Rodney Hide attempts to protect Telecom from democracy

This week Act leader Rodney Hide demonstrated how the Regulatory Responsibility Bill and any of its bastard offspring in terms of 'regulatory principles' are really about protecting big capital from democracy.

Hide rode to Telecom's defence, attacking the decision of Communications Minister Steven Joyce to fund the roll-out of high-speed broadband in rural areas by redirecting tens of millions of dollars Telecom received from its rivals under the Telecommunications Services Obligations*. Hide moaned this impaired Telecom's property rights. In order words regulation was going to cost them money.

"Mr Hide, who is also Regulatory Reform Minister, branded the plans a breach of National's own regulations policy and a "sad indictment" on the Government. He released a strongly-worded letter to Telecommunications Minister Steven Joyce that signals one of the biggest fallouts between ACT and National since the parties agreed to govern together."

"I'm very displeased and the reason I'm displeased is not only is it poor law-making, it also sends a signal to any investors into New Zealand that their investment isn't safe, and therefore it makes it tougher to get the sort of infrastructure and the sort of investment we need to grow the economy," he said.

Essentially Rodney is demanding that when government is considering legislation or regulation the squeals of needs of business and property holders should be treated as a special case. Bullshit. Large corporations are currently able to use the same mechanisms available to the rest of us to voice their concerns, such as writing to Ministers and making submissions to select committees. In fact there is already good evidence large business are already able to have a disproportionate voice through these channels, in particular in terms of access to Ministers.

An analyst at the multinational banker J P Morgan, Laurent Horrat went straight for the hyperbole when he declared that Telecom is becoming "a worst case scenario worldwide for the effect of government regulation on an incumbent telco". "I understand the policy objectives, but if you take the list of things Telecom is faced with, there aren't any incumbent telcos facing such an extensive list." Horrant also captured the pure sense of entitlement transnational corporates believe they deserve. "Typically in regulatory discussion between government and incumbent telcos there tends to be a give and take. I can see a lot of the take, I can't see a lot of the give here," said Horrut.

Horrut has a horribly short memory. Telecom has been on the take ever since it was privatised,

• running down the assets of the company to pay out high dividends to overseas shareholders
• paying its CEOs ridicious salaries for their efforts to avoid regulation.
• charging high prices for slow broadband well below international standards.
• fighting and suppressing competition whenever it had the chance to occur.
• worldwide there would not be many telco's who 'had it so good' for so long. If Telecom had been regulated earlier there would not be this impression of regulation happening all at once.
  

For years representatives of the 'markets', of which Horrut is only the modern equivalent, warned any attempt to regulate Telecom in favour of telecommunications users would crash the sharemarket given that Telecom was the largest listed company (it no longer is). This is oddly reminiscent of the claims the US banks were 'too big to fail' - well if that the case then this is an excellent argument for breaking such companies up and introducing regulations to ensure nothing gets 'too big to fail' in the first place. Its also a good argument for keeping key infrastructure in public ownership.

While Hide and his cohorts love to talk about the magic of Adam Smith's 'invisible hand', in reality Smith would have been the first to demand that Telecom's monopolistic outrages be bought to an end, and thats if Smith even accepted Telecom's existence as a 'joint stock' company in the first place.

If superannuation and Kiwisaver funds of New Zealanders happen to hold significant Telecom shares this only means that financial advisors and superannuation trustees need to be held to account for making poor investment decisions. Funnily enough this is a poorly regulated area too. Its not as if they were not warned the Telecom dividend machine was likely to be switched off. In 2007 Christopher Niesche called on Telecom to stop being a company obsessed with holding back the tide of regulation at any cost and become a company seeking growth.

A key reason why a select committee recommended against the Regulatory Responsibility Bill was that it increased the litigation risks associated with adopted the principles of the LAC guidelines and the regulatory impact statement requirements into legislation. The threat of litigation from litigious corporations like Telecom and Infratil, who then might start demanding compensation for government actions in the public interest. One hopes this and Hide's clash with Joyce will demonstrate to National why they should kill the Hide/Douglas Bill when it comes back into the House. Hide admits he is yet to secure National party support for the bill.

