RE: Wolfowitz and Riza at the Wold Bank

Facts of the case are that Wolfowitz and Riza were together every step of the way. They were in a relationship before he joined the Wold Bank. Universal Banking Laws suggest that people in high ranking positions cannot have their relatives or spouses in the same company as this increases the risk to the organisation. Wolfowitz wanted to have his cake and eat it too In the Board Room and in the Bedroom.

He decided to come out clean in the beginning and disclose of his relationship with Ms Riza, just to see what the board would suggest. The board suggested that he transfer Ms Riza to a position outside his influence.
Wolfowitz directed the VP - HR to transfer Ms Riza, increase her salary to an amount above and beyond those of others employees and even seeing to it that the terms of her position be changed after he was no longer with the organisation (Planning and Intent). This was highly unethical for Wolfowitz to do, for HR to comply and for Ms Riza to accept. This is an ethical offence only in countries that have Laws against them and the Resources to enforce them. But in the REAL world and thats how most Corporate Big wigs and Government officials Roll......

Ref:http://articles.timesofindia.indiatimes.com/2007-04-14/us/27870120_1_shaha-riza-bank-employees-riza-affair http://www.dailymail.co.uk/news/article-454960/White-House-defends-Wolfowitz-He-ousted.html http://gulfnews.com/business/banking/world-bank-promises-quick-action-on-wolfowitz-scandal-1.176879

RE: Wolfowitz and Riza at the Wold Bank

Law is not about who did what, but its about assigning Blame. If a law was broken somebody needed to be blamed and punished for it. When Wolfowitz realised that going to the board as a cover did not work, he insisted that any and all problems were the result of his colleagues' actions and not his own. This was just another brick in the wall for Shareholders and investors alike who have seen the organisation as a whole having a history of refusing responsibility for its own disastrous policies and projects. Wolfowitz had only one rule in this Rule book - Never get Caught.

World Bank -Background
The World Bank is a multi-national organization. It is based in Washington, was formed in 1944 as a way to help the reconstruction of the Post-World War II Europe and, according to its website is: “made up of two unique development institutions owned by 187 member countries-the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).” The World Bank's activities are focused on development countries in fields such as human development such as education, health, agriculture and rural development such as irrigation, rural services, environmental protection such as pollution reduction, establishing and enforcing regulations), infrastructure such as roads, urban regeneration, electricity, and anti-corruption, legal institutions development. The IBRD and IDA provide loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the economy. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and the implementation of new regulations to limit pollution. The activities also include investment in the private sector and providing insurance respectively. The World Bank Group consists of: “1) the International Bank for Reconstruction and Development (IBRD), established in 1945, which provides debt financing on the basis of sovereign guarantees, 2) The International Finance Corporation (IFC), established in 1956, which provides various forms of financing without sovereign guarantees, primarily to the private sector, 3) The International Development Association (IDA), established in 1960, which provides concessional financing (interest-free loans or grants), usually with sovereign guarantees, 4) The International Center for Settlement of Investment Disputes(ICSID), established in 1966, which works with governments to reduce investment risk, and 5) the Multilateral Investment Guarantee (MIGA), established in 1988, which provides insurance against certain types of risk, including political risk, aw primarily to the private sector.”

Source:
1- www.worldbank.org/ - accessed October 23, 2011 – about us
2- www.worldbank.org/ - accessed October 23, 2011 – Operation

The World Bank
The first ethical issues I see is that there was fraternization in which I think that they handled it correctly by taking it to the board. I strongly agree with the boards decision regarding her position given the circumstances. I do think that Wolfowitz might have been doing the right thing, but he ultimately handled it in the wrong way. The letter he sent to the Vice President of Human Resources sounding very demanding and threatning which might have just been a misuse of words, but given his position he should know how to address these things in a much more professional manner. I think the Board was too lenient to him and maybe he should have been given an ultimatum such as; take the suggestions and move her to another branch or have him draft some resignation papers. I say this because fraternization would occur if one of these things are not completed. The other issue I see is that he demanded that HR find her another position, in which she now make about $60,000 more than at the World Bank. That should not have been something for the World Bank to even think about considering. She's a grown adult and can learn to deal with her own responsibilities.

