The Decade Of Greed

Listener: 6 February, 1993

Keywords: Business & Finance;

Retiring BNZ managing director Lindsay Pyne will be remembered for his phrase, ‘The decade of greed’, well after his impressive achievement of turning around the Bank of New Zealand is long forgotten, The expression was used in an advertisement rejecting Winston Peters’s various calls for an inquiry into past actions of the bank. Peters reflects a widespread belief that some actions, before Pyne took over, were immoral, scandalous, or even criminal. There is a public bitterness over the billions of dollars that seemed to disappear, and a deep suspicion that they disappeared into self-enrichment. That much of this money was fictitious, or wound up wasted in untenanted buildings and unprofitable ventures, fails to convince the sceptics that none ended up in private pockets.

The problem the bank faces is that some people will not be satisfied until the probity of every transaction is proved. Take the Bank of Credit and Commerce International (BCCI). It operated in 73 countries. In Britain alone there were 100 million transactions, only 2.5 percent of which are being investigated. We know BCCI was corrupt, hence its nickname the ‘Bank of Crooks and Criminals’, but just imagine having to sift through all the paper if the bank had been a little less larcenous.

However, a number of Australian inquiries – usually by royal commissions – found widespread fraud and corruption across the Tasman. Why did events of similar proportion not happen here? That does not mean I think any particular institution here is guilty but as a researcher who draws parallels to generate tentative hypotheses, I am puzzled. What the Australian evidence does suggest is that incompetence was much more widespread than criminality. I am sure that was true on this side of the Tasman too.

But even if it was all incompetence, Pyne and others who leapt in to disabuse the public of Peters’s claims have to explain what was special about the 1980s. Why won’t the 1990s be a decade of greed too? The BNZ advert ‘we’ve addressed what went wrong and put things right’ was short on specifics, except to hint there have been sackings: ‘many former executives have left the bank’. But why are we to assume that the new executives are more competent (or whatever) than the last ones? How do you know that, given the chance, your favourite financial institution will not repeat its incompetence with your funds.

It is all very well saying that greed once dominated business. What has taken its place? Too often the answer is a euphemism for greed, like ‘pursuit of profit’ or ‘self interest’. We should not expect a conversion to a new objective, but the business environment needs to ensure greed/self interest/pursuit of profit is harnessed to the common good. Little has been done to reform that regulation.

There are a few improvements, like the Serious Fraud Office – at the bottom of the cliff. But I would have thought we needed a capital gains tax to stop lax avoidance which explodes into speculation, a new set of auditing standards, restrictions on – or public exposure of – donations to political parties and lobby groups, improvements in accountability to shareholders, the revised Company Act (about to be passed after hanging around for yonks), and a published code of business ethics.

Interestingly, the main lobby group for the pursuit of greed as a driving force in human relations appears uninterested in such reforms. The Business Roundtable has notably failed to address the one thing the chief executive officers on it know something about – business practices. Instead they freely give their opinions on matters on which they lack competence.

Take their study on Constitutional Change in New Zealand, which supported the current electoral system, opposing MMP. The three writers were economists who reported not a single publication of their own on constitutional matters. Two were Americans – an odd choice for a commentary on a British-based constitutional system (the third was an ex-employee of the Roundtable). They seemed unaware that in 1978 and 1981 the party with most votes did not form a government, or that in 1981, 1984, 1987 and 1990 the party that formed the government promptly broke major election promises.

Nor did the writers appear conscious of the public worries about enormous donations which some businesses made to political parties in 1987 and 1990. Allan Hawkins, now languishing in jail, made a $250,000 grant ‘in recognition of the good work’ while a Roundtabler (membership by invitation).

You might ask whether businessmen, who cannot tell the difference between an incompetent economist and a competent political scientist on a subject, are capable of appointing executives who are competent to run their businesses. And if Roundtablers have difficulties with such heady intellectual heights perhaps they should stop commenting on education, health and a variety of other areas well outside their competence. How can the public ‘respect business’, as the Roundtable chief executive officer, Roger Kerr, pleads, when they keep wheeling up uninformed and self-serving reports, while avoiding commenting on that which they know something about?

That is their best chance of dealing with the public worries that Peters articulates. Rather than berate him, they should demonstrate in action and counsel on business policy that they are doing their best to ensure a ‘decade of greed’ won’t happen again.