iz Banke. Ok, pošteno. No, pošto nije njena krivica što mora prisilno napustiti Banku i tako “dobiti udarac na njenu karijeru” i pošto je već bila na listi za promociju, SB ju je morala kompenzirati za “ometanje” karijere”. 27.7.2005 Odbor za Etiku je posalo memo Wolfowitzu sa instrukcijama kako riješiti problem. Lijepo i detaljno su prikazani koraci i riješenja koje je Odbor za Etiku komunicirao Wolfowitzu (PW). Predsjednik se protivio, no dao upute uredu za ljudske resurse što napraviti, a odgovorio je da “još jednom želim ponoviti duboko nezadovoljstvo sa čitavim načinom rješavanja situacije koja je trebala biti riješena sa mojim povlačenjem iz nje.”

    Odbor za Etiku je 24.10.2005 poslao memo Wolfowitzu da potvrdi “rezoluciju konflikta interesa u skladu sa smjernicama Odbora 27.7.” A u studenom 2005 Odbor se još jednom zahvaljuje Wolfowitzu za “otvoreni i konstruktivan dijalog” kojim je riješen teški problem. Sve pokazuje da nema problema, nema etičkih dilema i nepravilnosti. Čak kad su i Veljači 2006. procurili neki dokumenti preko emaila “John Smitha”, Odbor za Etiku ih je pregledao i NIJE pronašao nikakvih etičkih nepravilnosti za daljne razmatranje. Uostalo, kronologiju događaja možete i sami pratiti na stranicama Banke, kao i na dnu posta. Više od godinu dana je sve to stajalo zaboravljeno i nitkome važno. Osim, izgleda, onima koji su jednostavno htjeli ukloniti predsjednika smatrajući da su oni po nečemu vlasnici i upravitelji Banke i čekali pravu priliku za to. Nije im se svidjela njegova volja da se bori protiv korupcije u siromašnim zemljama, ali i u Banci i njenim projektima. A ništa slično se nije pojavilo (još) sa trenutnim direktorom gosp. Scholar koji ima ljubavnicu u Banci i time konflikt interesa. Isto tako, problem se nije pojavio sa podpredsjednikom Shengmang Zhang (za vrijeme James Wolfensohna) čija žena je ubrzano napredovala radeći u Banci. Hmmmm…

    Čista politička farsa, sa potpuno neutemeljenim optužbama koje bi pale na prvi dan suđenja, čak i na Hrvatskom sudu. I nakon svega ovoga, kad je cilj postignut i “omraženi neokonzervativac” je dao ostavku, što kaže Svijetska Banka? Pa ništa! Nije bilo nikakvih etičkih nepravilnosti, time odbacujući sve optužbe i nalaze komiteta koji je vršio istragu. Zahvaljuju se Wolfowitzu na njegovim uslugama i postignućima u Banci, prvenstveno oštrim mjerama protiv korupcije. “Najgore” što kažu u posljednjoj Izjavi je da je “počinjen broj grešaka.” Najveća ironija u svemu je da je Wolfowitz forsiran na ostavku zbog moguće “ljage” koju je cijela afera ostavila na najmoćniju instituciju u borbi protiv svijetskog siromaštva. No upravo su određene grupe zaposlenika i direktora Banke stvorile aferu daleko nakon što je mogući konflikt interesa riješen i to sa odobrenjem Odbora za Etiku. I sad, imamo prozor u instituciju i sav njen prljavi veš kako Wall Street Journal kaže (video link). Oni koji su stvorili od ovoga primarnu vijest u svijetu u posljednjih tjedana su kriv za “loše i nepošteno svijetlo” bačeno na SB, ne Paul Wolfowitz koji se samo branio od smiješnih optužbi koje su sjedile u ladicama više od godinu dana i čekale prigodu za coup d’etat. Što je javnost dobila je pravu sliku dijelova institucije Svijetske Banke, kako funkcioniraju, i koji su prioriteti. Ništa negativnog ili obečašćujećeg o Paul Wolfowitzu kako bi nas mediji, pogotovo Hrvatski, htjeli uvijeriti.