Telecom have always attempted to blame the threat of regulation for everything. Is it a co-incidence that Telecom's market friends are screeching about regulation at the same time Telecom's XT network is also screeching to a halt? Are they attempting to create the impression the slump in the share price had nothing to do with Telecom's own incompetence at running a mobile network?

I say call their bluff. Given the extent of Telecom's pillage since privatisation, perhaps a just outcome would be leaving to go it into receivership so the core network could be bought back into public ownership for a song. Regulation of the industry could then happen without Telecom's meddling, and access to the network could be rented out to telecommunications providers on the terms set by the representatives of the people. Ok receivership is a pipe dream - but a fun one. I actually suspect Telecom are overstating the extent of their poverty in any case.

David Cunliffe as communications minister in the previous government did a great thing when he broke the cycle by ignoring Telecom's protests and unbundled the local loop. Cunliffe stood up to Telecom where his Labour predecessors in the portfolio appeared to cower at Telecom's feared wrath. Another part of breaking the cycle is to ignore the protests made on behalf of 'foreign investors' - these are exactly the kind of foreign investors which bled Telecom dry in the 1990s. Real investment is welcome, but rent seeking ideologically driven cowboys are not. One could also ask why Hide, as a government minister is effectively encouraging a capital strike of the speculators.

In the wake of the collapse of the finance institutions in the United States which started the Global Financial Crisis and the examples of multinational corporations in our own backyard attempting to bully governments at the expense of the people, it is time whether it is asked whether corporations really ought to have more influence on government than everyone else.

And to cap it all off this week the Government appointed former Telecom boss Rod Deane to undertake a review of defence spending. Was he Hide's pick, or a payoff for all those donations Deane gave the National party?

* Used to be called the Kiwishare

Greedy hypocrisy of Telecom bosses

At the same time Telecom are attempting to force their staff employed as lines engineers to become dependent contractors, a move that will more than halve their income, the company continue to defend paying multi million dollar salaries to their top executives.

To make matters worse, Telecom CEO Paul Reynolds recieved his full performance bonus despite Telecom recently announcing a 43% drop in profits. The EMPU estimate his total remuneration package for the year is $7 million. Six other top executives receive a total of $11 million to share amongst themselves.

This problem is not new, and despite the excuses has nothing to do with the recession. A 2007 survey by Sheffield of 501 chief executives* found the proportion of bosses not reaching targets rose from 28 per cent in 2006 to 43 per cent in 2007. Those who missed targets were still paid three quarters of their targeted performance pay. Its highly unlikely these same bosses were so understanding when it came to paying their own workers based on performance.

Telecom chairman Wayne Boyd said Reynolds got the maximum bonus for his outstanding first full year in which he had negotiated the company's obligations with the government. It says a lot that Telecom believe Paul Reynolds deserves $7 million for his work attempting to influence the Government. It says a lot because this demonstrates how skewed the priorities of the company have been ever since it was privatised - protect the monopoly, or something as close to the monopoly is the goal - not providing decent telecommunications services.

As John Minto says, Telecom have been a boil on the country's backside for almost 20 years since it was privatised by Labour and National. Minto also notes the company employs over 90 lawyers and suggests this monster legal team is there to protect Telecom's near monopoly.

Telecom's relations with government have sometimes resembled Elizabethan style patronage, where monopolies were given out to loyal courtiers, who undertook a little price fixing to ensure they were enriched at public expense. This is an close description of the privatisation of the company, yet most people have no problems describing Elizabethan examples as political corruption. Telecom would have loved the 16th century - even if there were no phones.

Quite by accident, I did a google search in New Zealand with the words outstanding and CEO. Funninly enough its a rather boring platitute hosted on a lot of CEOs. Its just false flattery, in the mode of 'Oh, your majesty' (note capitalisation is a political issue).

Just this week, a telecommunications watchdog, the Independent Oversight Group found that Telecom had breached its operational seperation undertakings by offering wholesale discount deals to its customers. The IOG called these breaches 'non-trivial', which is another way of saying these breaches were serious. So Telecom is up to its old tricks, fighting and suppressing competition whenever it has the chance to occur. Why am I thinking about the prospects of a 'dissolution of the monasteries' right now? If that's going a bit far, at least make operational separation a genuine separation and break the company up.