RE: Wolfowitz Ethics

As far as what ethics were involved here, there were some to some extent in which Wolfowitz did not think the basic of ethics which involved fairness and moral standards on the other hand he did let the bank know of his relationship in hopes of being upfront with his intentions. Furthermore Wolfowitz was obviously not making the right decisions by making certain requests and or thinking about those employees who were reporting to him and that were actually being looked over as far as being promoted. Doing the right thing ethically does make a difference specially someone within his role and showing leadership by example.

In a response of Wolfowitz situation
In a written response, Wolfowitz maintained that he acted in good faith in seeking to resolve an obvious conflict of interest.The officials, who spoke on condition of anonymity because of the sensitivity of the matter, said some board members hope a strong statement of dissatisfaction would persuade the Bush administration to withdraw support for Wolfowitz. But the White House views the stakes as larger than control of the World Bank, said a senior administration official, with U.S. resolve and power on the line -- in particular the longstanding right of the United States to name the head of the institution.

Selection of Paul Wolfowitz - Was it politically motivated?
The President of the World Bank has traditionally been proposed by the President of the United States and ratified by the World Bank's Board of Governors. In March of 27, 2005, the Bush Administration recommended and Paul Wolfowitz was selected as a president of the World Bank. The selection of the Paul Wolfowitz was perhaps not challenged due do the fact that there is no need as “over 1.1 billion people around the world are in poverty and there sometimes seem to be just as many ideas, ranging from the radical to the reactionary, over what to do about this awful state of affairs” according to Farhad Manjoo the Salon staff writer. So there is a need for a new leader for the position. Wolfowitz, who is done little development work during his long career in government, and he had lots of good connections.

Source:
1- www.worldbank.org/
2- www.salon.com/

Wolfowitz
Wolfowitz acted ethically at the beginning, he was being forthright with the board regarding his relationship with Riza and was looking for guidance. Where he went astray was in his letter to Coll the VP of HR directing him to agree to some terms that would take affect after he left his current position in an attempt to protect Riza's employment at the World Bank. I understand wanting to protect someone you care about but placing demands on company employees by taking advantage of the position in the company you hold to do so is wrong.

The World Bank Situation
In this situation, Mr. Wolfowitz entered into a conflict of interest when he became the Chief Executive Officer of the bank of which his romantic interest was employed. As has been described, an attempt to resolve Wolfowitz made this conflict of interest by taking the issue to the Bank’s Ethics Committee. Many businesses, like the World Bank, have a desire to avoid conflicts of interest and specifically design guidelines, often referred to as code of ethics, to guard against unethical situations. The World Bank’s code of ethics, in fact, specifically prohibits simultaneous employment of couples if one reports to another even indirectly, which uses removal of the issue as the key resolution to this type of conflict of interest. While Mr. Wolfowitz was quoted as saying, If a personal relationship presents a potential conflict of interest, I will comply with Bank policies to resolve the issue the resolution to the issue only inflamed the problem with actions that appeared to confirm Wolfowitz’s intent of unethical behavior. While the Bank’s ethics committee presented several solutions, one of which included a promotion and raise for Ms. Riza to an external position, Wolfowitz continued to be criticized because of the breadth of the deal which included a raise of over $60,000, a promotion to the U.S. State Department, and guaranteed future increases paid for by the Bank. The head of the World Bank’s ethics committee at the time stated later that he was not informed of the extent of the present and future rises built into the deal .

Ethical issue or controversy
According to the report issued by World Bank, charged Mr. Paul Wolfowitz broke bank rules of ethics and his obligation to the World Bank. The report indicated that he tried to hide the compensation and promotion package offered to Shaha Ali Riza an employee of the bank. Ms. Riza is Mr. Paul Wolfowitz companion and a bank employee in which causes conflict of interest according to the World Bank. According to the memo, dated August 11, 2005 that Mr. Paul Wolfowitz wrote to Xavier Coll, the Bank Vice president of Human Resources suggested: “I now direct you to agree to a proposal which includes the following terms and conditions: The terms and conditions included her future at the bank when Mr. Wolfowitz was no longer heading it as well as an obligation to find her other employment. Ms. Riza now earns $193,590 per year at a non-profit organization, following a stint at the State Department at World Bank expense. She earned $132,000 at the World Bank (a salary that was tax-free because of diplomatic status).” The key issue is that the term and conditions of the package never reviewed and approved by the World Bank’s ethics committee its chairman and/or the board of executives. Although Mr. Wolfowitz apologized, this would follow the bank chair wherever he goes and politically weaken his position.

