Many of Washington’s 2,600 technocrats working at the International Monetary Fund do not regard Dominique Strauss-Kahn’s lavish lifestyle as an anomaly.
Privately they admire it, recognizing it as a description of their own standard of living. They call their many unseen perks “golden handshakes.” At the World Bank, Inter-American Development Bank, the African Development Bank, and at the IMF, you find extravagantly paid men and women who masquerade as anti-poverty fighters for the Third World. As one World Bank vice president said upon his resignation: “Poverty reduction is the last thing on most World Bank bureaucrats’ minds.”
These global institutions are supposed to act as non-profits, but big salaries and big perks rule as the norm. And you’re paying for them: as the largest single contributor, American taxpayers pick up the tab.
By now everyone knows about DSK’s extravagant $420,000 employment agreement that included an additional $73,000 for living expenses — a provision explained thusly by the IMF: “To enable you to maintain … a scale of living appropriate to your position.” Most of the non-profit development world remained silent when the Fund announced a $250,000 “golden parachute” severance for the indicted managing director.
A PJM survey found that a common annual compensation package for senior management at the anti-poverty banks exceeds $500,000 — tax-free. World Bank President Robert Zoellick currently receives $441,980 in base salary and $284,500 in other benefits. Strauss-Kahn’s deputy, John Lipsky, receives $384,000 in base salary plus “living allowances.”
Some may argue as the IMF did that global financial leaders — even from governmental organizations — should be highly compensated. But the IMF and World Bank payments for their executives are three times the annual salary for U.S. Federal Reserve Chairman Ben Bernanke, and four times the salary of America’s Federal Reserve governors: Bernanke’s gross annual salary is set at $199,700; his governors receive $179,000.
The global banks’ stratospheric governmental salaries are not limited to chief executives. Ten of Zoellick’s deputies receive tax-free base pay of $321,00 to $347,000, plus enjoy an additional $210,000 in benefits. Even mid-level World Bank employees earn well into six digits: the average salary for a professional manager is $181,000, plus $97,000 in benefits. A senior adviser receives on average $238,000 plus $127,000 in benefits. A vice president receives $286,000 plus $153,000 in benefits.
The biggest hidden benefits are the off-the-book perks called “living allowances.” These perks can nearly double a stated salary. Of the 2,600 IMF and 10,000 World Bank full-time employees, all receive some form of supplemental living allowances in addition to their base pay. These include home leave grants, dependent allowances, travel perks, and education “grants” for their children to attend private schools. In addition, they offer generous pensions and health insurance policies.
According to a U.S. General Accounting Office study, the average cost for these additional perks added $197,300 per employee cost beyond their base pay in 1994 dollars.
The public was awed by Strauss-Kahn’s ability to secure 24-hour standby first class travel, but he has a lot of company at the IMF. In fiscal year 2010 the IMF chalked up $169 million alone in airline fees. If every single employee traveled, that would be $61,000 in travel costs per employee. By 2013 the IMF estimates their air travel budget will escalate to $191 million.
As the United States is the single biggest contributor to the IMF and the World Bank, these salaries and benefits are paid for by the U.S. taxpayers. In 2009, when the IMF increased its lending capacity to $750 billion, the U.S. increased its contributions by $100 billion. In the final U.S. fiscal year budget, while there was a 2% across the board cut in federal spending, international expenditures to the banks rose 4%.
Congress has been passive. Although the U.S. executive directors to the Bank and the IMF are nominated by the president and confirmed by the Senate, the Senate has not insisted on bringing salaries in line with U.S. norms.
U.S. Senator Mike Johanns (R-NB), the ranking Republican member on a Senate subcommittee overseeing international finance, said U.S. policymakers should at the very least review U.S. contributions to the IMF in light of the allegations surrounding Dominque Strauss-Kahn.
A 1977 U.S. law does mandate that the president “take all appropriate actions to keep the compensation for IMF employees at a level comparable to the compensation of both private business and the U.S. government in comparable positions.” The law has never been enforced.
Complaints about lavish payrolls have been present for a long time. In 1990 when Martin Irwin resigned as a vice president from the World Bank, he wrote a scathing paper titled “Banking on Poverty.” Prominent among the deficiencies he identified was that Bank employees were fixated on personal salaries, perks, and benefits, and little on the fate of the poverty-stricken:
The institution is plagued by massive overstaffing, bureaucratic gridlock, and staff preoccupation with further salary and benefit hikes. Public proclamations to the contrary, poverty reduction is the last thing on most World Bank bureaucrats’ minds.
1995 was the last year the GAO examined the IMF compensation structure. They concluded:
They exceed the pay rates in the public sector in all surveyed markets, as well as in the United Nations.
Last year, the U.S. Senate Foreign Relations Committee slammed all of the development banks, describing them as “international bureaucracies answerable to no one government or constituency.”
In 2007, blogger Sameer Dossani reminisced about growing up in a World Bank household — both parents worked for the World Bank:
As a child I heard snippets of conversation about West African travels and poverty around the world. I also picked up talk of “golden handshakes” and benefits such as my own private school education being subsidized by the Bank.
Noted Sen. Johanns:
All of this controversy, it makes you wonder if they are minding the store over there.