The number that triggered the attacks on World Bank president Paul Wolfowitz was $193,590 (Rs79.3 lakh).
The figure represented the salary he endorsed for his girlfriend, communications advisor Shaha Riza. Even though Wolfowitz did try to recuse himself from decisions about Riza, colleagues have turned against him so violently that both his anti-corruption campaign and his career at the bank are now on hold. On Thursday, the European Parliament called for his resignation.
Some observers will tell you the Wolfowitz flap is about Democrats and their allies in the blue states—including the one known as the UK—trying to bring down another neocon friend of US President George W. Bush.
This fracas is also, just as the bank staff say, about company pay.
A closer look at bank pay suggests the trouble here isn’t that Riza gets a “girlfriend” salary, a mysterious wage not quite tethered to market reality. It is that World Bank staffers also do—and almost all without spending a minute alone with the bank’s embattled president.
The World Bank has an administrative budget of $1 billion a year. It employs more than 10,000 people. Thousands of others consult.
It doesn’t publish current salaries. But according to the 2006 annual report, a senior professional, or “G” level employee, starts at $92,230 and can go up to $167,860, a little more than the $165,200 for a member of the 110th Congress. A manager, or “H” level staffer, can make $226,650. This was the category for which Riza was on the shortlist.
Some 1,000 employees are in the “H” range. So the portrayal of Riza as someone receiving unheard-of compensation is inaccurate.
The next salary level, “I”, includes directors or senior advisors, who earn as much as $268,560. There are more than 200 of these, and they supervise many others. Wolfowitz stirred ire by bringing two allies into the bank at salaries of, reportedly, $240,000 and $250,000. He may have taken a misstep in the execution, but the “I” data suggest those pay levels weren’t out of line.
Move up a tier to the 25 or so professionals, the “J” level employees, or vice-presidents. Top salary: $289,540. Senior vice-presidents and managing directors who have made it to the “K” class received as much as $311,000. The president’s pay, when you include expenses, lands in the mid-$400,000 range.
Life for locals
In other words, Wolfowitz is paid like the US president, a foundation head, or a not-very-good securities analyst.
Income alone hardly tells this compensation story. When the bank was established in 1944, non-American employees were exempted from US income and social security levies. Some three-quarters of the bank’s employees aren’t American. Those who are, also get a break on federal taxes—they are worse off than the non-Americans, but better off than those outside the bank.
Compare that with life for the locals. Allowing for a $375,000, 30-year fixed-rate mortgage, a spouse, and real-estate taxes of $4,000 a year, a non-bank American resident of Washington would need to earn $350,000 to net $225,000, the top for “H” level bank employees. A married New Yorker would need $364,000. And the tax break isn’t all. The World Bank budget has historically included private-school tuition reimbursements, though it is cutting back.
Then there is the bank’s surreal job security. Of the six regional vice-presidents, four joined before 1981. Gold-plated pensions complete this picture—tax-free again. What’s more, almost 1,000 retired employees have consulting agreements with the bank, sometimes lavish, on top of the pension.
Try to justify
Staffers might try to justify their compensation by arguing that they are more akin to Wall Streeters than agriculture department paper pushers. They could note that the administrative budget comes out of profits from the bank’s investments, so what the bank pays is its own business.
But these arguments don’t hold. Most World Bank jobs are closer to non-profit than for-profit work—the kind of jobs that would pay five figures.
While the bank is backed by callable capital from its member governments, those nations in turn are backed by the goodwill of the citizen taxpayers. If the world’s taxpayers evaluated the bank’s salaries, they would deem them askew. The only reason the World Bank can compensate as it does is that it falls between jurisdictions. If no one is looking at World Bank pay, no one is monitoring other aspects of the bank’s work sufficiently either.
Hence the ferocity of the criticism—this crowd of loyal lifers thinks that by training the spotlight on Wolfowitz’s perks, or Riza’s, they can keep it off their own. Hence the critics’ attacks on Suzanne Rich Folsom, the head of the bank’s Department of Institutional Integrity. Folsom, an ethics lawyer, is in charge of investigating corruption in bank projects abroad and looking into possible wrongdoing by staff at home.
Maybe the staff’s salaries should come down. Maybe the quality of their work needs to improve. Maybe crooks and laggards should leave and others should be paid still more. Maybe the bank staff should start paying US taxes. Maybe the whole gray area between for-profit and not-for-profit needs adjustment. In any case, the old corporate rule holds yet again: When salaries seem odd, something is out of balance—just not always in the way you think.