Source:
1- New York Times report May 4, 2007

The World Bank Situation
Per textbook, based on the twelve categories that were developed and used in exchange, the magazine of the B.Y.U School of Business, the ethical dilemma that Mr.Wolfowitz encountered during his time as the head of the world bank is buying influence or engaging in conflict of interest. His personal relationship with an executive at the bank, Sasha Riza is clearly unacceptable. For instance, Ms.Riza received a $47,300 (35.5%) raise (to $180,000) just months after Wolfowitz took office in 2005. The highest raise she should have received was 12%. One year later, she received a $13,590 (7.5%) raise (to $193,590), whereas she wasn't supposed to receive a raise exceeding 3.7%.

At first, Wolfowitz was trying to do the right thing by asking ethics questions regarding his relationship and her employment. But, despite the fact that the bank board advised Ms.Riza to be relocated to a position beyond Wolfowitz's influence, he demanded special terms and conditions for her future in the bank as well as an obligation to find her another job. Wolfowitz took advantage of his power by constructing an improper financing of his companion's career.

Source: http://www.whistleblower.org/program-areas/international-reform/world-bank/paul-wolfowitz-scandal

The World Bank
The ethics violation here is that Mr. Wolfowitz, abused the power that was given to him as President of the World Bank, by demanding that the VP of HR agree to the terms he proposed for the transfer and continued employment of Ms. Riza. Although Mr. Wolfowitz initially went to the board for advice on dealing with the matter at hand, and followed the advice that was given to an extent but then proceeded to abuse his absolute power.

World Bank

Multiple ethical dilemmas are present in the matter of Paul Wolfowitz and his colleague at the World Bank. First of all, Mr. Wolfowitz accepted his position (and the terms of employment that go with it) before disclosing his relationship with Ms. Riza. Ms. Riza, who already held an executive position at the time, was also in violation of this policy. Secondly, the organization showed that it condoned this ethical breach by Xavier Coll’s decision to agree to the terms of Ms. Riza’s relocation (promotion). Coll even admitted that the percentage of her salary increase exceeded the limit set by the World Bank (Coll, 2007).

All parties involved acted inappropriately, as they all knowingly operated in violation of the policies of the organization. Mr. Wolfowitz’s participation in this makes his goal of “eliminating corruption in all countries that deal with the World Bank” ring a bit insincere – not to mention, downright hypocritical. It makes the rules set by the organization appear flimsy and arbitrary, when its own leaders conduct business as though they are exempt from the rules they are meant to enforce. If the bank’s own leaders cannot conduct business without violating their own policies, one can only expect that special exceptions to their policies are made in their external affairs, as well.

1. Coll, X. (2007). Annex 13 Letter to Mr. Wijffels from Mr. Coll Dated May 2, 2007 With Attachments (2). http://siteresources.worldbank.org/NEWS/Resources/Annex13.pdf

World Bank
We all need ethics to live in an orderly world. Ethics allows us to respect other people. We have set a rule of ethics almost in every facet of life because they are very important to have a since of honesty with each other. One of the most important places to have some ethical rules is at the work place. According to “Wolfowitz ‘broke World Bank rules’” an article I found that says that a panel investigating whether or not Wolfowitz had broken the World Bank code of ethics found that “ Mr. Wolfowitz broke staff rule 3.01 on professional conduct, rule 5.02 on external service and 6.01 on pay.” Wolfowitz broke these rules the moment he used the company for his personal interest and tried to have his girlfriend gain at the expense of World Bank. The company’s set of ethics are there to make sure that everybody is loyally and honestly working together to do the best for the company. When Wolfowitz by breaking those rules he broke the trust of the company and the stock holders. I think that Wolfowitz did not have a good set of personal ethics because he should have known better. A person with little or no personal ethics may be more incline to break their company’s code of ethics because they have little regard for the company and for others. And I think that the real issue with Wolfowitz was his own ethics.
Reference
http://www.ft.com/cms/s/0/0f18fcf0-0251-11dc-ac32-000b5df10621.html#axzz1cC3vbeS

