Ethics-free zone in top US law and business schools

23 May 2012

An extract from “Inside Job”, a book by Charles Ferguson about university corruption and the financial crisis, was published in the Guardian on Monday. It explains the muted contribution of US academics to understanding the global financial crisis. Many with power in universities are ”in bed” with business and financial sectors.

While medical and scientific communities have spent decades distancing themselves from the influence money, faculties teaching economics, law, business and political science  have not.

“…Over the past 30 years, significant portions of American academia have deteriorated into “pay to play” activities. These days, if you see a famous economics professor testify in Congress, or write an article, there is a good chance he or she is being paid by someone with a big stake in what’s being debated. Most of the time, these professors do not disclose these conflicts of interest, and most of the time their universities look the other way.”

“Half a dozen consulting firms, several speakers’ bureaus and various industry lobbying groups maintain large networks of academics for hire for the purpose of advocating industry interests in policy and regulatory debates. The principal industries involved are energy, telecommunications, healthcare, agribusiness – and, most definitely, financial services…”

The extract illustrates links that top graduate schools have with the banking and financial sectors.  Academics, paid  up to $135,000 per appearance by entities from those sectors, are not required by their employing university to disclose the connection – and seldom do so voluntarily.

“…The problem of academic corruption is now so deeply entrenched that these disciplines, and leading universities, are severely compromised, and anyone considering bucking the trend would rationally be very scared…”

Ferguson claims that US financial interests affect academic research and policymaking. With some exceptions, there has been no interest in challenging industry practices. This perhaps explains “….how an entire industry came to be structured such that employees are encouraged to loot and destroy their own firms …. and …why deregulation and economic theory fail so spectacularly…”

It seems ironical that a British paper should champion print media standards, but the extract notes that while universities have few disclosure requirements and few academic publications require the disclosure of interests, “….newspaper reporters are strictly prohibited from accepting money from any industry or organisation they write about…”

Ferguson also notes that “… most institutions continue to oppose further disclosure and … refused even to discuss the subject…”

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May 2, 2012

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Ministerial responsibility and special advisors under scrutiny

1 May 2012
 
The inquiry into Ministerial responsibility (and Ministers’ special advisors) announced last week by the the House of Lords Constitutional Committee should produce some helpful conclusions about the obligations of ministerial advisers in New Zealand.
 
Questions being asked about Ministerial responsibility include;
  • Is the convention on Ministerial responsibility still appropriate?
  • Do codes of conduct need to change and to be put into statute?
  • What influence, if any, should Ministers be able to exercise over civil service appointments?
  • Should the Civil Service act as a constitutional check on the actions of Ministers?
  • Are there any circumstances where civil servants should be directly accountable to Parliament?
  • Do the rules covering the relationship between civil servants and Select Committees require change?
The focus on special advisors will include questioning
  • the influence special advisors exercise both in theory and in practice
  • the current accountability mechanisms for special advisors
  • the case for increasing the accountability to Parliament for activities of special advisors
The Constitutional Committee will also inquire into accountability mechanisms for non-ministerial departments. The primary example is HM Revenue and Customs, where independence is assured by not appointing a portfolio Minister with day to day control (unlike New Zealand where legislation provides the framework for excluding the Minister from individual cases handled by IRD.) A collateral matter is the resignation of the Chair of HM Revenue and Customs – who has been subject to harsh criticism by the Public Accounts Committee regarding sweetheart deals with large corporates to substantially reduce their tax liability.
 
Media reports suggest that the Minister of Culture is going to be hung out to dry before the Constitutional Committee meets to explore Ministerial responsibility issues. The former chairman of the BBC Trust has criticised the closeness of the Minister to News Corp. He didn’t think the Minister “…. had a very high regard for his civil servants or a strong belief that a Minister needed to be particularly bounded by the contribution that the civil servants might make. So he did things very personally …”
 
A pertinent post on the Whitehall Watch blog suggests that civil servants must take some blame for recurring incidents of this type, resulting from deluded mandarins. “… the culture of ‘Whitehall knows best’ is so ingrained in the whole culture of the Civil Service, and the oft repeated claims that we have a ‘Rolls Royce’ Civil Service that is the envy of the world simply reinforces this sense of superiority. This is replicated inside Whitehall with the Treasury seeing itself as inherently superior to everyone else …”
 
