Faculty of Commerce and Administration

News

On this page:

2011 recipients of the Dean’s Award for Doctoral Achievement announced

14 May 2012

Congratulations to the 2011 recipients of the Dean’s Award for Doctoral Achievement at Victoria Business School.

This award recognises excellence in the quality of research and writing in the very best of our doctoral theses each year.

The awards are made on the recommendations of the Faculty of Commerce Post-Graduate Degrees committee, based on nominations from the school Research Degrees Committees, and thesis examiners’ reports. I congratulate all the recipients and their supervisors.

The award winners for 2011 are:

Wan Adibah Binti Wan Ismail: Earnings Quality, Family Influence and Corporate Governance: Empirical Evidence from Malaysia

Khairul Anuar Bin Kamarudin: Assessment of earnings conservatism in Malaysian financial reporting

Rebecca Suzanne Bednarek: Strategizing for legitimacy in Pluralistic contexts: New Zealand's Science Sector

Binh Thanh Bui: Strategy-Driven Implications for the Management Control Systems of Electricity Generators Due to Government Climate Change Policies

Hartmut Hoehle: Consumer Intentions to use Electronic Banking Channels: The Role of Task Channel Fit

Back to top ^

Victoria graduate awarded William Georgetti Scholarship

14 May 2012

Hautahi Kingi graduated from Victoria in 2011 with a BSc in Mathematics and Statistics and a BCA with first class honours in Economics, and is now near the end of his first year doing a PhD in Economics at Cornell University in New York.

“The William Georgetti Scholarship has allowed me to focus completely on my studies without the financial stress that can often accompany such an endeavour,” he says, adding that he is tremendously grateful to the committee for granting him the chance to take full advantage of the world of opportunities available at Cornell.

William Georgetti Scholarships encourage postgraduate study and research in fields that are particularly important to the social, cultural or economic development of New Zealand.

“The likely solution to New Zealand’s economic problems lie in taking full advantage of our excellent scientists, especially in niche high-tech fields” says Hautahi, echoing the views of the late Sir Paul Callaghan and the kaupapa of Te Rōpū Ᾱwhina, the on-campus whānau for Māori and Pacific scientists, technologists, engineers, architects and designers at Victoria.

Hautahi was a longstanding mentor for Te Rōpū Ᾱwhina and thanks them for their support, encouragement and inspiration.

“Not only are Ᾱwhina dealing with the problem of New Zealand's economic inertia, but also with the issue of Māori and Pacific education and the changing face of New Zealand demographics.

“Economic policies that can accommodate and catalyse these important steps forward are crucial. I hope to be in a position to contribute to this process, and I look forward to doing so.” 

 

Back to top ^

Honorary Doctorate for outstanding business leader

3 May 2012

Victoria University of Wellington and honorary degree on a successful businessman during this month’s Graduation ceremony.

Sir John Anderson will receive the honorary degree of Doctor of Commerce.

Well-known Wellingtonian Sir John Anderson has a lengthy and outstanding list of achievements in business and service to the country.

He has had a long and successful career at the executive level in banking and finance. Sir John is particularly noted for leading the mergers of the National Bank of New Zealand with Rural Bank and Countrywide Bank. When the National Bank was sold to ANZ Bank Limited he was appointed Chief Executive and Director of ANZ National Bank, until retiring in 2005. 

Sir John’s skills have been called upon by successive governments. He has held numerous chairmanships across fields as diverse as health, industry, media, rural services, finance, the environment and regional governance.

A passionate cricket supporter, Sir John has also significantly contributed to New Zealand cricket. He is a former Chairman of New Zealand Cricket and represented New Zealand on the International Cricket Council Executive Board. He is also a former Chairman of the New Zealand Sports Foundation.

Professor Pat Walsh says Sir John’s business achievements and community contributions make him thoroughly deserving of an honorary degree from Victoria.

“Sir John has been incredibly influential in New Zealand’s financial industry, but he has also shared his wealth of experience with numerous other organisations. It is very appropriate for us to recognise and celebrate his service.”

Back to top ^

Hospital productivity in New Zealand bucks the trend

1 May 2012

Victoria University health researchers say hospital productivity in New Zealand rose by more than three to five percent in the period between 2007 and 2009, challenging perceptions that productivity rates in the sector are declining.

