The 24-member board, in a statement released in the early morning, expressed its "great concern" over the matter and instructed the ad hoc group to take up the matter "immediately." Officials believed the ad hoc group — whose representatives were not identified — would convene later on Friday.
Wolfowitz, who has said he make a mistake and has apologized, said he "welcomes the decision of the board to move forward and resolve this very important issue." He also said he "looks forward to implementing the recommendations of the board."
It remained unclear what action, if any, would ultimately be taken in the matter. Many of the bank's employees, aid groups and some Democratic politicians want Wolfowitz to resign.
Also on Friday, the Pentagon said that a previously undisclosed investigation by its inspector general determined that while he served as deputy secretary of defense, Wolfowitz had personally recommended that companion Shaha Riza be awarded a 2003 contract to study ways to set up a new government in Iraq. The 2005 investigation concluded that the action by Wolfowitz, a chief architect of the Iraq campaign, did not violate ethics regulations.
Wolfowitz's nearly two-year tenure at the World Bank, which fights global poverty, has been marked by trouble. The current controversy — that he arranged a promotion and generous compensation for Riza, a bank employee whom he has dated — is calling into question his leadership and has put his job in jeopardy.
The World Bank board said Friday that the situation should be dealt with "urgently, effectively and in an orderly manner." The ad hoc group will make recommendations to the board's executive directors. No timetable was provided.
The board asked the ad hoc group to look into Wolfowitz's handling of Riza's compensation package with regard to bank rules and "conflict of interest, ethical, reputational and other relevant standards."
Other issues were identified that need to be addressed, including "the various public communications made by the bank on the matter and issues around employment contracts made in the Office of the President," the board said. That was viewed as a reference to salaries paid to Wolfowitz's close advisers, Kevin Kellems and Robin Cleveland. Each are paid more than $200,000 a year — compensation that also has irked some bank staff.
The United States — the bank's largest shareholder — is standing by Wolfowitz.
"As we've said before, the president has confidence in Paul Wolfowitz," White House spokeswoman Dana Perino said Thursday in a fresh statement of support. She also said it is appropriate to let the board's review process take place.
Although they have not said so publicly, some European governments would like to see Wolfowitz go but do not want to provoke a fight with the United States.
Under an informal agreement, the United States names the head of the 185-nation World Bank and the Europeans choose the leader of its sister institution, the International Monetary Fund. The controversy over Wolfowitz could bring this informal arrangement into question.
Documents released last week showed that Wolfowitz had a direct hand in securing a State Department job for Riza in September 2005 that pays her $193,590. Before the transfer, Riza was earning close to $133,000 as a communications adviser in the bank's Middle East department.
Riza remains on the World Bank's payroll even though she left the State Department job in 2006 and now works for Foundation for the Future, an international organization that gets some money from the department. "I have now been victimized" for agreeing to the arrangement, Riza said in a memo to the bank last week.
The bank's staff association wants Wolfowitz to resign, saying his actions have tarnished the reputation of the bank.
Critics fear the controversy will hobble efforts — now under way — to come up with close to $30 billion in funding for a World Bank program that provides financial help to poor countries.
The Defense Department inspector general's 2005 review concerning Wolfowitz and an Iraq contract was opened after there were allegations he had used his office for the personal gain of a private friend, which would have been an ethics violation.
Science Applications International Corp., a large defense contractor, said this week that it was directed to hire Riza, who at the time worked as a communications adviser in the bank's Middle East Department. Under the contract, which ran from April 25 to May 31, 2003, Riza spent a month studying ways to help set up a new government in Iraq and was paid expenses but no salary while in the country.
Whitman said the probe "found Ms. Riza was uniquely qualified" for the work, ordered at a chaotic time as officials rushed to try to install democracy and good governance to replace the ousted authoritarian regime of Saddam Hussein.