It is also up to its old tricks in its relations with its employees. Even National MPs are recommending the engineers refuse to sign the nonsense contracts offered by Telecom

Telecom are not offering their engineers a genuine 'business opportunity' as they are setting all the terms of the contract. Work will only be offered on Telecom's terms - these workers will be nothing like real independent contractors, and will lose the overtime payments they receive now. Telecom are offering no redundancy, yet the engineers are being given the 'opportunity' to front up with $60,000 for their own vans and equipment. The income of the lines engineers will drop by up to 66%, which of course is the reason why Telecom is attempting to pull this stunt. Please support the engineers and their families - in this situation they have little option but to go on strike.

Instead of gifting their new CEO all sorts of travel allowances when Paul Reynolds shifted from the UK, why didn't Telecom ask him to bring his own plane?

* Source: Dominion Post (6/3/2008), "Bosses collect despite targets"

Telecom Alternative Annual Report now available

From the Council of Trade Unions. I will update the post when a weblink to the PDF document becomes available. Given Telecom released their annual report this week, the following should also be of interest to investors.
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Telecom Alternative Annual Report 2009

Performance highlights:

• OECD leader! – Top 5 highest prices, but amongst lowest reinvestment in infrastructure.
• Terminator! – Commerce Commission says Telecom’s termination charges are twice as high as they should be.
• Walk the talk! – Dragging its feet over opening up the network to competition.
• Top gear! – New mobile network interfered with rival’s signals before launch because of lack of filters.
• Roger that! – Perennial nominee in Roger Award for Worst Transnational Corporation – Winner 2004 and 2007!
• Roaming! – Call centres offshored.

Employee relations:

• Chorus of disapproval – Telecom lines division Chorus hangs engineers out to dry.
• Vision problem – Telecom turning blind eye to Visionstream’s ugly dependent contractor model.
• BYO – If you want a job, bring your own van and equipment – decent income not included.
• Our most important asset – You’d think Telecom would have more concern for skills shortage workers essential to its business, not allow its contractor to drive down their earnings, put them at risk of bankruptcy, and maybe lose them from the industry altogether.

Customer service:

• Own goal – It’s Telecom’s cables that won’t get fixed if engineers have to cut corners to try and squeeze a living out of the job. Guess who else loses? That’s right – you, the customer.

Support the Telecom line engineers – Call 0900 STAND TALL to make a $10 donation to the support fund, or call 0800 1 UNION for more information on how you can help.

Telecom pirate leader resigns

Rod Emmerson's cartoon in this mornings Herald nicely summed up my thoughts on the resignation of Telecom CEO Theresa Gatting. Even TV3 voiced one criticism of Gatting in their coverage the other night - Gatting was too focused on shareholder returns. TV3 didn't make the connection, but "shareholder returns" is a key reason few New Zealanders have decent broadband. Long John Silver would be proud.

It appears some Telecom executives are still shaking in their insecure little new right boots that the Government stepped in and finally did some long overdue regulating.

Quite frankly unbundling the local loop is hardly heavy regulation, particularly if you look at the number of other countries who have also introduced the policy (and most did so many years ago).

If the local right wing loonies and the board of Telecom are going to overreact to a moderate policy like unbundling, then perhaps we should have gone the whole hong and renationalised the local loop instead. My point is, and I think this is a worthwhile lesson for the left - the reaction would have been the same.

Christopher Niesche also calls on Telecom to stop being a company obsessed with holding back the tide of regulation at any cost and become a company seeking growth

I hope Telecom appoint a CEO who takes a longer term view of Telecom's position in the market and realises the company will be far better off to invest in itself through greater investment in infrastructure. This would involve stop giving into the demands of the short term speculators for their blood sucking dividends and putting more emphasis on the interests of their customers, staff and real investors (ie the long term shareholders).

That said it will take some time for New Zealanders to forget the number of times Spot the dog shitted inside our house. I hope Telecom improve their behaviour, but unfortunately I can't help but think they will be a naughty puppy for some time yet.