A study led by Dr Jaikishan Desai from Victoria’s Health Services Research Centre in the School of Government analysed hospital productivity over the three years by looking at the number of people treated as inpatients, outpatients or in emergency departments, for each dollar of expenditure incurred by district health boards.

Dr Desai says that importantly, the study also shows increases in hospital efficiency in the same period.

He says researchers looked at three different measures of efficiency, covering technology change, technical efficiency and allocation of staff and resources, and all showed an improvement between 2007 and 2009.

The team was surprised by the findings, says Dr Desai, and checked the analysis using three different methods, all of which showed significant improvements in productivity and efficiency.

He says there is already international interest in the findings because they run counter to widely held views that hospital productivity is falling in developed countries.

The research also shows that the length of inpatient stays is dropping and more people are instead attending outpatient clinics.

“Hospitals clearly are trying to shift towards lower cost treatments,” says Dr Desai.

The study did not look at how this move is impacting on patient outcomes.

Dr Desai says the research findings are being written up for publication in academic journals.

“Internationally, there is little research on how hospital productivity changes over time despite its implications for funding of health services.

“Hospitals take a big chunk of government spending on health services so it’s important to know what value you are getting for the money.”

Dr Desai says an area of concern is the limited analysis of health data that takes place in New Zealand.

“We are very good at gathering information through questionnaires and surveys but less adept at finding out what it is telling us.

“There are some very capable people with research skills, but relatively little money is allocated for analysis of health services data—much of it goes to epidemiological and medically oriented studies. It’s a shame because finding new cures and treatments is not enough—we also have to figure out the best way of delivering them to the population.”

The research was done in collaboration with the University of Auckland and the University of Otago, Christchurch and funded by the Health Research Council.

For more information, please contact: Dr Jaikishan Desai

Back to top ^

2012 Identity Conference: Managing digital identity in a networked world

30 April 2012

How do we manage our personal information in online relationships with friends, family, businesses, government agencies, NGOs and community service providers?

Have our concepts of personal identity and identity management changed in the social networking era, with a quarter of a billion people using Facebook on any given day?

World-leading experts have gathered in Wellington to discuss these questions and others at the 2012 Identity Conference ‘Managing Digital Identity in a Networked World’ at Te Papa, 30 April–1 May 2012.

They’ll consider issues such as:

  • Who ‘owns’ our digital identity information and what are the challenges and opportunities around new forms of accessing, sharing, processing, storing or tracking identity information;
  • How we can protect our identity information against current and future security threats; and
  • How businesses and government agencies can develop trusted relationships with their customers in an online environment.

Among a stellar line-up of internationally and nationally renowned thought-leaders are world-renowned information security expert Bruce Schneier, Google Privacy Director Alma Whitten, privacy-by-design strategist Dr John Borking and Microsoft’s Identity Policy Strategist and Stanford University Research Fellow Mary Rundle.

National speakers include Deputy Prime Minister Hon Bill English, Privacy Commissioner Marie Shroff, Chief Executive of the Department of Internal Affairs and Government CIO Colin MacDonald, CEO of Xero Rod Drury and the Director of the National Health IT Board Graeme Osborne.

The two-day conference is co-hosted by the Victoria University School of Government Chair in e-Government Professor Miriam Lips, the Department of Internal Affairs and the Office of the Privacy Commissioner.

As we increasingly live, work and play online, the conference is a timely gathering of representatives from government, business and academia.

Professor Miriam Lips says the conference’s purpose is to widen perspectives on identity information management in emerging online environments and discuss the challenges and opportunities of managing digital identity in a networked world.

For more information please visit www.identityconference.victoria.ac.nz

Back to top ^

Training aimed at what businesses really need

20 April 2012

Top education providers say the leading trend in their sector is for customised training programmes for businesses. NBR Special Report: Executive Education. Training aimed at what businesses really need.

Back to top ^

The importance of ensuring customer satisfaction

2 April 2012

David Crick, Professor of International Entrepreneurship's Business Forum opinion piece in the Dominion Post, 2 April 2012, The importance of ensuring customer statisfaction.

Back to top ^

Professor Bob Buckle to chair new Treasury panel

22 March 2012

Victoria’s Pro Vice-Chancellor and Dean of Commerce Professor Bob Buckle has been appointed as Chair of a new panel established by the Treasury to test its analysis of the Crown's long-term financial challenges.

This independent external panel of independent experts has been set up to help ensure that the Treasury’s next Statement on the Long-term Fiscal Position is robust and provides a range of viable options for managing the Crown's financial position in a way which protects the interests of New Zealanders now and in the future.