Suggested solutions – a number of which are already in place in New Zealand – include
  • regionalised agencies
  • separating economic development from the Treasury
  • setting up a coordinating Prime Minister’s Office to which Treasury is subordinate
  • requiring broader experience of entrants to the senior civil service
  • increasing the accountability of civil servants to Parliament for policy advice and implementing that policy
  • giving the National Audit Office the role of supporting select committee oversight of value for money issues
  • opening up the public finance process, akin to US practices, to provide truly independent and non-partisan analysis of spending
 
 

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May 1, 2012

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The Sun no longer shines on the right choice

 
30 April 2012
 
This week’s evidence at the Leveson inquiry has not been good for News Corp, exemplified by Rupert Murdoch’s concession (if not confession) that there was a cover up of phone hacking. Apparently journalists made more than 2000 requests to intercept the phones of at least 64 prominent people.
 
But disclosures about the relationship between the Special Adviser to the Minister of Culture – responsible for the BSkyB decision – and News Corp is likely to have more fundamental impact. The Special Adviser promptly resigned regretting that he fed information to a News Corp lobbyist. He admitted flying too close to the Sun! But Jeremy Hunt the Minister, hasn’t (yet?) accepted responsibility for the actions of his staff.
The volume will be turned up on the debate about Ministerial responsibility. Is a Minister deceitful or incompetent when he claims he doesn’t know what his advisers are doing. Some would suggest that resignation is the remedy either way.   But he may have  made misleading statements to Parliament on several occasions. If proven, he will not have  must choice!
 
The start of the constitutional fallout is an inquiry into the Ministerial responsibility announced in the House of Lords on Thursday. What is the constitutional accountability of the civil service?
 
Ironically this arises in the year New Zealand celebrates the centenary of the Public Service Act which imposed process for a permanent non political public service in place of the former, politically led, civil service. Our law specifies that departmental chief executives are responsible to the Minister – although the relationship between a chief executives and a select committee may be more ambivalent.  The UK only gave statutory recognition to its civil service in 2010, and the effect on many well recognised conventions is uncertain.
 
The Constitutional Committee “…will examine the convention of individual ministerial responsibility under which civil servants are responsible to ministers, who in turn are responsible to Parliament. They will also consider the position of civil servants in non-ministerial departments such as HM Revenue and Customs and the Office of Fair Trading, where government ministers do not have day-to-day control.”
 
What will excite the media more will be the Committee’s consideration of the role of special advisors to Ministers, who are exempt from the duties of other civil servants to act with impartiality and objectivity. These advisors are not appointed on merit, and are seen to exercise increasing influence within government. Is there an inclination by Ministers to revert to the 19th century model?
 
 
 
 
 

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April 30, 2012

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Championing the rule of law

27 April 2012
 
Among topics explored at a well attended Lawyers in Government Conference yesterday were issues relating to ethics, public interest and delivering on the results being sought from better public services changes. Agency lawyers have a role to champion lawfulness, something that is not always appreciated by their colleagues who are focused on achieving particular policy outcomes. Interestingly speakers’ attention was on the professional obligations of practitioners and the concurrent obligations as government employees gained little attention.
 
Agency lawyers, in the same way as any other group in government that has a professional code of ethics, cannot subordinate their obligations to government. The Standards of Integrity and Conduct for the State Services apply across the State Services, and the principles of public service specified in the Cabinet Manual have a continuing application. Guidance on Understanding the code of conduct recognises the complications of multiple obligations –
 
“ In some organisations, collective employment agreements …may recognise commitments under codes of conduct of relevant professional associations. Organisations must always have regard to their obligations to the Government and determine how they will comply with the requirements of the State Services Commissioner’s code of conduct when developing this type of agreement…”
 
The conference concluded with a superb address by Justice Joe Williams. He identified the characteristics of a good life as the outcomes of good government. Good government is delivered through the rule of law. The Judge seemed familiar with the World Justice Project findings although not referring specifically to this international programme for measuring and promoting compliance with the rule of law. He electrified the audience recounting the story of te Kooti, and abusive processes by officials over many years. The message was that government lawyers must be champions of the rule of law.
 
Of course that is the duty of everyone in government. Championing the rule of law is part of the spirit of service. It is explicit in being fair, impartial, responsible and trustworthy.
 
 
 
 
 

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April 27, 2012

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Lobbying is business – as usual!

 

25 April 2012
 
Evidence given to the Leveson inquiry this week illustrates why business works at establishing relationships with politicians. A clearer picture seems to be emerging of the purpose and frequency of meetings between News International leaders and Ministers. Rupert Murdoch however was emphatic that in the ten years Tony Blair was in power, he “…never asked the Prime Minister for anything, nor did I receive any favours”.
 