Rudman on Jenny Gibbs and Telecom

Good to see Brian Rudman in yesterday's Herald taking up a couple of points I made on Thursday last week about Jenny Gibbs and her inability to access broadband internet on the leafy Paratai Drive.

This is worth noting in the context of the venomous Herald on Sunday editorial criticising blogs for "rarely researching" their offerings, when the editoral itself was really just a poorly researched rant.

I regularly see more evidence of research on the blogs than I do in the newspapers these days. Pushed for time many journalists are forced to spout the public relations lines given to them by newsmakers. Could it be the editors of the newspapers are feeling a bit sensitive on this point as they rarely give their journos the time to adequately research their stories?

But back to Brian Rudman's column on Telecom.

A) Jenny Gibbs, former wife of Telecom privatiser Alan Gibbs, gained some of her wealth from the privatisation of Telecom

"Not until Mrs Gibbs, angered by weeks of Telecom come-on promotions for broadband, came to the Herald, with the damaging publicity for the company that ensued, did the monopoly lines provider leap into damage control and suddenly do the impossible.

Sadly for the rest of suffering humanity, Mrs Gibbs was not set on becoming the people's champion. As soon as she gained the ability to download art prints from foreign parts at high speed, it was up with the drawbridge and, "Sorry, I'm all right, Jack, I don't want to talk to the media any more."

Which was a shame. Telecom would have found it harder to flannel the rest of us with one excuse after another if one of the privileged class was there to keep them honest. It seemed so little to ask of someone whose wealth, in part at least, derives from former husband Alan Gibbs' part in the privatising of Telecom."

B) If Telecom shareholders like Ms Gibbs had taken less out of the company in terms of dividends Telecom would have had more capital to invest in infrastructure and the residents of Paratai Drive would be more likely to be able to access decent broadband services.

"One can only assume that, like the privatised rail system, Telecom has been squeezed for profits by its new shareholders, at the expense of basic infrastructural maintenance and improvement. Meanwhile, while the infrastructure groans and splutters, the Telecom sales staff are pitching away like used car salesmen, promising Rolls-Royce performance from a secondhand Lada network."

Draining dividends from Telecom can mean you don't get broadband

While I usually do not relish schadenfreude, I did enjoy reading in today's NZ Herald about poor Jenny Gibbs who cannot get broadband in at her leafy home in Paratai Drive. Who is Jenny Gibbs? She is the former wife of Alan Gibbs - a key player in the privatisation of Telecom in 1990.

In an earlier post I explained how the current parlous state of broadband services in New Zealand can be directly attributable to the sale of Telecom to the private sector. It is not often that you see a member of the new right establishment admit they have been negatively affected by the short sighted nature of their own policies. It usually hits everyone else but them.

Why can't I feel sorry for Jenny Barbara Gibbs? Because it is highly likely she (directly or indirectly) benefited from the high levels of dividends paid out to shareholders of Telecom during the 1990s. If Telecom had paid lower dividends in favour of greater investment in infrastructure, Jenny Gibbs would now be more likely to access broadband in Paratai Drive. The shareholders of Telecom asset stripped the company for their own personal benefit. She split from Alan in 1996, and stayed in the house on Paratai Drive.

Alan Gibbs was on the board of Telecom from 1990 and a director until 1999.

Also, according to the Companies Office, Jenny Gibbs has 120,000 shares (held jointly) in TeamTalk Ltd - a company which Telecom bought a 19.9% stake in 2001. In 2003 the company bought back the Telecom shares (probably with debt) and listed itself on the stock exchange with an IPO the following year, gaining a significant premium. Her holiday home has been used for a Telecom ad - one presumes they paid her for the use of the venue.

So while Jenny Gibbs can't get broadband, she has had many opportunities to directly or indirectly financially benefit from Telecom.

That said, I must congratulate Jenny Gibbs for pointing out the glaring inconsistency between Telecom's promotion of 'super fast broadband' and the service the company actually offers most of its customers. Telecom ought to realise that when their greatest ideological supporters are having trouble believing Telecom corporate propoganda, the general public are likely to see Telecom's claims for what they are - outright lies.