“This process draws on some of the experiences of the Tax Working Group,” says Professor Buckle, who was Chair of the Group in 2009.

“It is intended to bring together people with a range of experiences and skills to provide a challenge to Treasury and ensure it considers a range of options.”

Most members of the external panel will provide their own views and observations of key issues, options and potential trade-offs through the presentation of papers at a conference, which will be jointly hosted by Victoria University and the Treasury in December. The panel will meet monthly from August to November 2012.

Among the other appointees to the panel are four Victoria staff: Professor John Creedy, Professor of Economics; Professor Norman Gemmell, Chair in Public Finance; Alison O'Connell, Senior Associate, Institute of Policy Studies; and Professor Neil Quigley, Deputy Vice Chancellor (Research).

 

Back to top ^

Business schools measure up to international standards

21 March 2012

View Professor Bob Buckle's National Business Review article, Business schools measure up to international standards, National Business Review, 9 March 2012.

Back to top ^

The future of the public sector - on a knife edge

15 March 2012

Victoria University expert, Associate Professor Bill Ryan, on an expected public sector merger.

Please feel free to use the quotes below or email Associate Professor Bill Ryan, or phone 04 463 5848, 027 463 5848.

“In some respects, the future of the public sector in New Zealand is on a knife-edge. What government decides it wants done in the next few months and how the public sector responds will be critical for New Zealand medium and long term.

“The present round of activity - of which the Prime Minister's statement on Thursday and the presumed release of the report of the Better Public Services Advisory Group (although it is still unclear if and when that report will be released) - is likely to be crucial.

“To date, government's talk has been dominated by cost-cutting, rationalisations and mergers. While responsible fiscal management and efficiency in the public sector are important, there are many other important issues that are decisive for the future about which little or nothing has been said.

“Many of these are complex issues that some New Zealanders might think sound boring but which are actually very important in sustaining the kind of competent, high-integrity, politically-neutral and evidence-driven public sector that countries such as ours rely on.

“Some of these matters relate to what sort of governance arrangements New Zealanders actually want now and in the future; how ministers conduct themselves in cabinet and in relation to the public service; how officials act in relation to ministers and to citizens; how the public sector is organised relative to the policy goals and objectives of government; whether public management should be organised around outputs or outcomes; whether restructuring improves performance; how shared responsibility is to be enacted; and so on.

“These are just some of the issues raised in a recent book 'Future State: Directions for Public Management in New Zealand’ (eds. B. Ryan and D. Gill; Victoria University Press, 2011).

“For many years, New Zealand was regarded as an international leader in matters of public management and governance - in how to organise a public sector and have it serve government and citizens. In recent years, things have stagnated and fallen behind international developments, mainly because of an endless repetition of ideas and approaches devised in the 1980s.

“What the political arm of the executive decides to do in the next few months will have a critical impact on whether the administrative arm, the public sector, is able to adapt and develop in confronting the challenging conditions of the 21st century. So far, the reform agenda for the future articulated by government has been far too narrow and one-sided. Much more needs to be discussed than has been introduced to date.”

Back to top ^

Public Lecture by Professor Stephen Zeff

13 March 2012

Public lecture by Professor Stephen Zeff: ‘Towards Global Financial Reporting Comparability’

The Centre for Accounting, Governance and Taxation Research (CAGTR), in collaboration with the External Reporting Board (XRB), hosted the XRB’s inaugural Occasional Lecture last Tuesday, ‘Towards Global Financial Reporting Comparability’.

In his introductory comments, Kevin Simpkins, Chair of the XRB and Adjunct Professor in the School of Accounting and Commercial Law, emphasised the XRB’s commitment to encouraging discussion and debate of accounting and auditing topics of importance to New Zealand.

professor-stephen-zeffThe lecture was presented by Professor Stephen Zeff, the Herbert S. Autrey Professor of Accounting, Rice University, Houston. Professor Zeff traced the history of the International Accounting Standards Board (IASB) and discussed the key challenges faced by the IASB in the quest for global comparability. These challenges included reactions to a US decision on adoption of International Financial Reporting Standards and the pleadings from major jurisdictions for special tailoring of standards. (left: Prof Stephen Zeff).