According to Tuesday’s evidence, Murdoch and his lobbyist “… worked their way through every crack in the walls of Whitehall in search of influence…” and, seeking details of the Government’s policy regarding BSkyB, they found friends in the Culture Minister’s Office where they were supplied with information, advice and support. This seems to be corroborated by the resignation today of the Minister’s special adviser. His statement is that he acted without the authority of his boss and that he had allowed a misleading impression to be created that there was a very close a relationship between News Corps and the Department.
 
Whether through the conduct of the Minister or his staff, the intention of influencing decision-making seems to have been achieved. This is what concerns anti lobbying groups. But would the lobbying legislation proposed by the New Zealand Greens make any difference in similar circumstances?
 
The Civil Service code of conduct does not extend to special advisers. They have their own code which recognises the political character of their role. This position differs from the New Zealand situation. Here, Ministerial advisers are departmental employees and subject to the State Services code in the same way as all public servants. But under the UK Ministerial code  Ministers are responsible for the actions of their special advisers. Will the Westminster principle hold up? Will the Minister accept that responsibility or does the speedy resignation of the special adviser indicate that the Minister is distinguishing the actions of his office from the actions of the special adviser?
 
 

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April 26, 2012

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Staff expect “organisational justice”

24 April 2012

The Dominion Post editorial today pulled no punches in commenting about the Bach affair; it criticises the long drawn out process, involving an independent investigator, coming to a bizarre conclusion. New Zealand is not the only place where the independence and effectiveness of ethics related investigations has been in the news this week.
 
The New York Times reported the extraordinarily self serving investigation used to cover up massive bribery by Wal Mart in Mexico – more might be expected of Wal-Mart as the largest private employer in both USA and Mexico. In Britain, the Leveson inquiry continues to disclose jaw dropping conflicts of interest and confirmation that the internal investigations undertaken within News International were structured to avoid disclosing the character and extent of corrupting influences, contrary to their purport.
 
A post-Enron phenomenon in the US is the expansive use of “special counsel” to conduct commercial investigations where the involvement of directors or chief executives may create conflicts of interest. The trustworthiness of  findings is strengthened by the independence of the investigator. This seems to be defeated in some case by disingenuous independence.
 
The NY Times report about Wal Mart was that the investigator was rebuked by the chief executive for being overly aggressive. The investigation files were then shipped to Wal Mart’s general counsel in Mexico – the person alleged to have organised massive payments to make legal and bureaucratic problems fade away – who then exonerated his senior executive colleagues. The cover up seems to reflect an acceptance by company leaders that some business involves “working on the dark side of the moon”. In public however, Wal Mart affirms a commitment to high ethical practices.
 
Which brings into question the genuineness of the ethics being promoted. The US Corporate Executive Board advocates the importance of organisations building integrity capital. A 2011 survey of approximately 600,000 employees in more than 150 companies in 2011 confirmed that corporate culture, not process failure, underlies most corporate catastrophes.
 
Managing that risk “… is simply the movement of information from the informed to the empowered. While employees are often not willing to share observations about compliance or ethics risks, some companies are markedly better at enabling and encouraging employees to do so. Because these firms’ employees understand the value of being transparent about compliance and ethics issues, the firms benefit from what CEB calls high integrity capital.”
 
This is done through “organisational justice”. Like all justice it must be expeditious, fair and open. Organisations must be quick and consistent when responding to integrity breaches. CEB guidance is that leading companies show employees that when unethical behavior is uncovered, people are held accountable and the company does the right thing quickly and consistently.  “To foster organisational justice, leaders should:
  • Set clear expectations that unethical behavior is not tolerated;
  • Hold employees at all levels consistently accountable; and
  • Share details regarding detected, punished misconduct (within the bounds of privacy laws).” 
These are reflected in the “Six Trust Elements” which the State Services Commissioner requires agencies to address in giving effect to the Standards of Integrity and Conduct for the State Services;
 
  • Agencies have standards of integrity and conduct
  • Agencies promote the standards of integrity and conduct
  • The standards of integrity and conduct are integrated into the behaviour of State servants
  • Managers model the standards of integrity and conduct in their behaviour.
  • Consequences for behaviour that breaches the standards of integrity and conduct are known by State servants
  • Agencies act decisively when breaches occur
 
 
 
 
 
 

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April 25, 2012

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…a conundrum of codes?

