Thursday, June 22, 2006

Right on cue...

And right on cue, we have Katherine Rich, complaining about Labour "cronyism" in appointments to SOE boards. Except that the facts don't actually support her argument; just three of 43 appointments in the last year have been Labour Party members. Rich's response? She "admitted she had not closely looked at Mr Mallard's appointments yet", but said that it wasn't just about mallard's appointments anyway. Because why should little things like facts get in the way of a good smear?


The whole point of a company board is that it's a forum for the *owners* of a company to interact with and supervise the *managers*.

The owners of an SOE are the state - so I don't see why their non-exec appointees shouldn't be people whose thinking is aligned with the party that currently governs.

The trouble to me is that this doesn't happen enough, so SOEs go their own sweet way and do things that turn out to be politically unacceptable - paying broadcasters huge salaries or failing to backup the Auckland power supply are a few examples.

Posted by Rich : 6/22/2006 01:06:00 PM

Two things:

1) It is more sensble to look at the record over the term, not just the most recent year.

2) If one includes non SOEs, there has been IIRC well over 40 appointemts of known party activists

Personally the issue for me isn't appointing one or two people known to the Minister to the board. That is normal. It is more what the directors survey showed that very good and competent directors are blacklisted because they may have disagreed with the Govt on other issues.

Posted by David Farrar : 6/22/2006 01:54:00 PM

DPF: When those "very good and competant directors" are rabid, market-darwinist idealogues who insist on preparing the SOE they are supposed to be overseeing for sale, in blatant disregard of government policy on the issue, then I think its entirely appropriate not to (re)appoint them. Directors are there to run things on behalf of owners - not on behalf of the BRT or ACT party.

Icehawk: oh, it's good that they're being scrutinised. What bugs me is Rich's attitude that the actual facts matter so little that she won't even bother to look before issuing a press release.

Posted by Idiot/Savant : 6/22/2006 02:30:00 PM

The thing is, these organisations are SOEs rather than private companies for a reason. Typically this is a structural "market failure" - they provide a service which is a natural monopoly or is essential to the nation.

Electrical power is a good example - there is (as we have just seen) no commercial imperative for a power company to provide adequate service reliability - they could switch the power off for two hours every teatime and still make a profit.

There are basically three ways to deal with this: direct state control, regulation or an artificial market. The trouble with the SOE model is that it aims at state *ownership* without state *control* - which is pointless and worse (IMHO) than a regulated private monopoly. It's also very bad politics, because the government winds up taking for electoral responsibility for things that it has no control over.

A sensible centre-left government would have reformed SOEs and the whole output-based system of public accounting years ago, rather than continuing with a failed right-wing experiment (that very few other countries have adopted, BTW).

Posted by Rich : 6/23/2006 11:10:00 AM