John Shewan, Chairman of PricewaterhouseCoopers and Chair of the Advisory Board to the Faculty of Commerce and Administration, provided the Commentary and suggested that the process of standard setting needs to recognise the trade-off between comparability and complexity while aiming for the goals of credibility and coherence.

Around 120 people, from a wide variety of corporate and public sector organisations, attended the lecture.

cagtr-xrb-group-photo

From left to right: Professor Tony van Zijl (Director, CAGTR), Professor Stephen Zeff, John Shewan, Kevin Simpkins and Tony Dale (CEO, XRB).

 

Back to top ^

New partnership between School of Management and IMC New Zealand

7 March 2012

Victoria University’s School of Management and Institute of Management Consultants New Zealand (IMC New Zealand) are launching a new partnership to help further develop ‘town and gown’ links.

The partnership will include a forum for examining critical issues faced by New Zealand managers with a view to debating the latest management theory and practices. Forum events will be held monthly at Rutherford House and will include joint seminars, workshops and quarterly ‘think tank’ sessions for a wider business and government audience.

“The partnership will encourage our MBA students and experienced management consultants to share their knowledge and experiences for mutual benefit and may also lead to the development of new leading edge management approaches,” says Professor Stephen Cummings, Head of the School of Management. .

Phil Guerin, Vice-President IMC New Zealand noted that the partnership supports the Institute’s professional development goals. “It makes a wealth of experience available to the University and its students,” he says.

The forums will strengthen links between theory and practice and help determine the most effective strategies for organisations in today’s post-recessionary climate.

Back to top ^

What is driving workers to strike?

6 March 2012

View Dr Stephen Blumenfeld's interview on TVNZ's Breakfast, Tuesday 6 March 2012.

Back to top ^

New Pasifika Scholarships

21 February 2012

Last Thursday, Dean of Commerce Professor Bob Buckle and Assistant Vice-Chancellor (Pasifika) Associate Professor Hon Luamanuvao Winnie Laban attended and spoke at the Young Enterprise Scheme (YES) E-Day held at the Faculty of Commerce and Administration.

The day attracted around 300 students from 13 local schools, who heard guest speakers explain how their work was always fun because they had found a way to mix their passion or hobby with business skills.

Professor Buckle and Luamanuvao Laban also launched new scholarships from the Assistant Vice-Chancellor (Pasifika) and Facultyof Commerce and Administration in conjunction with YES for a Year 13 Pasifika Male/Female Student of the Year. The scholarship awards $500 per student, with the purpose of incentivising and encouraging more Pasifika students into Commerce and Administration pathways at Victoria.

The students must be recommended by a teacher as having demonstrated enterprising and business skills in the Young Enterprise Scheme programme in Year 13, obtain quality of achievement in NCEA and complete a brief essay about their learnings from the YES scheme.

The event was held at Rutherford House and fittingly, Luamanuvao quoted the famous New Zealand scientist in her encouragement to the students. "Ernest Rutherford once said 'When you don't have money, you have to think'," she said, then added, "You have to create and innovate.” 

"These scholarships will encourage more Pasifika students into business degrees at Victoria and to complete their studies,” says Luamanuvao Laban.

“They are an important initiative and it is good that we work collaboratively toward these shared goals.” 

Back to top ^

SOE's: statism vs participatory democracy

15 February 2012

A link to an article by Lewis Evans, Professor of Economics, in the ISCR Times.

Back to top ^

Mixed ownership model for state assets - what does it mean for New Zealand business and how will it improve economic performance?

15 February 2012

On 15 February 2012, Hon Bill English, Minister of Finance, delivered a presentation to the Faculty of Commerce and Administration's stakeholders and alumni on the Government's vision for the mixed ownership model for state assets.

After the presentation, expert commentary was provided by Professor Lew Evans and Andrew Harmos.

The Minister's presentation is below, along with a video link.

To view the presentation, visit our Mediasite

Good evening

It's just over a year since Prime Minister John Key first outlined the Government's plans to sell minority stakes in its four energy companies and Air New Zealand.

Since then, there has been plenty of noise - mainly from our political opponents. So today I'd like to go back over the reasons why the Government is proceeding with mixed ownership.

The rationale is fairly simple - mixed ownership is a win-win for New Zealand.

Firstly, the Government gets to free up $5 to $7 billion – less than 3 per cent of its total assets - to invest in other public assets like schools and hospitals, without having to borrow in volatile overseas markets.