23 April 2012
 
Should anything be read into the State Services Commissioner’s report on a bullying allegation in the Department of Building and Housing?  Is it fair to suggest there is an ambivalence about the role and application of the Standards of Integrity and Conduct for the State Services (the SSCer’s code of conduct)?
 
The findings include … “that the conduct of the Chief Executive in relation to the staff member:
  • was inappropriate in relation to the incident in which the Chief Executive swore at the staff member and unacceptable in relation to the incident in which the Chief Executive put her hands on the staff member’s head; and
  • breached the Department’s policies and Code of Conduct….”
The issue throughout was managed as a personal grievance. There is no indication that the SSCer treated the circumstances as a possible breach of his code although in the report conclusion he referred to the highest standards of conduct and behaviour expected of chief executives and that ” … the conduct of the Chief Executive in this matter fell below the standards expected of her…”
 
The report refers to the incident breaching the Department’s code of conduct. That code is not available on the Department’s website. (Interestingly many New Zealand organisations, in government and commercial sectors, seem reluctant to publish their codes. It is more common with international organisations, for example BP, National Bank, KPMG, Cathay Airways – although not AirNZ or Fonterra.)
 
A departmental code reflects the duty in section 56 of the State Sector Act that “….each chief executive shall ensure that all employees maintain proper standards of integrity, conduct, and concern for the public interest…” As a chief executive is not one of their own employees, there needs to be special inclusion of them, if the chief executive is to breach such a code.
 
A departmental code is a vehicle under section 57A of that Act for “…applying additional or detailed standards that are consistent with the standards applied to the agency…” by the SSCer through his code. It seems unlikely that a breach of a departmental code will not breach the overarching requirements of the SSCer’s code.
 
The DBH incident could be the sentinel case. It is, perhaps, a missed opportunity to explain the relationship between the codes, and when the SSCer will explore failures to comply with his code. SSC guidance is that “ …there is a relatively high threshold for the involvement of the Commissioner in individual matters of misconduct…”
 
The SSCer’s code would appear to be relevant to this matter. That code applies across the State Services. It applies to chief executives as part of their agency; the obligations are imposed by section 57A on “…an agency (including its employees)…”  The introductory explanation confirms that the code applies “… to everyone working for State Services organisations…”
 
The SSCer’s code is summarised in the transformational expression, in effect a mantra, that in the State Services “…we must be fair, impartial, responsible and trustworthy…”
 
This mantra is mirrored in the Cabinet Manual specification of the principles of public service, and the requirement that employees in the State sector must “…meet high standards of integrity and conduct in everything they do. In particular, employees must be fair, impartial, responsible, and trustworthy…”
 
From this cascade you can infer that where a State servant breaches an agency code, they are likely to have breached both the SSCer’s code and the Cabinet Manual directions.
 
So what does being fair mean? The SSCer’s code requires that We must treat everyone fairly and with respect. This is the first of the 18 standards – primus inter pares – the first among equals.
 
The SSCer’s guidance indicates that this relates to “the public we serve and the colleagues we work with. This requires being courteous and contributing to the smooth functioning of our workplaces by:
  • not discriminating against anyone, except as legally required to give effect to our organisation’s functions
  • protecting the privacy of people accessing services
  • not harassing, bullying or otherwise intimidating members of the public or colleagues
  • respecting the cultural background of members of the public and colleagues
  • having proper regard for the safety of others
  • avoiding behaviour that may endanger or cause distress to colleagues
  • not allowing workplace relationships to adversely affect our work performance
  • valuing equality and diversity by understanding our differences…”
 
The SSCer conducted surveys in 2007 and 2010 to measure the extent to which there was awareness of, and compliance with, his code. Abusive or intimidating behaviour towards other staff was the most frequently identified misconduct in both surveys, being observed in the previous 12 months by 38% of the 8238 survey respondents across the State Services in 2010.
 
Following the surveys, agencies were reminded of the importance of  the “Six Trust Elements” when considering misconduct.  One of the elements is the requirement that “Managers model the standards of integrity and conduct in their behaviour”.
 
 
 
 
 
 
 
 

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April 23, 2012

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High level meeting to harden open government commitments

20 April 2012
 
It will be interesting to see what eventuates from the commitments of participating states at the Open Government Partnership meeting in Brasilia. This first High Level meeting which wound up yesterday got underway earlier in the week with encouragement from Hillary Clinton.
 
