Ireland just twisting the tiger’s tail?

4 January 2011

It was less than five years ago that New Zealand media unfavourably compared the business environment here with Ireland; the general sentiment being that our markets were more like a domestic moggy than that celtic tiger. How things changed. Ireland is now in an economic mess, and nothing is heard from those who advocated adopting the Irish model.

An interesting holiday read was Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger by Fintan O’Toole, who is an Irish Times columnist. He explores the economic bubble, and the way it burst.

The story is now well known – disregard for good fiscal policy, and through both incompetence and corruption, the capture of government by business interests. The boom, resulting from minimal controls on the Irish banking and financial sectors, and rash tax incentives for property developers, was both spectacular and short lived.

O’Toole explores widespread disregard for principles of good government – self interest seems to have overcome any sense of integrity and commitment to the well being of community. Ship of Fools is a case study on the destructive consequences of unmanaged conflicts of interest.

New Zealand Ministers are bound by the Cabinet Manual which is explicit about identifying and managing potential conflicts.  The Cabinet Manual also specifies that “all employees in the state sector must act with a spirit of service to the community and meet high standards of integrity and conduct in everything they do. In particular, employees must be fair, impartial, responsible, and trustworthy.”

Such prescriptions are not an assurance of good government. People in public office must be unwavering in respecting the democratic process and the rule of law. Integrity is a state of mind not a set of rules.

http://www.guardian.co.uk/books/2009/nov/28/ireland-fintan-otoole-book-review

cabinetmanual.cabinetoffice.govt.nz/node/42#3.50

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January 4, 2011

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Being responsible with official information

3 January 2011

Happy New Year… enough of festive frivolities – back to blogging….

The security implications arising when officials lose IT equipment has been highlighted by the Inspector General for the US Government Printing Office.  That agency is unable to account for  88 laptops (from a sample of 304). As many as 314 GPO lap tops may have been lost over the last five years. The probability is that some will hold sensitive data. Many were allocated to the branch responsible for developing and supplying the US e-passport.

There are already doubts whether the e-Passport will secure the holder’s biodata as intended.  For more than 12 months the chips for the e-Passport were manufactured in Thailand, in an uncontrolled factory. Someone with access  to e-Passport components could make a clone that would foil the electronic security system.

The audit report of ethical practices in the Government Printing Office makes for interesting reading.  There is no equivalent systematic appraisal of processes published on the website of any New Zealand agency.

The loss of data storage devices creates the same sort of operational and reputational threat to agencies in New Zealand as elsewhere. In mid 2010, the Privacy Commissioner investigated agency controls on portable storage devices,  such as USB sticks, cell phones, iPods, PDAs (personal digital assistants), and smart phones such as BlackBerrys and iPhones.  Few agencies have substantive controls and processes to account for these devices.  The research found that more than 120 devices were known to have “gone missing” over the preceding 12 months from 42 agencies surveyed.

The Privacy Commissioner’s guidance recommends publishing an agency policy and setting up controls.  These should include using software to track use of portable storage devises, data encryption, keeping a register of devices, and regularly accounting for them.

Interestingly kiwiblog.co.nz yesterday commented about agency IT systems, not relating to the way information is protected, but in response to criticisms about the number of games which had been entered into the Department of Labour system, as noted by the chief executive replying to an Official Information Act request.

http://www.publicintegrity.org/articles/entry/2776/

http://gpo.gov/pdfs/ig/audits/11-01_FinalReportGPOsEthicsProgram.pdf

http://privacy.org.nz/assets/Files/Surveys/Portable-Storage-Device-Survey-Report-2010.pdf

 

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January 3, 2011

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China seeks a culture of integrity

31 December 2010

This week the Chinese Government published a report on measures being taken within both the Communist party and the Public Service, to establish a “culture of integrity”. It is part of a campaign to “combat corruption and build a clean government”. China acknowledges that corruption is still a ”very serious” problem.