Telecom the Telecon

Click here to watch a fantastic spoof of the latest Telecom TV advertisement. Even if you are only on dialup it is totally worth the wait!

Imagine the kids saying "I am not going to take it anymore, I've been ripped off"

While I agree Telecom do not deserve to keep any of their customers, it is not as simple as closing your accounts and taking you business somewhere else - in many areas of New Zealand there is simply no choice of provider for basic phone services. Hopefully unbundling the local loop will help fix this problem - the best way to ensure "stability", in every sense, would be to fast track the required legislation.

Update: Telecom are attempting to suppress it - typical corporate censorship - it is now available here

BNZ and Westpac worst transnational corporations in NZ in 2005

Congratulations to the Bank of New Zealand and Westpac Banking Corporation for being joint winners of the 2005 Roger Award - assessed by an eminent panel of judges as being the worst transnational corporations operating in New Zealand in 2005.

"The BNZ and Westpac are the Roger Award's first co-winners. They won because of tax avoidance, profiteering, bullying of the Government and banking authorities, blatant attempts to lure Kiwis into debt, and treatment of their workers. To quote the Judges' Report: "…many of the practices they have adopted also apply to the other two large Australian-owned banks ASB and ANZ– and had they also been nominated then the likelihood is that all four would have been joint winners. Together these banks constitute a '‘gang of four'’ wielding huge power and influence over the NZ economy and operating solely in their own interests rather than that of their accountholders, employees and the wider community"”

Third Place: Toll Holdings
Forth Place: Telecom
Special Award for the Protection of Profit and Privilege at the Expense of Public Health: Guardian Healthcare, British American Tobacco and Merck, Sharp and Dohme.

Judges: John Minto, Laila Harre, Mary-Ellen O'Connor and Marie Leadbeater. The judges statement can be read here.

For more reasons why the banks won the Roger Award this year, see the Roger Report (written by me) and the Sue Newberry's Financial Analysis.

The Roger just made Nightline. Apparently the banks have no comment to make...

Tags: Politics, New Zealand, Corporates, Westpac, BNZ

Telecom should never have been privatised

Yesterday the Dominion Post published an article from Chairman of the Business Roundtable, Rod McLeod, arguing against the need for further regulation of Telecom. Yet McLeod and the Dominion Post failed to mention a blatant and obvious conflict of interest - Rod McLeod is also a Director of Telecom (hat tip DPF)

McLeod concluded, without citing any real evidence, that "New Zealand has benefited hugely by moving from a state-owned telecommunications monopoly to a competitive (sic) private industry with relatively light-handed regulation. We should keep it that way."

Bullshit. The current fracas over broadband is a direct result of the sale of Telecom by the Labour Government in 1990. While the Business Roundtable claim to be 'free marketeers' McLeod article is just yet another example of how often they run to the defence of private monopolies.

Richard Prebble sold Telecom in 1990 for $NZ4,250 million. Last year Telecom made a $NZ 1.3 billion dollar profit in 2005 alone. Even without some of the more extreme "efficiency" drives (read job losses) Telecom could have made a significant contribution to public funds over the past 16 years if it had stayed in public hands.

It would be nice if some people who support the privatisation of Telecom would actually admit that also selling the local loop was a big mistake, and it is a mistake we are still paying for. The Government could have made free local calling a condition of access to the local loop, and told Telecom that if they wished to charge for local calls they could create their own network (oh the irony). After all, Telecom did not create the local loop, it was created by at least two generations of taxpayers.

One argument that is often used in support of privatisation, especially in "capital intensive" industries, is that sometimes the private sector can provide greater investment than a Government (stop giggling..) Telecom provides a very good example of how this is often not the case. As CAFCA pointed out in their submission on the Overseas Investment Bill in 2005, since privatisation, Telecom have regularly run down their assets at the same time they gifted whopping big dividends to their overseas shareholders.
"Telecom’s overseas owners have failed to live up to the promise of making new technology available to New Zealanders. The company closed off options rather than developed new ones. Its overseas owners have sacked thousands of employees and have extracted billions from New Zealand in profits and capital, while over-charging for services (such as broadband networking to the home) which will be the backbone of the economy in the future, virtually killing others (such as ISDN) in the past, failing to develop services which are commonplace overseas until forced to, and using every possible means to keep out the competitors who would not have been necessary had it been providing a decent service.