The Secretary of State spoke of strengthening … “a global ethos of transparency and accountability… to help make the Open Government Partnership a leader in ensuring that the 21st century is an era of openness, transparency, accountability, freedom, democracy, and results for people everywhere.”
 
It was different from many international events because in addition to the usual member governments more than 200 civil society organisations took part. It was also different because of the poor showing from Asia, the Middle East and Oceania. Only Indonesia, South Korea and the Philippines were represented (and Russia if its Pacific credentials count.) Mongolia took part but otherwise no other country further “east’ than Azerbaijan – important in its own right as the first democratic and secular state in the Muslim world.
 
Australia and New Zealand, despite commitments to the accessibility of official data were notably absent from this conference to promote open government elsewhere in the world. A critical observation by the writer of the Australian Open and Shut blog is that countries are known by the company they keep – implying that the Australian and New Zealand absence aligns them with countries less interested in good government.
 
Another irony is that a blog was launched earlier this month to promote the conference and its proceedings. But no post has been added this week of the conference! Something has happened to participants’ enthusiasm for sharing information.
 
A symbolic action by Hillary Clinton was the announcement that she would… “be sending policy guidance to every U.S. Embassy worldwide on modernizing technology through diplomacy. We want to open up the State Department not only to U.S. citizens, but to people everywhere, because in keeping with the principles of open government and this partnership, we believe that when people are empowered to speak their minds and leaders are held to account for their actions, we all do better.”
 
 
 
 
 
 

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April 20, 2012

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Assad learns nothing this year

19 April 2012
 
A blog entry posted here a year ago, conceded that perhaps the Syrian President was willing to improve government in Syria, that his public comments could be seen as a wish for change. The problem I suggested was perhaps that he was a slow learner.
 
Twelve months on, there seems to be very little evidence that he has any interest in what is needed to bring about any sort of decent civil society in Syria. If he is learning he is on a very slow trajectory!
 
Although more “western” than most of the Arab world, Assad’s administration is making no progress in promoting transparency, integrity or sound democracy. What amounts to civil war may be the inevitable consequence. The ceasefire brought into force this week is reported to be a very grudging concession to world opinion. Many believe it will be shortlived.
 
In 2010 Transparency International rated Syria in 127th place on the Corruption Perceptions Index. In the updated survey results published in December 2011, things had worsened. Syria slipped to 129th place. It is likely to slip further this year with the armed forces showing little commitment to the ceasefire promoted by the UN Secretary General. There is little confidence in Europe with general cynicism about the likelihood of UN observers being able to influence things for the better.
 
A time series of the World Bank World Wide Governance Indicators between 1998 and 2010 shows that the high point in Syrian economic and political development was in 2004. All ratings have deteriorated since. Reversing the trend seems unlikely to occur for quite some time yet.
 
Assad is a very, very, slow learner!
 
 
 

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April 19, 2012

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Registering lobbyists …. and the rub of the greens

18 April 2012
 
The Prime Minister, claiming that his Government has done more for transparency than any other, said that he was not fundamentally opposed to a register of lobbyists. The private member’s bill on lobbying may make progress. Until recently New Zealand has seemed oblivious to developments elsewhere. Now, media and public opinion suggests that the tide for regulating lobbyists is on the rise here also.
 
The rationale had been that formal controls were unnecessary as we are blessed with low levels of corruption. But that is somewhat hollow. Comparable Scandinavian jurisdictions are tightening their processes, and the OECD expects member states to implement its Principles of Transparency and Integrity in Lobbying.
 
If, as many claim, there is no problem, there may be little detriment in codifying openness. Responding to public sentiment can only be politically advantageous
 
The purpose of lobbying is to grease the wheels. Grease makes the wheels spin more freely. It increases efficiency. It obviates what can be seen as the wasteful processes of democratic government.
 
The State Sector Act requires efficient, effective and economical management of departments. But the legislation also requires that standards of integrity are imbued and maintained. Those standards create friction.
 
Measures to exclude personal interest, disclose decision-making processes, and provide transparency are a brake on any base motivations of those exercising power. Experience shows that lobbyists lubricate the system; their craft is to reduce drag.
 
Integrity measures create resistance to self interest. Ironically the inefficiency of that resistance is a ‘good thing’.  It reinforces the democratic process, supports the rule of law and promotes trust in government.  It embodies the spirit of service.
 
 
 
 

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April 18, 2012

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