Zoellick replaces Wolfowitz: What the World Bank’s Board Must Do to Get Ready

Robert Zoellick is the one and only candidate for World Bank President. Beginning on June 20, the Bank’s Board of Executive Directors must take some important actions to prepare for a successful five years, and build on the Wolfowitz Scandal to move forward and restore credibility in its own role and behavior.

June 18’s Irish Times puts it well

“However, the Bank’s board must not treat Mr Zoellick’s presidency as a done deal. He must convince them that he has a firm understanding of what it seeks to do and of its full potential in alleviating poverty. The Bank hopes to raise $30 billion over the next three years to further its aims. Mr Zoellick must demonstrate that the Bank deserves that funding and will distribute it without fear or favour.”

Well said, but it’s $39 billion for IDA, as well as a stronger role for the Bank in Middle Income Countries, and greater clarity about what IFC’s role is vis-a-vis other financing sources for the private sector.

The Board has to do three things.  

Deliberate and Credible Due Diligence on Robert Zoellick

The Board must assess Robert Zoellick as the putative leader and most senior manager of the World Bank Group. He is used to being a spokesman for American interests, and has successfully done so. Did his old jobs prepare him to build consensus and gather stakeholders in development together for action?

The Board must ask:
• For a time when he changed his original position to one that he originally had ruled out?
• How he encourages dissent and draw from it to establish a position from which to move forward?
• A time when he reacted well to criticism about his own behavior? Badly, and what he learned from that? Examples of what he does with feedback?

Zoellick has, after all, never successfully run a large organization. His gap in experience is not nearly as obvious a flaw as it was for his failed predecessor, Paul Wolfowitz; however, unlike Robert McNamara, or Tom Clausen, or Lew Preston, who led large and complicated companies (Ford, Bank of America, JP Morgan), Zoellick has not run one himself. In this way, he resembles Jim Wolfensohn, who ran a small organization (his own investment bank), but took a while to find out how to get the World Bank to do what needed doing.

Unlike Wolfensohn, who convened an advisory board of leaders of large global companies, Zoellick is of an age, ambition and background that he would benefit from having a management coach to help him understand the impact he is having on colleagues and reports. This is relatively common at the World Bank, and by having one himself, Zoellick would learn to control those urges to take charge and curtly dismiss work that does not persuade him. There are other ways to get the Bank to raise its game: as Robin Cleveland and Paul Wolfowitz showed, rude, curt or detached reactions are not among them.

Having taken his measure beyond his resume of successes (and good tries, like Doha), the Board should then set out the rules for a small group of senior Executive Directors to meet with Robert Zoellick annually to take stock of his achievements, and agree on the results he will bring them in the coming year. Rigor in regular assessments of his progress and results would have three benefits. First, it would let the Board send early feedback, or warning, about any management quirks or lapses in judgment or behavior they felt were not serving him, or the Bank. That is the duty of any competent, well-performing Board. Second, it would send a signal that even he, the Bank’s president, wanted regular, organized feedback about his performance. Third, the Board’s compact with Zoellick would set a fine, explicit example for his direct reports, and help him agree with them the contribution they will make to his success, and the Bank’s.

Credible Action on Corporate Governance

The Board must deal before July 1 with lingering corporate governance issues that are now painfully obvious to anyone who has watched the Bank, particularly over the last three months. The Ad Hoc Committee restored some confidence in the Board’s competence and thoroughness, after the embarrassment of having given Wolfowitz a pass in the first place, ignored the deal he cut for his lover, and blew off–twice–the whistleblower who put the inconvenient facts before them in early 2006.

The Board must ask the Governors to agree that the selection of Zoellick’s successor must be an international, merit-based search. All other international organizations, bar the IMF and the other MDBs, so this. This opacity must be fixed. A proposal has been on the table since 2000. Agree on it now, before Zoellick takes office, so it is never an issue again. If Japan, forgetting it got the ADB presidency about a year ago, is the obstacle, the United States needs to weigh in with Tokyo now.

The Board must agree it will have a role only in the section of the senior staff who report to it, namely the General Counsel, the Corporate Secretary, the Auditor-General, and the Director of Institutional Integrity (who should not report to the President), and the executive heads of IFC and MIGA.

Everyone else is ‘staff’ and the Board should hold the Bob Zoellick responsible for making the right choices, seeing that they do their jobs well. He must see that the senior management of the Bank Group is as diverse and inclusive as the stakeholders of the Bank expect. His success at selecting and managing them, and their contribution to the Bank’s performance, would be part of the Board’s annual discussion with him of how he is doing. Past experience has shown that the Board’s involvement, e.g., in the appointment of Suzanne Folsom, opposed by 23 of 24 Board members, has had no positive effect. Even their being informed about all Director (level GI) appointments adds no value to the selection process, when Bank management has followed it.

Ana Palacio’s paper on the history of Board involvement in management selection displays a sad lack of awareness that there is much to be said for avoiding conflicts of interest, and that there needs to be a line between Management and the Board. The kinds of social friendliness (Ad Melkert insisting that PW and Shaha join the US ED and his wife at Melkert’s house for dinner) suggest that things have gotten not only ineffective, but also too cozy. The Bank’s shareholders deserve better.