From 1995 to 2004 it paid out more than its net earnings in dividends (reported earnings of NZ$6,464 million and dividends paid out of NZ$6,698 million), for most of that time, its capital expenditure barely covering reported depreciation. It was running down its assets. More recently it has used its cash to invest (rather unsuccessfully) in Australia rather than develop the extensive new services needed in New Zealand."

(my emphasis)

CAFCA also quote economic commentator Brian Gaynor who described the privatisation as follows (“Testing years ahead for Telecom”, NZ Herald, 26/5/01):
"The Ameritech/Bell Atlantic/Fay, Richwhite, Gibbs, Farmer syndicate walked away from Telecom with a realised capital profit of $7.2 billion. In addition, the telecommunications group paid over $4.2 billion in dividends in the 1991 to 1998 period, more than half to the consortium members.… These are extraordinary figures for a company that is supposed to be at the cutting edge of new technological developments."

No wonder Sir Michael Fay sang 'Sailing Away' - it is the perfect theme tune for a pirate.

Perhaps if people starting talking seriously about the renationalisation of the local loop Telecom might suddenly start being more reasonable. Given the fact Telecom have been ripping New Zealanders off for years, $1 ought to be adequate compensation. When the Government bought the rail tracks it actually ended up costing them $2 because an official did not have a $1 coin in his pocket. If officials are ever in the position of buying back the local loop they should ensure they have correct change - Telecom don't deserve $2.

Tags: Privatisation, New Zealand, Internet, Corporates, Telecom

PS: Why does the Microsoft Outlook dictionary refuse to recognise 'renationalisation' as a word, and suggest 'denationalisation' as an alternative? More bloody corporate newspeak!

Worst transnational operating in New Zealand: The finalists

CAFCA and GATT Watchdog have announced the finalists for the 2005 Roger Award for the worst transnational corporation (TNC) operating in New Zealand.

The nominees are, in no particular order:

• Telecom
• Westpac
• BNZ
• Toll (took over Tranz Rail in 2004)
• Comalco (including subsidiary NZ Aluminium Smelters Ltd)
• Guardian Healthcare (owns private aged care rest homes and hospitals)
• Merck Sharp and Dome (a drug company)
• British American Tobacco

In reaching their decision a team of eminent judges will assess the negative impact of the finalists in each or all of the following categories:

• Economic Dominance - monopoly, profiteering, tax dodging, cultural imperialism.
• People - unemployment, impact on tangata whenua, impact on women, impact on children, abuse of workers/conditions, health and safety of workers and the public, cultural imperialism.
• Environment - environmental damage, abuse of animals.
• Political interference - cultural imperialism, running an ideological crusade.

ADVERTISEMENT

In a novel move, Action on Smoking and Health (ASH) have "congratulated" British American Tobacco on being a finalist in the 2005 Roger Award.
“In light of the fact that half of their best customers will die as a result of smoking their products, it is only right that British American Tobacco New Zealand be recognised for their contribution to our society,” says Becky Freeman, Director, ASH NZ.

Judges for the 2005 Roger Award are John Minto, Laila Harre, Maire Leadbeater and Mary-Ellen O'Connor. May the very worst transnational win!

PS: If you have any goss on irresponsible deeds committed by the TNCs listed above please feel free to comment. Who do you think should win?

Income inequality and the dominance of corporations

In the latest edition of Focus on the Corporation, Russell Mokhiber and Robert Weissman collate some interesting facts demonstrating the inequality of the world, and how the gap between the rich and the poor is widening.

While they title their piece 'Economic Apartheid in America', many of the examples have a familar ring, perhaps demonstrating how US hegemony over the world economy has led to inequity becoming a significant (and unwelcome) export.

"Of the world's 100 largest economies, 47 are nations, and 53 are corporations. Seventy-five percent of major corporations hire a consultant to stop employees from forming a union."