Timeline – Wolfowitz Controversy – WSJ


June 1 — Paul Wolfowitz becomes World Bank president.

July 21 — After weeks of negotiations, Mr. Wolfowitz proposes to recuse himself for “any influence over personnel decisions” involving friend Shaha Riza, but that she remain at World Bank and that he not be barred from “professional contact.”

July 27 — World Bank Board’s Ethics Committee suggests Ms. Riza “be relocated to a position beyond (potential) supervising influence of Mr. Wolfowitz and, because she would be out of running for a higher position inside the Bank, be given an “in situ promotion.”

Aug. 8 — Ethics Committee tells Mr. Wolfowitz to have Ms. Riza work out details with Bank human-resources vice president, Xavier Coll.

Aug. 11 — Mr. Wolfowitz sends Mr. Coll a letter — not seen by executive directors, Ethics Committee or general counsel — dictating terms of Ms. Riza’s current and future pay. Adds: “I wish to reiterate [my] deep unhappiness with the whole way of dealing with a situation that I still believe…should have been resolved by my recusal.”

Aug. 12 — Mr. Wolfowitz tells ethics committee that Ms. Riza will be detailed outside the bank and he withdraws his proposal for recusal.

Aug. 29 — Ethics Committee challenges Mr. Wolfowitz’s characterizations, noting that it had advised Ms. Riza could remain at the Bank as long as he doesn’t supervise her and there is “no routine professional contact.” But says outcome acceptable.

Oct. 25 — Ethics Committee tells executive directors that conflict of interest has been resolved.


Jan. 31 and Feb. 15 — An employee complains to Ethics Committee about Ms. Riza’s pay, among other things.

Feb. 28 — Ehtics Committee tells Mr. Wolfowitz of complaint, says it finds no “ethical issues.”


March 28 — Whistleblower outfit, Government Accountability Project, provides Washington Post with details of Ms. Riza’s salary. The Post quotes Wolfowitz spokesman Kevin Kellems: “All arrangements concerning Shaha Riza were made at the direction of the bank’s board of directors.”

April 6 — World Bank executive directors form ad hoc committee to investigate facts.

April 9 — Mr. Wolfowitz writes to staff: “I…acted on the advice of the [World Bank] Board’s Ethics Committee to work out an agreement that balanced the interests of the institution and the rights of the staff member in an exceptional and unprecedented situation.”

April 9 — Ms. Riza writes1 ad hoc board committee that she has been “victimized for agreeing to an arrangement that I have objected to and that I did not believe from the outset was in my best interest.”

April 12 — World Bank Staff Association calls2 on Mr. Wolfowitz to resign. Mr. Wolfowitz says3 he told Ethics Committee’s advice “to promote and relocate” Ms. Riza. “In hindsight, I wish I had trusted my original instincts and kept myself out of the negotiations. I made a mistake, for which I am sorry.”

April 13 — Executive directors release4 documents, vow to “move expeditiously to reach a conclusion on possible actions.”

April 14 — Spring meetings of World Bank begin in Washington.

April 20 — After an extended closed-door meeting, the board orders the ad hoc committee to discuss Mr. Wolfowitz’s fate.

April 24 — In a closed-door meeting of the board, several European members of the World Bank revolt against a U.S.-backed proposal on the bank’s family-planning policy, illuminating how tensions over Mr. Wolfowitz and his appointees are spilling into the institution’s functioning.

April 30 — Mr. Wolfowitz decries what he calls a “smear campaign” against him and tells a special bank panel that he acted in good faith in securing a promotion and pay raise for Ms. Riza. He reiterates that he has no plans to resign.

May 7 — A World Bank panel says Mr. Wolfowitz ran afoul of ethics rules. Kevin Kellems5, one of Mr. Wolfowitz’s key aides, resigns his post, saying turmoil at the bank has made it difficult for him to help advance the institution’s mission.

May 9 — Bank directors give Mr. Wolfowitz until May 11 to respond to the group’s draft report.

May 14: Executive directors of the World Bank issue final report.

May 15: Bank begins deliberations on his fate.

May 16: Is it reported that Wolfowitz has begun negotiations6 on his departure.

Source: World Bank documents, WSJ reporting

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