To complete the review of Bank governance the Board must ask the Governors at this year’s Annual Meetings to commission an external review of Board processes and effectiveness, including whether a full-time, resident Board has a relevant, efficient and cost-effective oversight and policy-setting function in the 21st Century. No other global corporation devotes three floors at its headquarters, and over $100 million annually in direct costs, to appointees who see their job as to play “gotcha” with management and staff alike, 24/7. A non-resident Board might have brought the Wolfowitz scandal to an early finish by senior members convening urgently to tell him to go, to go quickly, and to go quietly.

See that Management Clears the President’s Inbox for July 1

The Wolfowitz scandal has left a lot of management business unfinished. The Board should ask the Senior Management Team to prove their mettle by resolving matters that came to light during the Ad Hoc Committee’s work, and the in-depth press and blogger coverage that surrounded it.

The matters include:
• Finishing the Fox leak investigation or halting it as no longer useful and necessary. Poor young Mr. Kravitz is sitting waiting for people to call.
• Establishing whether some documents given to the Ad Hoc Committee were forgeries, and dealing with anyone who had the audacity to try to deceive the Board in this way.
• Making sure that any cronies who are trying to burrow in are judged according to normal Bank recruitment standards, including educational and experience qualifications.
• Ensuring that the groundwork is in place in Human Resources to investigate Shaha Riza’s vacation job with SAIC, which prima facie is a violation of the Staff Rules for which she should be fired, not allowed to return to the Bank at a grade for which she was not cleared. Ensure that her file is complete with her accounts of what she did at the State Department and Foundation for the Future. Have HR audit her results statements–there is nothing in her letter on external service that says the Bank can’t do this.
• Establishing clear results agreements for Juan-Jose Daboub and Ana Palacio, whose behavior and contribution has been less than satisfactory. Make it clear to Mr. Zoellick that Mr. Daboub’s dissembling role in health and reproductive rights, and in climate change, will not be repeated. Ask for country directors’ accounts of Mr. Daboub’s meetings with Bank clients, and the damage control needed after his plane took off. On the other hand, Ms. Palacio reports to the Board, and it is up to them to determine themselves whether she is so tainted that her value to them, and to the Bank corporately, is too compromised that a replacement should be found after an international, merit-based search.
• Tell the Audit Committee to stop behaving like children and order that Internal Audit resume its audit of INT, which Paul Wolfowitz ordered stopped when it got close to some contracts Suzanne Rich Folsom did not want to expose to the cleansing of sunlight. In this regard, the new United States Executive Director might rely more on the Board’s own records of what happened before his recent arrival, and place less stock in the Volcker investigation to cure all that ails INT.
• Ask Human Resources to review all appointments made by Messrs. Daboub and Kellums, and Mmes Palacio and Folsom, to ensure their compliance with Bank norms on qualifications, grade levels and salaries. These managers appear to have been given bad advice by their HR Manager. Management should correct any irregularities.

Only if the Board take action in these three areas can they say they have set the stage for Robert Zoellick to arrive July 1 and begin the process of rebuilding the World Bank on a new, sound ethical platform.

7 thoughts on “Zoellick replaces Wolfowitz: What the World Bank’s Board Must Do to Get Ready

  1. If only someone could post these 3 recommendations on the Bank internal staff site for each and everyone ( from the EDs to the Office Assistants) to see, thus pressuring the Board to do what need to be done for the good of the Bank, its shareholders, its beneficiaries and its staff.

  2. This is useful to do list. One comment — the Director General of the Independent Evaluation Group (currently Vinod Thomas) currently reports to and is independently appointed by the Board. This should continue (along with INT reporting independently to the Board).

  3. The Board and the new president should also take a look at the Smithsonian Institution governance report which was prepared by an outside panel of experts. It is excellent and there are parallels to the World Banks situation. They have analyzed the situation, proposed remedies including how th Board is organized and conducts its business, and they have made decisive leadership changes to restore integrity. And they did it promptly, enabling the organization to move forward.

  4. this is a very interesting piece but refers obliquely to some information that bank outsiders don’t have — who is Mr. Kravitz and can someone post Ana Palacio’s paper that is referenced?

  5. Mr. Kravis (sorry about spelling) is the bright young lawyer at Williams & Connolly who’s doing the staff work for the investigation of the leaks to Fox News of board documents. The disclosure in early January of raw minutes of the Board’s displeased and critical discussion of Karl Jackson and Robin Cleveland’s paper on strategy was embarrassing at the time. The minutes showed the extent of Board discontent with Team Wolfowitz’s strategic vision and execution capacity. It seems to have been done to embarrass some executive directors into supporting the GAC paper, which the leaker did not realize they were going to do anyway. The leak investigation may no longer be relevant now that the winds of transparency and accountabilty are blowing briskly through 1818 H Street NW. The paper on legal history is a Board document so someone else can post it. As for what Ms. Palacio has been up to recently, someone inside is going to have to post her latest announcement, sent ‘on behalf of’ the senior management team and the Dean of the Board. You’d think they could speak for themselves..

  6. … to whom it may concern (wb) pertaining to its global financial affairs – this is big business (!) governing the financial needs of a world at large – on a nation-by-nation basis – seeing to all of these responsibilities would take a great thinking cap – in the leadership capacity – which is what I though we had in the leadership abilities of our current (wb) president (mr paul d wolfowitz) something must have gone over my head in all of this – but then I just live in this world – I did not make it … let us pick ourselves up and move forward – let us take this one mishap and let it become our stepping stone to a greater tomorrow – and it can happen if we faint not according to our bibical teachings … pray that I have shared some essentials – rsvp please via email – a note of thanks – sincerely – ms e m garrison (usa) pine bluff arkansas … cc:emg/wl

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