Tuesday, 7 April 2009

Cullen and NZ Post (updated)

I said about a month ago when the story first leaked that Michael Cullen was being tipped for a job with a top SOE that one of the main reasons private firms out perform SOEs is that SOEs are more politicised than a normal company. A standard firm has the incentive to maximise profits by producing what people want, in the less cost, most efficient manner possible. Politicised firms don't, they have incentives to do what the government wants, regardless of the economic consequences of their actions.

I also said that the appointment of someone like Cullen, with no commercial knowledge or experience, at least in recent times - if at all, but a lot of political experience signals that the government is more interested in following political agendas than they are in pursuing commercial objectives. If this is the case then outright privatisation of the SOE must be called for. And I would still say this, it's time to privatise NZ Post ... and the other SOEs.

This appointment just shows the problem with government appointments to state boards, "jobs for the boys". The simple answer to this problem is, as I say above, privatise the SOEs. Make the firms private and there will be no appointments for governments to make and the whole problem will go away.

Updated: Homepaddock comments here and gives links to many other comments.


adamsmith1922 said...

Agree wholeheartedly,

homepaddock said...

You've got my vote, and if they're not sold outright, partial sales so they face the discipline required of public companies.

Sally said...

Great blog Paul.

It seems to me that those in power need to be reminded of the KISS principle.