Must government contractors demonstrate public sector ethics?
2 March 2012
The starting point for this post is that campaigning journalism is often part of political axe-grinding. Sympathetic media can promote that campaigning. A report in yesterday’s Independent is an illustration. The paper highlighted recent research by the Ethical Consumer. Ethical Consumer has investigated governance arrangements among the top 20 companies that have contracts with the British Government. Many are rated poorly. The conclusion is that … “companies lining up to take a slice of the mushrooming multi-billion pound public service sector are among the most unethical in the UK … and … have the bottom rating for … ethical and environmental criteria, including environmental reporting, supply chain management, human and workers’ rights and political activity.”
A description once used by the Guardian is that “Ethical Consumer approaches ethical issues with a mind-boggling thoroughness and integrity that makes everyone else look like a charlatan.”
An implication from a New Zealand perspective is that the Ethical Consumer identifies 4GS and Serco as being “of particular concern”. Both operate in New Zealand.
Serco is placed 19th out of the 20 companies assessed, with a bottom rating in nine of 17 survey characteristics. Its “ethicscore” is 4.5 (from 20). In sixteenth place, 4GS has an ethicscore of 5.
An aspect of the survey picked up by the Independent was the number of companies with contracts for public services that had arrangements to minimise their tax liability. It found that 13 of the 20 companies surveyed had subsidiaries in countries that are widely considered to be tax havens ….. This implies that the companies concerned,… are managing their other finances in such a way that they may be actively avoiding paying tax here in the UK…” Serco has interests in Luxembourg, Singapore and Ireland. 4GS is more widely spread in numerous tax havens, including Panama, Macau, and the Virgin Islands.
That assessment perhaps should not be a New Zealand concern. Shaxson’s “Treasure Islands and the men who stole the World” classifies New Zealand as a tax haven that “lets down the developed world”.
Although some of Britain’s Opposition MPs are becoming vocal about taxpayer funded contracts being awarded to companies that manage their affairs to minimise UK tax liability, professional services businesses often facilitate that outcome. The IOS reports that KPMG (itself a major contractor to government, with 2010 turnover exceeding $21 billion) uses 47 out of the 60 globally recognised tax havens. “On its UK website the company openly states that it’s able to substantially reduce companies’ tax bills through a series of nifty financial manoeuvrings.”
Which raises the question of whether companies contracted to deliver public services should adopt a public service ethic when delivering those services? When undertaking government functions, should contractors demonstrate the spirit of service required of officials and the ethical governance required of agencies?