"Top executives now make more in a day than the average worker makes in a year."
(I assume this is based on US figures)

The Washington monument is 555 feet tall. Imagine it signifies the 2003 average compensation for CEOs in the Fortune 500.
- Today the salary of the average worker would be only 16 inches tall
(a ratio of 419 to one)
- In 1965 the worker's monument was 13 feet six inches tall
(a ratio of 41 to one)

And in order to preempt the predictable defence that the wealthy deserve higher incomes because they 'work harder', Mokhiber and Weissman point out that forty-two percent of those listed on the Forbes 400 in the US, inherited sufficient wealth to make this list.

"J. Paul Getty Jr. inherited the oil fortune from his father. David Rockerfeller Sr ($2.5 billion) is the grandson of Standard Oil founder John D. Rockefeller....."

They also include a nice quote from the Constitution of the Knights of Labour. Dating from 1869, it is a nice way to demonstrate the similarities between the so called modern 'global' economy and that of the 19th century.
"The alarming development and aggressiveness of great capitalists and corporations, unless checked, will inevitably lead to the pauperization and hopeless degradation of the toiling masses. It is imperative, if we desire to enjoy the full blessings of life, that a check be placed upon unjust accumulations and the power for evil of aggravated wealth."
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When modern so called free marketers like to associate their ideas with Adam Smith, the man who coined the term the 'invisible hand', it is worth noting that they often use Smith in a selective fashion. While Smith did not like governments (the bit right wingers love), he also hated what we now call corporations. Smith would have argued for the need to resist mergers and acquisitions and break up monopolistic firms like Microsoft or Telecom. Yet the call for stronger competition law is now more likely to come from the left, rather than the right.

Big Business: Helen's real coalition partner

Fran O'Sullivan in the NZ Herald (Hat tip Cathy) alleges that Helen Clark and senior ministers sought the advice of senior business CEOs on the makeup of her new cabinet and a more pro-business direction for her third term in office.

"While television journalists traipsed about the Beehive after self-important minor party leaders as coalition negotiations deepened, Clark was carrying out parallel "coalition" negotiations with an arguably more important constituency: NZ business."

Clark is understood to have invited:

"Ann Sherry (Westpac CEO and chairwoman of the Government's Innovation Advisory Group); Theresa Gattung (Telecom CEO and GIAB member); Mark Weldon (NZX CEO), Fonterra chiefs, Craig Norgate (Rural Portfolio Investments managing director and GIAB member); NZ Institute CEO David Skilling, Rob Fenwick (Council for Business Sustainability); Michael Barnett (CEO Auckland Regional Chamber of Commerce); and a group of energy sector players convened by Wellington lawyer Mai Chen." ... "The CEOs were whisked to her ninth-floor office for individual consultations with Clark, her chief of staff, Heather Simpson, and Finance Minister Michael Cullen. Other ministers from Clark's inner circle such as Pete Hodgson and Trevor Mallard were brought in as required."

I wonder if there were any similar meetings with trade union representatives, poverty campaigners, environmentalists or community groups? Surely it would have been more appropriate to hold such a meeting prior to the election, or subsequent to the formation of the government? Or are we leading to a situation where dosh leads our democracy?

Now I have no problem with business leaders meeting with the Government to discuss policy issues, so long as their level of access to Ministers is no different to that offered to any other individual or other group in New Zealand. But I believe it is highly inappropriate for big business to have a say in the formation of a government. This should be the exclusive domain of voters and those they elected to be their representatives, with 'apolitical' public servants providing constitutional advice where necessary. Even inviting business leaders into such a meeting gives them the impression they have more power than they are entitled to.

What is Helen scared of?

Does this help explain why the Green party attempted to improve relations with the business community with a well intentioned, but ultimately ill fated meeting? Was it your idea Helen?

Now what would have happened if I, or any other voter rang Clark's office and requested a meeting to discuss the formation of a the new government. "Hi Helen, could I give you some advice on who you should put in your cabinet?" I would expect to be told to noddy off until the politicians had completed their negotiations.

