Week in Review

‘We took corporatisation of the state too far’

Rob Campbell, deeply involved in the corporatisation of state assets and local bodies in the late 80s and early 90s, argues some are now too dividend-focused and unaccountable to their communities.

I was around in the 1980s when economic reforms introduced corporatisation to wide areas of the public sector. What happened in central government was followed in many aspects of local government. I was involved as a director in many of the processes such as NZPost becoming an SOE, the corporatisation and subsequent privatisation of Government Print, and Wellington City Transport to name a few.

In subsequent decades I’ve acted in various capacities within or in relationship with the many public but corporate entities. In nearly every instance the process has generated efficiencies and improvements in their operation. We have moved on from running our economy as David Lange memorably put it “like a Polish shipyard”.

There have also been costs, primarily felt by the individuals and communities who lost jobs in the process. Only the most fervid advocate of corporatisation would deny that we failed to match zeal for efficiency with equivalent energy and focus on the social costs of change and transition.

I have had cause recently to give thought to some of the agencies running today under the corporate model at local and central government level. It seems to me that there are a number that need a re-think.

First, some of the agencies which are corporate or even fully or partially privatised exercise market power to the detriment of the community. The owners have become addicted to the dividend stream. I’m not going to name them. They, their owners and you know who they are. This outcome is a lapse from the logic which originally drove corporatisation which was that both ownership/control forms and market structure were vital to efficiency. Competition rules and processes should be strengthened or the new boss is the same as the old boss.

Second, some things have been corporatised which should never have been. I’m struck by the many agencies which have expensive boards and executives duplicating activities and mis-allocating resources while claiming independence from political control which serve nothing but the interests of those same boards and managers.

Corporate form is not a good in itself. It is a means to an end which works well in competitive markets with traded goods and services. It has no particular logic in monopoly social services.

Third, in the process of corporatising many activities we have missed the bigger opportunity to decentralise control and delivery to communities and to activate those communities around the activity. Some wise people have shown me recently how vital it is that solutions are found and recreated within communities not delivered from above in standard, 'take it or leave it', form.

Even some of the better efforts to recognise this struggle under corporatised governance forms which were devised for a different purpose and culture.

.. what passes for sound corporate governance of public sector activities is simply the equivalent of basket weaving occupational therapy for those involved.

Fourth, we have found ourselves removed from effective control of agencies which remain important to us.

There is a great number of activities which communities do not need to control, and provided sound market structures are in place (not by any means always the case as noted earlier), private ownership will do what it does best including keeping users happy. The market has a strong form of accountability in this situation.

But when a community or government has decided democratically that some activity is not of that kind then accountability does not have to be abandoned to experts or corporate structures. With our corporate structures we have excessively weak forms of accountability which are bureaucratic and formulaic.

Elaborate reporting structures and form filling which signify not much at all and let appointed boards and managers pretty much do as they see fit. No capitalist would put up with it, so why should we ?

I am not suggesting that we return to old public service or local government process. But we do need to recognise that corporate structure is just one of many forms and is not well suited for all activities.

To my mind much of what passes for sound corporate governance of public sector activities is simply the equivalent of basket weaving occupational therapy for those involved.

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