Secondly, New Zealanders get an opportunity to invest in big Kiwi companies at a time when they are looking to diversify their growing savings away from property and finance companies.

Thirdly, it’s good for the companies themselves. Greater transparency and oversight from being listed on the stock exchange will improve their performance and the companies won't have to depend entirely on a cash-strapped government for new capital to grow.

We already have a living, breathing example of the mixed ownership model - Air New Zealand, which is 75 per cent owned by the Government and 25 per cent by private shareholders. Air New Zealand has been a creative and innovative company, a model corporate citizen, and has twice won Airline of the Year awards.

Before I talk in more detail about the benefits of mixed ownership, I'd like to take a little time to explain the economic context in which the Government has taken its decisions.

Lifting national savings

For the last three years, the Government has been focused on lifting New Zealand's national savings.
That's because our biggest vulnerability remains our high foreign debt, a legacy of excessive household and government consumption and a debt-fuelled property boom through much of the 2000s.

Between 2000 and early 2009, New Zealand's combined Government, household and business debt to foreign lenders climbed from about $100 billion to about $160 billion.

Markets are increasingly looking at this measure when they decide whether to keep lending a country money.

The Government has made some progress reducing this liability, but most forecasters are picking it to widen again as confidence gradually improves. This is a concern. You only have to look at Europe to see how markets treat countries with too much debt. Their interest rates have climbed sharply, while they remain low for countries that are deemed a good risk.

The message from this is clear. The price for failing to get on top of debt is higher interest rates and lower growth. When we break down what is happening with savings and debt flows in New Zealand, there are two notable trends.

The first is the Government's debt is still growing and will continue to grow until we get back to surplus in 2014/15. At the same time, households seem to have got the message around debt and are borrowing less and saving more. In the year to March 2011, net household saving became positive for the first time in 10 years. That's quite a turnaround from 2007 when households were spending about $1.11 for every dollar they earned. Private savings rates are forecast to continue improving.

So we now face a situation where Crown debt is still growing and needs to be contained. At the same time, household savings are improving, but savers need more choices of where to put their money. The mixed ownership model addresses both of these problems – by helping to contain public debt, while providing new savings options for local investors.

Reducing Government debt through mixed ownership

On the Government side, we are addressing our debt in two ways.

We have laid out a clear plan to build a more competitive economy based on savings and exports, rather than the borrowing and consumption that characterised the last decade. Over time this should lift growth and with it the Government's revenue.

Secondly, we have put in place measures to manage our finances more responsibly. For example, over the last three Budgets we found $9 billion of operating savings that we either redirected into higher priority areas or used to reduce debt.

And we have committed to a faster return to surplus in 2014/15 after which we can start repaying debt. This is one of the most important contributions the Government can make to lifting national savings.

But operating spending is just one side of the Government's ledger. The Government also holds about $245 billion of assets on its balance sheet and spends about $6 billion a year maintaining these assets and buying new ones.

These assets are forecast to grow another $22 billion over the next four years. That's a very large commitment to public investment. Over a third of these assets are either financial or commercial assets, which carry considerable risk. The rest are social assets, including a large amount of property. This property is subject to all the same risks as privately held property, but there has been little incentive put on the state sector to manage this risk properly. So, it's important we make the best use of this growing pool of capital and where possible reduce the Crown's exposure to risk.
 
The Government has taken several steps in this direction.

We have demanded better asset management practices from the state sector. We've clearly set out the Crown's assets and liabilities and how we intend to manage them, in the Government Investment Statement. And we have been more demanding about how we allocate capital through the Budget process. Previous governments have sorely neglected these areas.

Another part of managing the Government's capital more efficiently has been taking a hard look at the mix of assets we own. At the margin, there are two ways we can acquire new assets – either we can borrow more, or we can change the mix of assets we own. Part of better managing the Government's balance sheet has been identifying where new assets are most needed and where we have more money invested than we need to. The greatest scope to change the mix of assets lies with the Government's portfolio of commercial assets – and that is what we are doing with mixed ownership. By selling minority stakes in some of these companies, the Crown reduces its exposure to commercial risk and frees up $5 to $7 billion to pay for new priority assets. That's $5 to $7 billion less the Government needs to borrow on volatile overseas markets.

How mixed ownership impacts on the Crown accounts

Over the past year there has been a lot of conjecture about how mixed ownership will impact on the Government's books, so I'd like to take a moment to explain that.

