I'm copy/pasting his complete article here, so good a read it makes. It may be not the done thing, such an unauthorized grab of someone else's work but if need be, I'll take it down and link to the original.
"National's "mixed ownership model" - the innocuous-sounding vehicle tasked with making the party's unpopular privatisation agenda more appetising - paradoxically may yet end up making the partial sell-offs of state corporations even less palatable to voters.
The model was supposed to take the political heat out of the issue by hocking off minority shareholdings in a clutch of major energy-related state-owned enterprises, rather than selling them holus-bolus.
This week, the plan instead raised the temperature of the privatisation debate and, worse, pitted supposed allies against one another.
Too late, the warning bells should be ringing in the Beehive.
The model may turn out to be one of those seductive ideas which seem to offer all the answers, but end up stumbling under the weight of their own contradictions and unforeseen consequences.
This week's very public stoush between the Maori Party and National over the retention of a longstanding treaty clause, is the first such sign of trouble ahead.
This problem should have been foreseen. Cabinet papers released under the Official Information Act last year indicate the tricky question of whether the catch-all treaty protection clause in the 25-year-old State Owned Enterprises Act should be reinserted into replacement legislation which will cover the partially privatised companies looks to have been on Treasury officials' radar.
But someone forgot to tell the Maori Party.
What the wrangling over the treaty clause has exposed is the inherent flaw in the mixed ownership model.
Its seeming beauty when unveiled by the Prime Minister just over 12 months ago was that it offered something to appease everyone.
The new state companies would benefit from greater commercial and market discipline through having private shareholders.
The share floats would be safe havens for small investors. The sale proceeds would make a sizeable contribution to the capital spending budget of a severely cash-strapped Government.
All this and the State would still retain control through its majority 51% shareholding.
The latter factor - state control - is the most crucial in political terms. It will prove to be a myth.
It is a myth that John Key and Bill English were naturally keen to perpetuate in the run-up to last November's election, however.
Ownership and control are not the same thing. Mr Key, in particular, has confused the two, perhaps deliberately.
Moreover, the rights of minority shareholders will have to be taken into account. Above all, commercial imperatives will drive these entities to the exclusion of everything else.
These restructured companies - the electricity generators Mighty River Power, Meridian Energy and Genesis, and, the state coal company Solid Energy - will not be accountable to the Prime Minister or Minister of Finance.
They will be expected to behave like any other privately listed company and be answerable to the stock exchange.
It might be argued that traditional 100% state-owned enterprises have been equally profit-driven and rarely, if ever, behave in anything but a corporate fashion.
The difference is that the latter are still potentially subject to ministerial direction and have been over such things as dividend policy and through the drawing up of their guiding statements of corporate intent.
The SOEs are also obliged to be "socially responsible", although that has rarely been tested.
The dispute over the treaty clause has Labour predicting that the social responsibility provision will also not feature either when the exact working detail of the mixed ownership model is unveiled in conjunction with the float of Mighty River Power, the first candidate for partial sale.
Labour is probably correct. The Treasury has consistently and insistently warned that any trade-offs to Maori or mechanisms to maintain Crown control will depress the share price and thus reduce the receipts from the share floats.
An inadvertently released draft report setting out the terms for consultation with Maori is also instructive as to the Government's thinking. It declares that ministers' powers with respect to the mixed ownership model "will not be as great" as they have under the SOE Act.
The intention was to move the restructured corporations into a framework that applies to listed companies and create a "greater commercial focus to their operations".
These statements were exorcised from the report's final public version, however.
Clearly, the Government does not want the public to know yet that these entities are going to be very different creatures from the standard SOE.
The Treasury's advice, meanwhile, notes that introducing other shareholders into a company "fundamentally changes" governance arrangements be it in board appointments, voting rights or company planning.
The blueprint for the likely structure and corporate governance of these new companies is Air New Zealand, in which the Crown has a 74% shareholding.
It was only as the result of pressure from the Auditor-general in 2003 that Air New Zealand was made subject to Parliamentary scrutiny, though only in minimal form.
The report covering the last such select committee review of the airline in 2009 had no matters to report and stretched to all of five lines.
Apart from the Government having to agree to the board's choice of its chairman, Air New Zealand is free to run itself as it sees fit.
It is conceivable that National could seek to ensure tighter control of the new state companies through nominating directors and placing veto rights over appointments and introducing specific Kiwishare provisions, for example, to limit foreign ownership.
The public, however, is still under the mistaken impression that these companies will still very much be like SOEs, albeit with some private shareholders on board.
Mr Key and Mr English will have some explaining to do when the public discovers otherwise. However, they will ride out the storm on the back of what they (fingers crossed) expect to be highly successful floats.
All this begs one question: Apart from retaining the dividend flow, what will be the point in the Government maintaining ownership?
National's political opponents will see this model as proof of what they have long been arguing - that the partial privatisations are a halfway house to full sale and that was always National's intention.
It will be a difficult charge for National to rebut.
John Armstrong is The New Zealand Herald political correspondent
9 comments:
lets get over the politicing and scaremongering. In fact what Armstrong is saying - selling off the SOE's will provide greater public scrutiny. Here's a brilliant example of why we should sell them off: http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10445493
Paranormal
Robert
No observations of your own then?
