Political Roundup by Dr Bryce Edwards.
Love or hate them, the views of New Zealand CEOs about politics and the economy are always worth reading. So what’s on the mind of the capitalists?
You can’t divorce politics and economics, and you have to understand one in order to understand the other. Of course, the business elite will always put forward biased and self-interested views on what government is doing or should be doing, but what they say counts and can give us a guide to what’s happening amongst the elite. That’s why it’s always worth reading the Herald’s annual “Mood of the Boardroom” survey of CEOs – the latest of which came out on Thursday – you can read most of the report here: 2015 Mood of the Boardroom.
John Key’s leadership succession
One part of the report caused a stir, overshadowing everything else, because it addresses the question of John Key’s performance and who might replace him as National leader – see Bill Bennett’s Top bosses want Key to sort out succession.
The main message of this article is how much the business world respects Key, relaying the perceived strengths of the PM according to business: “He is seen as pragmatic — the word turns up dozens of times in responses. He gets things done, knows how to win elections and doesn’t ruffle too many feathers”. Of particular interest is the fact that business says they like him because of his pragmatism and lack of ideology.
Key’s CEO rating has dropped a bit – from 4.49 out of 5 down to 4.28. Yet compared to previous years, he comes off very well in the CEO survey. In 2013, the Mood of the Boardroom report stressed how business leaders regarded him as having become ‘vulnerable to silly sideshows’ and ‘petty distractions’ – see: Managing the hot potatoes. And then in 2014 Key was severely criticised for his role in the Dirty Politics saga – see Fran O’Sullivan’s 2014 report, Revelations damage Brand Key.
It was the “leadership successor” element that sparked the most interest in this year’s report. The report says, “Much as business leaders are comfortable with the PM, most think it is time for National to plan for his replacement”. It then surveyed future possibilities, with Paula Bennett being the frontrunner in “a wide open field”.
Despite the generally positive CEO statements on Key, the Newstalk ZB website published an article pronouncing that the survey results showed that “The ‘Key’ brand is over”, with the survey supposedly saying that “three quarters of business leaders want a new John Key”. The inaccurate report was soon taken offline and eventually replaced with a more accurate one – however, the “internet never forgets”, and after it was “deleted” you could still read the webcached version of the old story – see: Business leaders say time for Key to go.
This also caused quite a stir, with copies of the “deleted” news report circulating on social media, and accusations of political censorship being thrown around. For instance Russel Norman (@RusselNorman) tweeted to suggest manipulation of the media was occurring. For the best coverage of the saga, see Hayden Donnell’s article, This Image Doesn’t Mean What You Think it Means.
CEO views of other politicians
For the third year in a row, English is the business elites’ favourite politician, outperforming the Prime Minister – see Bill Bennett’s Mr Consistent still top performer. CEOs give the Finance Minister heaps of praise for his handling of the economy, with an overall score of 4.6 out of 5. He also gets positive evaluations because “He understands the need to invest in solving social issues that ultimately have economic consequences” and because he is not “a person to engage in petty politics or cheap tactics”.
English is cited as one of the other frontrunners to replace Key as leader, along with Bennett, Simon Bridges and Steven Joyce. Other names mentioned are: “Amy Adams, Judith Collins, Simon Power, Nathan Guy, Jonathan Coleman and Hekia Parata”. But none of these supposed candidates receive high performance ratings by the CEOs. And the worst performing minister noted in the report is Maggie Barry on 2.22 out of 5.
In contrast to CEO evaluations you can see the Herald’s recent press gallery evaluations in Audrey Young’s Ministers’ ratings: Lotu-Iiga bottom of the class. One notable difference is the Herald only rates Bill English 6 out of 10.
On the Labour side, the CEOs give their highest rating (3.3 out of 5) to Jacinda Ardern, followed by Kelvin Davis on 3/5. Just below Davis are Andrew Little, Annette King and Grant Robertson. The reports notes that former leaders David Shearer and Phil Goff are rating “ahead of up-and-comers like Chris Hipkins and Phil Twyford”.
Labour leader Andrew Little gets a mixed overall evaluation from business, but “An overwhelming 72 per cent” say he “has not achieved cut-through for himself and his party with the business community” – see Bill Bennett’s It’s a big job for Little.
Better news for Labour comes in Alexander Spiers’ Future of Work initiative strikes a chord, in which business take seriously the need for progress on preparing “New Zealanders for a future where technological disruption and robotics will remove many jobs”.