Under mixed ownership, the Government is foregoing up to 49 per cent of the future income from the companies involved. But it’s getting a big lump sum of money in exchange – as I mentioned, somewhere between $5 and $7 billion.

That’s a fair exchange. To the extent that the mixed ownership companies are well run and profitable, the sale price will reflect that. So in effect, the Government is not missing out on any future earnings under mixed ownership, it simply gets these expected earnings up front and in a lump sum.

The next step is to invest that $5 to $7 billion in other types of assets that will benefit New Zealand. For example, we are going to invest $1 billion of these proceeds in building new schools, and modernising existing schools, which the Government would otherwise have to borrow to pay for.

So it’s quite clear from this reinvestment that the Government’s assets will not decrease as a result of mixed ownership. The effect of mixed ownership is simply to change the mix of assets the Government owns, without affecting the overall amount.

After the mixed ownership changes, we’ll have a bit less invested in commercially-driven energy companies and a bit more invested in public assets like schools.

These won’t be huge changes – mixed ownership affects less than 3 per cent of the Crown’s total assets. But because we are able to change the mix of our assets, we won’t have to borrow to invest in new public assets over the next few years.

In other words, mixed ownership allows us to keep up our investment in much-needed capital projects, while at the same time reducing the amount the Government has to borrow quite considerably.

That is hugely important for New Zealand.

The alternative is a lot more debt, which would need to be borrowed from foreign lenders, at a time when markets are increasingly worried about lending to heavily indebted countries.

Because of mixed ownership, our net government debt will peak at just under 30 per cent of GDP, which maintains our fiscal credibility in a world that is more and more focused on government debt.

That credibility is helping keep interest rates in New Zealand at record lows. It’s also helping keep overseas lenders funding our banks and therefore ultimately our mortgages, business loans and so on.

In terms of the precise impact of mixed ownership on the Government’s books, that can’t be confirmed until the transactions have actually occurred. Until then we can only estimate the sale price we will receive for shares.

But the Budget Policy Statement, which is being released tomorrow, will contain more information on the impact of mixed ownership than was possible in previous updates.

Total proceeds from mixed ownership over the next four years are assumed to be $6 billion, which is the midpoint of the estimated range of $5 to $7 billion. Estimates of foregone profits and foregone dividends are based on a four-year average of the companies’ own forecasts.

So in the accounts, net government debt is reduced by a bit over $6 billion because of mixed ownership.
The operating balance before gains and losses decreases slightly because of mixed ownership, which simply reflects the difference in risk between owning a commercial business and reducing our debt requirement. As I’ve said, we are firmly focused on reducing our debt.

The overall operating balance, however, increases slightly because of mixed ownership, because it includes an $800 million gain on sale. That’s because the $6 billion proceeds that have been assumed are more than the current book value of the mixed ownership assets.

So I would summarise the effects of mixed ownership on the Governments books as a significant reduction in debt, together with a fairly neutral impact on the Government's cash flows and operating balances over the forecast period.

Lifting investment

As well as reducing the Government's debt, the mixed ownership companies will also provide New Zealanders with another investment option for their large and growing pool of savings. In fact, New Zealanders are telling us they're hungry for other options as they look to diversify their investments away from highly-leveraged property and finance companies.

Kiwi investors have about $100 billion sitting in term deposits. And there are tens of billions of dollars invested by other New Zealand investors from KiwiSaver providers to the NZ Super Fund, ACC, Government Superannuation Fund, and iwi.

As a result, we expect strong local demand for these shares and a high degree of New Zealand ownership. Ministers have made three clear promises to ensure this happens:

  • The Government will retain at least 51 per cent control.
  • Kiwi investors will be at the front of the queue for shares and ministers expect New Zealand ownership will be around 85-90 per cent.
  • No shareholder other than the Government will be able to own more than about 10 per cent.
  • We expect the high level of interest will also lift confidence and participation in our capital markets, which will benefit the economy overall.

Benefits for the companies

In addition to benefiting the balance sheets of Kiwi investors and the Government, the mixed ownership model will be good for the companies themselves.

The Government has already taken steps to improve the transparency and performance of these companies. However commercial discipline and oversight imposed by ministers fluctuates from election to election and government to government.

The Treasury's advice is that sharper commercial disciplines, more transparency and greater external oversight as a result of being listed on the stock exchange will over time improve the economic performance of these companies.

That's good for the companies and taxpayers.

