India’s outsourcing sector suffered a fresh blow on Monday when the World Bank revealed it had barred Wipro Technologies – the industry’s third biggest outsourcing company by revenue – from doing business with it. The allegations against Wipro, which the bank accused of “providing improper benefits” to bank staff, come less than a week after news that the sector’s fourth largest operator, Satyam Computer Services, had been fixing its accounts in a fraud worth more than $1bn.Like the ejected pub patrons in the John Smith's commercials, I am inclined to give Wipro the benefit of the doubt. The World Bank employees who bought ADRs did sign a conflict of interest statement. Why is the World Bank now so sensitive to the slightest whiff of impropriety? This one I'll have to chalk up to its harrowing experience with its resigned former chief--Mr. Loverman himself--Paul Wolfowitz. As much as possible, it wants to avoid any rehash of that sort of thing.
The ban on Wipro sent the group’s shares tumbling 9.3 per cent to Rs228.35 amid growing concern over governance in the sector – one of the country’s showcase industries with export earnings of more than $40bn. Wipro, one of three Indian IT outsourcing companies affected by the World Bank ban, was barred in June 2007 for four years. The others included Satyam, barred in September 2008 in a case unrelated to the present scandal, and Megasoft Consultants, a smaller operator.
Wipro said the ban related to an allocation of shares in its 2000 initial public offering of American depositary receipts [ADRs--see here to know what they are] to the World Bank’s senior chief information officer and another staff member. “They directed this offer to members of their family and friends,” Wipro said.
It said the offering was done under a scheme called the “directed shares programme” in line with Securities and Exchange Commission regulations that allow the allocation of shares to employees and clients.
The World Bank staff, who bought 1,750 shares for a total of $72,000, had signed a conflict of interest statement, saying the purchase did not violate the internal policies of their employer, Wipro said. [Wipro] said its revenue from the World Bank was “insignificant”. Analysts said even if Wipro had not acted unlawfully, the purchase sent the wrong signal.
The World Bank should change its tagline from "Our dream is a world without poverty" to "No nonsense, just development - World Bank." And it should hire John Kay. That'd spice up its moribund PR efforts, I'll bet.