And on the issue of Labour’s Chinese-sounding names saga, business has mixed thoughts – see Anne Gibson’s CEOs – we need facts not rhetoric.
What business wants from politics
Business leaders are fairly predictable in their political demands – which usually include a list of self-serving reforms that they want implemented. This year the list is a bit more surprising, and shows that business is in a very pragmatic and statist mood. Of course the CEO elite still want further cuts to government spending and taxation, but these standard policies have become lower priorities against rising demands for state intervention in various areas.
It’s the need for state spending on national infrastructure that is the leading concern of the CEOs this year – see Patrick Smellie’s Rock solid beats rock star. This is the highest priority in importance – with a 6/10 rating, compared to concerns over “Level of government spending”, which was only rated 3.6/10 in importance. And also of great importance for the CEOs is the housing affordability issue.
Business’ increasing fashion for state interventionism is also strongly reflected in Fran O’Sulivan’s report, Government needs a Plan B. According to this, 75 per cent of the business elite “said the Government should form a Plan B in case the slump lasted for longer than expected”. Some also complain about the dominance of dairy in Government (especially in terms of prioritising dairy in its free trade negotiations).
For more criticism of the Government’s lack of vision or planning, see Brendan Manning’s Is co-ordinated plan working?
CEOs are also split about “the question of whether New Zealand is placing too much reliance on the China market with 42 per cent saying Yes, and, 41 per cent saying No” – see Fran O’Sullivan’s All our eggs in one basket.
The need for a more active government response to economic changes is also conveyed by O’Sullivan’s article, Bring on the rolling maul, in which CEOs want National to replicate their GFC strategy of intervention to avert another looming crisis. But O’Sullivan says that there is “the vacuum that exists at the top political tables for frank talking on the issues that matter to New Zealand’s future”, and that “there is a vacant chair when it comes to leading debate on the next wave of change towards building a sustainable future for New Zealand”.
Such an interventionist approach even extends to apparent problems with Fonterra, with nearly a third of CEOs thinking that “the Government should introduce legislation to break up Fonterra” – see O’Sullivan’s Business leaders question Fonterra structure. It’s noted that only “45 per cent of CEO respondents believe Fonterra has been a success”.
Despite being relatively positive about John Key and Bill English, the business community are not entirely enamoured with the Government’s handling of many crucial areas. The recent package of changes to deal with the housing affordability crisis do not go far enough according to half of CEOs – see Greg Hall’s Housing measures too mild. Only “21 per cent were satisfied and 31 per cent were unsure” about the likely effectiveness of the reforms.
Half of CEOs describe the Auckland housing market as “a bubble” – see Anne Gibson’s Bubble that’s hard to burst. And “Asked if the Government should apply a ban on foreign residents investing in existing Auckland residential property, 35 per cent of the respondents agreed, 51 per cent disagreed and 14 per cent were unsure”. In response, the Finance Minister says that Auckland house prices might well drop, as they have done elsewhere in the world – see Gibson’s Auckland property prices may fall – English.
Problems with regional development are also of concern for many CEOs, and they’re not convinced that the Government’s policies are going to deal with the problem – see Graham Skellern’s A regional plan for migrants. Instead many CEOs appear to want special economic zones created, in which different rules and taxes would be applied.
And when it comes to the controversial TPPA debate, there is hardly the overwhelming endorsement that the Government might expect of their agenda, with only “53 per cent of CEOs responding to the Herald survey were confident that TPP (if successfully negotiated) would hold significant net benefits for the New Zealand economy and business” – see Alexander Speirs’ Boardroom backing for the TPP.
Interestingly, complaints are also made about multinational companies not paying enough tax, with 53 per cent of CEOs saying such businesses should be paying more. Expect to see the Government move to protect domestic businesses with a lowering the threshold for paying GST when shopping online.
There is also a very interesting report (which is not online) as part of the Herald’s Mood of the Boardroom series, in which Adrian Orr, CEO of the NZ Superannuation Fund, says we need to move to a more “inclusive capitalism”. Here’s his main point: “today’s capitalist system falls short in providing access to all who demand it and the reassurance that their contributions will be fairly rewarded. It is time again for change and several new efforts are now directed to the design of more relevant and resilient capitalism”.
Finally, how well is the business world itself performing? For a discussion of the plight, performance and diversity problems amongst boards of directors, see Grant Bradley’s Directors fees: The pressure is on.