Listing these companies will also give them access to additional capital from the market. Currently, if these companies need a capital injection, they generally come cap in hand to the Government, which can be fairly reluctant to take on additional commercial risk – particularly if it requires more borrowing.

Under the mixed ownership model, these companies will also be able to call on their private shareholders for additional capital, reducing the Government's contribution and sharing the risk.

Next steps

Completing the mixed ownership programme is likely to take three to five years, depending on market conditions.

That process is already underway with the first sale – Mighty River Power – expected to take place in the third quarter of this year.

The exact timing of the initial public offering will be firmed up in the next three months, once Ministers have made more decisions around its design, including how shares will be allocated.

At the same time we are consulting Maori around the removal of Mighty River Power, Genesis, Meridian and Solid Energy from the State Owned Enterprises Act.

This consultation includes how the Crown's Treaty of Waitangi obligations should be reflected in legislation covering the companies. Among the issues is whether a general principles clause of the SOEs Act – Section 9 – should be carried over, made more specific or not included.

The Crown clearly recognises its Treaty obligations and will continue to meet those obligations irrespective of the final shape of the mixed ownership legislation.

And Section 9 will remain in the SOEs Act regardless of how the Crown's Treaty obligations are recorded in the mixed ownership legislation.

Decisions will be taken following consultation and new legislation covering these companies will then be introduced.

Conclusion

Let me finish by saying the mixed ownership programme will be good for Kiwi investors, the Government and the economy as a whole.

But let's remember, it is just one part of a broad programme to build a more competitive, faster-growing economy supported by higher savings and less debt.

Over the next three years, New Zealand has the opportunity to grow solidly, create more jobs and increase wages. The Government wants to take advantage of that opportunity.

Thank you.

Back to top ^

Mixed ownership model for state assets - Commentary by Andrew Harmos

15 February 2012

On 15 February 2012, Hon Bill English, Minister of Finance, gave a presentation at the Faculty of Commerce and Administration on the mixed ownership model for state assets.

After the presentation, commentary was provided by Professor Lew Evans and Andrew Harmos. Below are some notes on Andrew Harmos' response:

How should one think about or analyse MoM?

  • not as an end in itself
  • in the context of a piece in the jigsaw of New Zealand’s overall economic plan
  • what does NZ look like now and what would we like to look like in 10, 20, 30 years’ time?
  • what is optimal role of government in terms of the ownership and management of its significant asset portfolio and in terms of stimulating the economy, generating economic and societal outcomes?
  • understanding all of the elements Mixed Ownership Model, does it enable or block achievement of our goals?
  • How would you categorise New Zealand now?

All businesses need customers and a 4.5 million person domestic market is simply not enough for many businesses to get to scale. So they have to go global. Without enough domestic savings, without an active pro NZ asset allocation bias from institutional and quasi government investors (and so without ready access to risk and growth capital to fund their growth aspirations), companies have to look for capital offshore: this has often meant selling or being sold offshore. This has been compounded by foreign entities buying NZ businesses to access low growth but stable revenue and deriving their returns by stripping cost out - generally by moving functions to their offshore (mostly Australian) head offices

This, and a naive view on the importance of controlling our own strategic assets, has resulted in an undesirable trend to branch office rather than head office status as many of our companies have foreign control rather than being simply the recipients of managed foreign investment. What is the difference? A big difference – foreign investment positive – shows confidence in economy, market rules and law, etc.: foreign control over time results in head office, people infrastructure, intellectual property, decision making and top jobs disappearing. It’s not the physical infrastructure that goes – it’s the intangible and hard to replace intangibles.

So – we export our people who end up chasing the opportunities we have exported – negative second order effect - resulting in a small sub–scale economy.

A savings industry which, because of a lack of suitable domestic product, does more to support the Australian and other foreign economies and ours.

Few national champions in the corporate world that drive jobs, positive investment outcomes, export earnings for New Zealand, head office infrastructure and IP generation and retention, and tax base (like Australia’s BHP, banks and other resource etc companies): all of which are necessary – wealth creation is essential to meet our egalitarian objectives.


What is the rest of the world doing?

Particularly emerging markets, governments have actively managed their asset portfolios; instruments of state capitalism; recent article in the January 21 Economist:

State owned enterprises make up most of the market capitalisation of China and Russia’s stock markets, 38% of Brazil’s and they account for 28 of the emerging world’s 100 biggest companies.