Fran also talks to business leaders "speaking on background" who take delight in Clark appointing more pragmatic (read right-wing) ministers into economic portfolios and report they expect Clark to be "'much more pragmatic' about economic reality". Yet they give no grounding to their metaphysical speculations, leading me only to recall the words of David Hume about 'sophistry and illusion'.

It seems the third term of this Labour-led government will be driven by a greater sense of cash consciousness.

PS: Now I admit I do take anything written by Fran O'Sullivan with a touch of salt, given her history of strong "advocacy" journalism on issues such as free trade with the US, joining NAFTA and taking trips abroad "courtesy" of the free trade lobby. It may not directly influence her writing, but its not a good look. I get the impression Fran is no fan of Helen's either.

Corporates should stop defaming cute fluffy animals

Watching Contact's latest television advertising campaign the other day, I realised that Telecom and Contact Energy are two peas in a pod. Both are former publicly owned assets which were privatised with disastrous results. Both make huge profits from New Zealand consumers, as a large portion of which is exported into the pockets of overseas investors.

But Mother Earth is pissed at Telecom and Contact for another heinous crime - the exploitation of cute fluffy animals. Back in the 1990s Telecom asked an advertising agency to come up with a campaign to improve its public image, an image damaged by abuse of its monopolistic market position and sending thousands of its workers onto the dole queue. Not that Telecom had any intention of changing their spots and improving their corporate behavior. Instead, they introduced a sideshow, SPOT the dog.

Following negative publicity about power blackouts and price rises, Contact have adopted a similar approach with their 'birds' campaign. The use of birds also has an implied environmental message, despite the fact Contact is using power consumers money to run a propaganda campaign in favour of coal power, which may be the most profit friendly form of energy for Contact, but it certainly is not the most environmentally friendly option for New Zealand. Instead of improving their behavior and becoming socially responsible corporate citizens, Telecom and Contact opt for emotional manipulation of the populace.

It is a shame irresponsible corporates can use the good name of cute fluffy animals with no repercussions. Often the poor animals will work for no more than a bone. I am sure SPOT's brothers and sisters, as well as their human companions, had to face taunts of 'telecom dog' and an unwelcome association with New Zealand's most unloved multinational corporate. Now thanks to Contact, cartoon birds are going to be tarred forever.

Telecom win the Roger Award for 2004

Just got back from the Roger 'awards' ceremony, where Telecom was proclaimed to be the worst transnational corporation operating in Aotearoa in 2004. Contact Energy was the runner-up.

Last year Telecom turned their effective monopoly of most of the NZ telecommunications market into another massive profit. The dominance of Telecom over the New Zealand sharemarket makes the Government too nervous to dismantle their monopoly, even shying away from small steps such as local loop unbundling.

New Zealand continues to suffer ongoing negative effects from the sale of this strategic asset. To give one example Telecom have used their monopoly over the local loop, to prevent other operators from offering more attractive broadband options over the New Zealand network.

From 1995 to 2004 Telecom paid out more than its net earnings in dividends, meaning that the company is effectively being cash stripped by its wealthy foreign and local owners (reported earnings of NZ$6,464 million and dividends paid out of NZ$6,698 million). CEO Teresa Gattung takes home a salary of $2.82 million, earning more in a single week ($53,270) than the average New Zealander earns in an entire year.

In a financial analysis accompanying the Judges Report on the Roger, accountancy lecturer Sue Newberry makes two worrying observations about Telecom. As Telecom also operates in the US, it also must file financial reports according to the US accounting standards, standards that have been tightened since the Enron scandal. Telecom's total reported profits for the last four years are less than half of those reported in New Zealand. Since 2001 Telecom have incurred losses of $604m in Southern Cross Cables Limited (a subsidiary registered in a Bermuda tax haven), losses they did not have to declare in their NZ results. Also the pattern of shareholding in Telecom is changing, with foreign investors selling down their shares while NZers and Aussies buy them up. While this may improve NZ current account deficit, this and the fact Telecom continues to pay more out in dividends than it makes in profits suggests Telecom is financially unsustainable and should not be touched with a bargepole.

Still, if Telecom does crash like Air New Zealand, it may provide the Government with an opportunity to renationalise Telecom at a comparatively low cost :)