World Bank
The World Bank has a good grasp on their policies, as I do not believe that fratenization within the company is a good idea. It goes into too many ethical dilemmas, and possible legal issues down the road. The fact that Mr. Wolfowitz actually brought his relationship up to the board was ethical, and what he should do. I believe that Mr. Wolfowitz was trying to have Ms. Riza compensated for having to find another position due to their relationship, but I do not believe this was the responsibility of the world bank. It was their choice to have the relationship and they need to take responsibility for their own personal lives. By World Bank agreeing to the terms and having their resources used to solve a personal problem was completely out of line. This now poses a legal issue and presents a precedent for any of the other employees that now want to engage with relationships within the company.

RE: World Bank
I know that Brian will be traveling next week, Earl and Umer have not quite got their codes for their input. Here's my comment on the World Bank situation.

Effective governance requires clear meetings, clear documentation, and clear approvals. Mr. Wolfowitz standards had to be beyond reproach and regardless of the merits he is vulnerable now. More importantly, the tone at the top of the organization, he had worked for has lost its spokesperson. Mr. Wolfowitz has clothed himself in the robe of helping the poor, a claim that, perhaps while true, does not speak sell of a tone that has just granted a $50,000 raise to a girlfriend/employee. The issue is now whether the misstep that has attracted the attention o employees and the world, can be tolerated at the top. Bad judgment at the top is a tone that breeds cynicism and a lack of respect among employees.

Good discussion points from everyone.

World Bank
There are several factors to be studied in this case. It wont be justified to say who was right who was wrong but yes it is possible to say that what could bring what results. Some of the ethical issues in the entire case are : 1. as a senior having emotional affair with his collegue. 2. if they were dating each other even before they came to world bank all the history should have been null and void at this point. 3. using authority as a head of the world bank to promote and benifit personal relations. 4. directing HR to follow instructions even after his post is no longer active.

Now what he was doing was not wrong at all , all he wanted to do was to bring it infront of the board and say it upfront. what board did could have changed the entire decision. Board could have followed the law and could have asked for immidiate replacement and/or termination of the Riza. If not they could ask her to sign the waiver in case of any issue. Moreover , Mr. wolfowitz , after the decision of board tried to save his partner from the entire trouble. he suggested actually enforced his decision to HR and made sure that Riza was taken care of during his tanure and after his post is gone. as we can read , the women made enough benifit from the entire case. Ethically , Mr. wolfowitz did right to help riza , but he helped in him on the cost of company which was ethically wrong. Board did not suggest with ethical and legit solution of the situation due to the post of the head of the world bank. Riza used the maximum out of the oppertunity by cashing the emotional quotient on to the head of world bank. Overall , it was unethical from both parties to get in to such relation at work place. it was honest of Mr. Wolfowitz to bring it up to board. it was wrong of board to make such decision with influenced by the post of Mr. Wolfowitz. Forcing his command on HR and manouvering the situation for future of his beloved women was undoubtedly Unethica

The World Bank Situation – Response
Wolfowitz was confirmed as World Bank President in June 2005. According to a file released by the World Bank, Wolfowitz had acknowledged his association with Riza in May. The relationship allegedly threatened to violate a World Bank ethics rule against personal relationships between bank employees and their supervisors, including indirect supervision through a chain of command. Wolfowitz's position was that Riza should be allowed to keep her job at the bank if he recused himself from all personnel actions or decisions that involved her. He also noted that there was, in fact, no World Bank rule governing informal relationships. To compensate Riza for the disruption caused by the Wolfowitz ethics panel, the committee advised an in situ promotion.