These companies have become more productive and more global – this concept of state capitalism has been successful at producing national champions that can compete globally. There is, according to reports by McKinsey and others, striking evidence that fully fledged SOE’s are less innovative and less productive than their private competitors and those with less than 75% state ownership. And look at how the presence of outside shareholders has lifted the accountability and performance of Vector and Air NZ as examples of state or local authority mixed ownership.

The emerging world’s model for these state sponsored companies shows that these governments, particularly those with a background in anything but capitalism, believe that significant benefits flow from their version of public/private partnerships.

  • they have created national champions which are significant on the world stage – their own BHP’s and Nokia’s
  • retention of domestic control; the difference between foreign investment and foreign ownership
  • with this background – where do we see NZ in 10, 20, 30 years time?

Aspirational goal of home grown, locally domiciled global champions – a strong and competitive domestic environment that supports locally based firms to succeed in global markets from a base in NZ – strong job creation and income generation, greater scale and relevance as a country – high levels of productivity and strong export based trading nation – strong tax base and wealth/savings levels rising so that we are able to be in control of our own future, retain or attract back our valuable ex-pat base of human talent – and be able to afford to achieve our egalitarian and social goals.


So is MoM an enable or a blocker, and can the perceived negatives be mitigated or managed.

Government (and local authorities – Christchurch an example) - like any other asset owner - has to assess its asset portfolio - does it need and can it afford 100% in order to control – is it prudent to rebalance, to allow investment elsewhere rather than borrow or tax more.

Access to capital – why Govt a poor owner – 2 main reasons - always fiscally constrained – no spare money to invest - and Ministers err on the side of saying no for the wrong reasons. (AMI a disastrous example of Govt having to step in to what the capital markets are there to solve).

Is it right that we starve MRP/Solid Energy as examples from the capital and tools to become our Nokia and BHP from NZ headquarters?

Reduce scope for political and election cycle interference and decision paralysis.

Transparency and governance benefits.

Staff as owners – Fulton Hogan an example of productivity/self-reliance gains.

Mums and dads as savers – invest in NZ’s growth – partner with Govt on stable enterprises rather than be faced with sub-optimal alternatives.

Financial literacy and NZers as asset owners.

Broader participation in and support for capital markets.

This will lead to higher value job creation and retain/attract expertise/IP here.

Reduce branch office trend – legislated NZ control.

Conclusion

Use of funds – repaying debt not aspirational – we can repay from increased productivity, especially export sector – this will facilitate.

Lloyd would also say – NZ can do it – support the local markets – look at the trading volumes on NZX vs ASX of dual listed NZ domiciled businesses – 90% plus in NZ - encouraging NZ ownership – why add the cost and complexity and why support any foreign market by dual listing? Foreign investors ought to have to invest via our markets – they are NZ businesses after all.

Back to top ^

Victoria Adjunct Professor recognised for outstanding service to the accounting profession

15 January 2012

Kevin Simpkins, Adjunct Professor in the School of Accounting and Commercial Law (SACL), received the American Express Outstanding Service to the Profession Award 2011 at New Zealand Institute of Chartered Accountants’ (NZICA) Leadership Awards Dinner last Wednesday. The award was made for the outstanding contribution he has made to the accounting profession over his entire career on the nomination of peers within the profession. 

“For more than two decades Kevin has played a central role in the development of accounting thought in New Zealand, and I am delighted that he has been honoured for his significant contribution,” says Professor Bob Buckle, Pro Vice-Chancellor and Dean of Commerce.

In addition to his role within the School of Accounting and Commercial Law, Mr Simpkins was appointed the inaugural Chair of the External Reporting Board, established as a crown entity on 1 July 2011 to take over responsibility for setting accounting and auditing standards for all New Zealand entities.

He was Technical Director of NZICA during the period of major change in public sector accounting in the early 1990s.  He became National Director of Accounting of Ernst & Young in the mid-1990s and then served for over a decade in the Audit Office.  From 2002 to 2005 he was Deputy Controller and Auditor-General. Mr Simpkins has been associated with SACL since 2006.

Over the last 25 years, Mr Simpkins has served on numerous national boards and committees. In May 2009, he was also appointed as a member of the Australian Financial Reporting Council. He is a member of the Trans-Tasman Accounting and Auditing Standards Advisory Group to Ministers and has chaired that Group for 2010 and 2011.

Back to top ^