Adam - yes and no. I've been on the marae all day and wanted to leave you something to chew on. I'll revisit the theme as soon as I've posted on the day.
It's this aspect, para and Adam, that I find most revealing, both in it's implications for controlling the direction of the 'enterprises' and where it shows how key is hiding vital aspects of the dealings from New Zealanders:
"All this and the State would still retain control through its majority 51% shareholding.
The latter factor - state control - is the most crucial in political terms. It will prove to be a myth.
It is a myth that John Key and Bill English were naturally keen to perpetuate in the run-up to last November's election, however.
Ownership and control are not the same thing. Mr Key, in particular, has confused the two, perhaps deliberately.
Moreover, the rights of minority shareholders will have to be taken into account. Above all, commercial imperatives will drive these entities to the exclusion of everything else."
RG I don't think you understand how the SOE model currently operates. The driving imperative is currently the creation of profit. What is missing under the SOE model is the balance that private ownership provides - shareholders with a real stake in the business. That is why SOE's do things with impunity that private companies just would not do.
Paranormal
Paranormal ...what you fail to grasp regardless of your justification to sell the assets, the majority of NZers by a country mile in every poll taken DONT want to SELL our ASSETS ....
Why should I pay more for an assets like electricity some Rich P...K overseas to be richer. These assets to be sold are which my descendants sacrificed themsleves, worked hard (and paid for) to build up in NZ for their decendants benifit, not a very rich Chinnese/ German/ American investor .
If the economy is in trouble there are other answers to balance the budget including a more fairer taxation system ...cut spending by no increase in payment to higher salaries earnings .....
I am sure others could add more ...such as Keys not spending as much as he does on his personal body guards!!!
Good leadership is all about leading by example ..........
pualinem - what you and all those other sheeple have failed to grasp is this is the result of government overspending on things we think we want, to buy their continued hold on the reigns of power.
My family members also worked on building the dams. it helped the family to survive the 30's. But get real. Like any asset in hard times it may need to be sold. I've used the analogy before - we've lived beyond our means and like any family that spends motre than they earn, they have to sell the house to pay the debt. Really simple.
All the sheeple don't want to sell the supposed assets but they still want the gravy train of government largesse that knows no end. That's the gravy train that's costing them the assets - du'oh. You should also gain an understanding of how business assets are valued for sale. Those rich pricks you rail against, the ones that have provided your standard of living over the past 40 years, are paying the value of future earnings.
As for the 'fairer' tax system you want - good grief there is no way we can get the bludgers to pay a fairer share of their cost. A small minority, and getting smaller, already pay the majority of tax in NZ.
Whilst I think the government should not be involved in running commercial tv stations, telecommunications, post offices and a whole lot of other SOE businesses for the reasons above, I think it is sad they're selling the assets so they can afford to keep more families on welfare.
Paranormal
Paranormal our economic problems started when Douglas introduced neoliberalism into our economy.
It was then taken up with gusto by the Richardson/ National party an the rich became very rich who were experts at dodging paying tax ( re there hypocritical ranting re capital gains tax) and yes the rank and file workers end up paying up the bulk of the countries tax re a fairer tax system with capital gains introduced ..
Our rich minority pay bugger all tax per income and have done so since Douglas came to power .......... Our debt went into mega levels under Douglas/?Richardson later Cullen/ English...why the debt because our neo-liberalism economy was based solely on greed and love of greed......
In the days of Keynesian economy pre 1984 we had a very equilibrium society and our country prospered and we always OWNED ALL our asses ts ..we only got into debt when Birch/Muldoon panicked they wouldn't be re-elected under our then FPP system....so they BROUGHT votes to assure re-election,
Paranormal give me a break with the total utter bullshit re welfare society causing our economic problems ...
Keys and his friends are the biggest welfare suckers of all ... they just call it by another name such as been enterprising/helping the economy and any other PC name to give they are really doing treating the taxpayers as suckers to enjoy a lifestyle of choice etc
Paulinem - what colour is the sky in your world? You really need to stop spreading propoganda and have a look at what really happened.
The country was broke in 1984. Fact. It was so bad, on opening the books once they got into Power the Lange Dougals government thought they would only be there for one term . Muldoon (and those before him) had seriously buggered the economy. Proof positive that your Keynsian paradise just didn't have any clothes.
If Douglas hadn't started sorting things out the IMF would have come in, as they did in England in the 1970's, and in it wouldn't have been pretty. Douglas set the country up for the next 20 years of prosperity. Only to be ruined by 9 years of Liabour and spud bolger/winston first before that. Have you ever wondered why we are in such a bad state after the best trading conditions in a generation? And spare me your occupy "it's the bankers fault" crap. The bankers didn't spend the money like drunken sailors on poor outcomes.
We've only had two very short periods of reform under Douglas and Richardson with decades of overspending to buy power by both the blue and red teams, that is again coming home to roost now.
It is clearly living beyond our means as a country that has caused our fiscal malaise with the government just taking too big a share of the productive economy nd then squandering it on buying power. Welfare for families and student loans are just two examples amongst many.
As for tax payers - you've been listening to too much propoganda again. From memory 70% of tax is paid by the top 10% of earners.
The welfare society has caused more than just our economic problems. The founder of the welfare society in New Zealand must be spinning in his grave to see how politicians have debased a noble imperative to trap people in poverty simply for political power.
Paranormal
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