Public ownership does not mean public accountability

September 5th, 2008 at 10:00 am by David Farrar

From the Dom Post:

A parliamentary report has given a damning assessment of the monitoring and valuation of state-owned enterprises, describing the lack of transparency as “indefensible”.

This has prompted chief executive to offer free listings for five per cent of SOE shares so the market can enforce a higher degree of transparency and accountability.

The transparency and discipline listings would bring are an excellent reasons to have some private ownership in the . The public would actually get more and better information on the billions locked up in the .

Every year Treasury and the publish a statement of corporate intent providing information such as shareholder rates of returns. There were no statistics included in the statements in 2007 and 2008.

The committee said it had been told by officials “informally” that satisfactory portfolio performance data was not published because of a lack of resources.

The report said this implied that portfolio performance and public accountability were not considered relevant or important, respectively.

Again ownership does not translate to accountability.

The committee said it was concerned because Government documents, particularly the State-owned Enterprises Act, state the main aim of an SOE is to be as efficient and profitable as a comparable private company.

The committee said if Treasury or the CCMAU lacked the resources to do the analysis, they could put the work up for tender.

One funds research analyst said the private sector “couldn’t do a worse job even if we were drunk in charge”.

A possibility that can’t be ruled out :-)

The most recent financial statements value the Crown’s interest in the 18 SOEs at $23.5 billion at June 30, 2007, the equivalent of 40 per cent of the $59 billion market capitalisation of the New Zealand sharemarket at June 2008.

Issues like this are not sexy but can be vitally important.

Tags: , , ,

17 Responses to “Public ownership does not mean public accountability”

  1. Grant Michael McKenna (1,152 comments) says:

    The secret agenda is revealed! Reject those who seek accountability! Refuse the calls of those who seek transparency!
    Deny the cry for good governance! Rally around Our Dear Leader!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  2. insider (990 comments) says:

    WHat partial floats would also do is make it much much harder for meddling ministers to use SOEs to push political agendas as they would have to deal with stroppy banks, pension funds and investment companie etc and their assembled influence. It might mean that some of the directors would be far more qualified and independent of govt too.

    That said Weldon and the NZX hardly covered themselves in glory in standing up over the Govt’s dealings with Air NZ and AIA over the years.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  3. Joker (40 comments) says:

    As I mentioned elsewhere. During the recent power crisis Mallard bowled in to the Meridien offices and told them that they had to hold back generation the idea behind this was a purely political one, if things really got bad this reserve generation could be used to keep peoples lights on.

    This is all well and good but Meridien had supply contracts they had to honour and due to the Ministers meddling they now had to purchase energy from their competitors at sky high spot rates in order to service their clients.

    The word is this policy was losing the company millions every day.

    That was our money being tossed away on a political whim. Greater transperancy indeed.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  4. PhilBest (5,112 comments) says:

    “…..Every year Treasury and the CCMAU publish a statement of corporate intent providing information such as shareholder rates of returns. There were no statistics included in the statements in 2007 and 2008…….”

    DPF:

    “…Issues like this are not sexy but can be vitally important…..”

    Well put, DPF.

    Rodney Hide and Murray McCully, among others, have been banging on about this for a year or two. But while these issues are “not sexy”, surely if our media was truly any sort of “public watchdog”, the government would not get away with it? This is just too akin to Soviet Russia, all us Proles need to know is that everything is in good hands, whether it is Uncle Joe or Aunty Helen.

    To extend the analysis, any Private Health operator KNOWS what any given health intervention costs, otherwise they would not know how much to charge their customers. But it is the long-established norm in the Public system, that NO-ONE IS TO KNOW what anything costs, especially not the taxpayer/voter. Why is this acceptable? Why have honest efforts by administrations in the past to actually work out this information, been the subject of vicious smearing by the news media?

    If the taxpayer/voter KNEW, for example, that getting health interventions done in the Private sector was going to cost HALF or less than the Public sector, well, why would we not want them to know that?

    Money being sucked out of the economy by government and then spent wastefully and inefficiently, is actually the means of Socialism’s own self-destruction; it is just a pity that so much long-term damage is done to a nation before the final crash comes; but if the Russkies today are anything to go by, denial can be so total that the cycle of self-damage can never be broken out of. The more Socialist the nation is, the quicker things get worse. It is the fate of NZ, Britain, Canada, Sweden, etc, to be HALF socialised; so the economic self-damage is not so stark as in North Korea, and it is more difficult to awaken people to the real causes of their plight; especially as the media are willing accomplices in the damage.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  5. barry (1,317 comments) says:

    Youre right – its important.

    This sector of the economy is living proof that the arguements all those funny people put up for “the government cant run companies – so they should all be sold”

    Telecom (the profits of which since they were sold equate to the total student loan debt – and most of these profits have gone overseas) could have been run just as well as Contact or anyother of the SOE’s. There was absolutely no need at all to sell all those companies and suffer the consequent losses – both finacially and socially.

    Why National want to sell everything is beyond me. Dont worry Im no left wing supporter and as a country we desperately need to get rid of labour, but if National would only just forget this stupid aspect of their programme they would fly into power

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  6. berend (1,599 comments) says:

    DPF: Issues like this are not sexy but can be vitally important.

    I’m so relieved to know that John Key won’t change a single thing here either.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  7. PhilBest (5,112 comments) says:

    # Grant Michael McKenna (346) Add karma Subtract karma +4 Says:
    September 5th, 2008 at 10:20 am

    “The secret agenda is revealed! Reject those who seek accountability! Refuse the calls of those who seek transparency!
    Deny the cry for good governance! Rally around Our Dear Leader!”

    Actually, although that deserves a laugh for its humour, it is too true of the way our media has and does act on these issues (see my comments about “Health” above); so I feel just as much like crying or throwing up.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  8. PhilBest (5,112 comments) says:

    # berend (178) Add karma Subtract karma +0 Says:
    September 5th, 2008 at 10:46 am

    DPF: Issues like this are not sexy but can be vitally important.

    “I’m so relieved to know that John Key won’t change a single thing here either.”

    AAAARGH, stop it, stop it, there we go again, I’m torn between laughing, crying, and throwing up……

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  9. emmess (1,333 comments) says:

    >>“Public ownership does not mean public accountability”

    That ‘s the understatement of the century
    In fact public ownership removes all public accountablility
    SOE’s main justification simply becomes being used a proganda arms of the government
    Whether it the faux nationalism of kiwibank, or the real secret agenda of the unquestioning internationalism behind the climate change con being pushed by the energy companies

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  10. Paul Walker (41 comments) says:

    DPF, the correct title for your post would be “Public ownership does not mean public ownership”. The important point here is that without control you don’t have ownership. As Oliver Wendell Holmes Jr. put it,

    “But what are the rights of ownership? They are substantially the same as those incident to possession. Within the limits prescribed by policy, the owner is allowed to exercise his natural powers over the subject-matter uninterfered with, and is more or less protected in excluding other people from such interference. The owner is allowed to exclude all, and is accountable to no one.” (The Common Law, p193, (1963 edn.))

    Clearly the “public” does not have the rights Holmes refers to. The government has these rights. Following Grossman and Hart (“The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration”, ‘Journal of Political Economy’, 94:691-719) economist’s tend to define the owner of an asset as the one who has residual rights of control over the asset; that is whoever can determine what is done with the asset, how it is used, by whom it is used, when they can use it etc – the public can do none of these thing with a public asset. Hence the public doesn’t have ownership.

    The public have no ownership and thus there is no accountability to them.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  11. gd (2,286 comments) says:

    One of the major reasons for the non preformance of the State enterprises is CCMAUs appointment of incompetent directors. Rather than pick the most qualified and experienced they fall for the Socialists insistence on having a ‘quota” on each Board.

    So you get a bunch of well meaning people who cant understand the reports that are presented to them and have no concept of even the most basis principles of good corproate governance and frankly would have difficulty managing Mannys Music Store.

    Yet they get to prescide over very large balance sheets.

    I have seen CCMAU turn down extremely good candidates for no other reason than they didnt fit the quota criteria for that Board.

    Until we get enough young professionally educated directors onto these Board so they can also gain the experience under the watchful eyes of the older wiser prodessionally educated directors we will not see optinum results.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  12. dave strings (608 comments) says:

    >
    >>if our media was truly any sort of “public watchdog”

    Are they meant to be?

    I have the problem of their profit motive banging away in my head, reminding me that ANY sex scandal will shift politics, even PetersGate, off the front page. In fact, it doesn’t need to be a scandal really; two girls kissing in public is enough, for the simple reason that people will buy the paper to see what’s going on, increasing readership, which increases the ratecard, which increases profit!

    The days of moguls, with axes to grind, running the media in a way that enabled them to plaster the front page with a ‘sexless’ issue like SOEs not dealing impartially with their customers are well over. Sad, but true. These days the public watchdogs are right here on the internet. In NZ, this – KikiBlog – is the most read and perhaps the leader in (almost) impartially raising all the issues and promoting debate. Maybe we should all club together into a tontine and put some 200 inch plasma displays up to show the blog in all the major cities!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  13. insider (990 comments) says:

    No Joker, what Meridian did was gamble the farm on it raining and instead of managing conservatively, potentially put the whole electricity sector at risk by running their fuel supplies down. They were sending energy north in May when lakes were less than 60% of average and it was obvious there were issues. They didn’t cover their risk and are now winging that they ended up paying spot market prices. Have they never heard of hedging? It’s not as if we haven’t had dry years so they can’t claim it was unprecedented.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  14. kiwipolemicist (393 comments) says:

    Increasing accountability would be great, but it would be akin to trying to keep the Titanic afloat, because governments are incapable of running businesses.

    http://kiwipolemicist.wordpress.com/2008/08/29/what-the-government-does-with-your-money-is-none-of-your-business-yeah-right/
    http://kiwipolemicist.wordpress.com/2008/08/21/waikato-hospital-puts-a-band-aid-on-their-inefficiencies/

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  15. stephen (4,063 comments) says:

    good point dave strings. Witness the ‘editor’s picks’ on stuff – “Keira or Ange – who would you kiss?” FFS

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  16. PhilBest (5,112 comments) says:

    You have a point Dave Strings, but it is the political biases of the journalists themselves that is the problem, and NZ is not big enough for the likes of Murdoch to ensure that the market is covered on both the Left and the Right. Even then, it is apparently a frustrating exercise to actually get some staff who do not just trot out lefty spin at the bidding of the likes of Helen Clark.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  17. OECD rank 22 kiwi (2,786 comments) says:

    Isn’t it fun to spend other peoples money?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote

Leave a Reply

You must be logged in to post a comment.