The report makes impressive reading  – indicating a comprehensive programme to reverse China’s reputation for corruption. Few other countries would be able to describe  similar commitments.  The report lists not only internal measures but also endeavours to comply with treaty obligations and the leading contribution China is making to the activities of  the APEC Anti-Corruption and Transparency Experts Task Force and the ADB/OECD Anti-Corruption Initiative for Asia-Pacific.

The number of corruption investigations increased again over the year.  However, as if to reinforce the Government’s resolve, on the day the report was released, the media carried news of the execution of a regional Party leader for accepting bribes of more than $US 4 million.

The challenge for China is imbuing younger generations with an understanding that a culture of integrity is more than not getting caught contravening regulations; that integrity is a state of mind, it is not a set of rules.

www.chinadaily.com.cn/cndy/2010-12/30/content_11774079.htm

http://news.xinhuanet.com/english2010/china/2010-12/29/c_13669383.htm

www.bbc.co.uk/news/world-asia-pacific-12088147

http://news.xinhuanet.com/english2010/china/2010-12/30/c_13671251.htm

 

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December 31, 2010

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Enforcement skills valued in US private sector

30 December 2010

The Washington Post reports that staff in agencies like the Justice Department and the Securities and Exchange Commission,  recruited by banks and law firms, are doubling their salaries.  Their skills are in demand.  Will these prospects affect the way officials do their job? What is the private sector getting for its money?

Conflict of interest rules relating to future employment are much more rigorous in US agencies than in New Zealand, eg former officials are barred from cases they worked on while in government. Generally, they may not work in areas of their public service specialty for two years, and for 12 months may not represent clients before their former agency.

There has been no public or political concern about revolving doors in New Zealand. The current view is that limiting employment opportunities is an unacceptable constraint in almost all circumstances. There is one statutory limitation and that is on the registration as an immigration agent of a former immigration officer.  Unconcern for the implications of officials privatising their public service skills distinguishes New Zealand from almost all other OECD member states. This can be seen in the data gathered in 2010 OECD research.

www.washingtonpost.com/wp-dyn/content/article/2010/12/29/AR2010122902721.html?hpid=topnews

www.oecd-ilibrary.org/governance/post-public-employment_9789264056701-en

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December 31, 2010

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Public confidence changes in government agencies

24 December 2010

The 2010 UMR Mood of the Nation report provides a disappointing picture of public confidence in the Public Service, which, grouped with Parliament and Big Business, recorded the most substantive drops.  The Public Service fell (5%) from 34% to 29% in the number of respondents who indicated that they  had a great deal of confidence in it.  Big Business and Parliament both fell to 22% in numbers who had a great deal of confidence in them.

As in 2009 the Fire Service is the most highly rated agency, followed by Police then the Departments of Customs and Conservation.  The Accident Compensation Corporation, and Ministries of Social Development and Maori Development (TPK) were the least highly rated.

The Department of Corrections was the agency recording the largest positive movement in the respondents who rated it as doing an excellent job, improving 4% from 2009.

http://www.umr.co.nz/Reports/UMR%20Mood%20of%20the%20Nation_2010.pdf


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December 24, 2010

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Are gifts just a token of appreciation?

23 December 2010

Christmas is a time of giving. Whether reflecting age old customs, religious rites or marketing pressures,  we mark the year end with parties and gifts for family and friends.  There tends to be more partying than gift giving within work places, but gift giving by suppliers to their client businesses has become widespread.  The rationale is clear – to maintain relationships with customers and show appreciation for their custom.  The motivation is commercial  – it isn’t personal. The costs are deductible expenses; rarely are they personal and paid from after-tax income. Gifts and hospitality are commonly given to decision makers – those with the discretion to decide where purchases will be made.

And that is why State servants must be careful in their readiness to accept goodies distributed during the festive season. Principles about the acceptability gifts and hospitality do not change because it is Christmas. Guidance from the Office of the Auditor General has continuing applicability. We should discourage gifts of more than nominal value. But more importantly, we must remain alert to the commercial motivation behind giving, recognise the unavoidable sense of obligation that beneficiaries of gifts experience, and ensure that we follow our agency policies for transparency. Gifts need to be declared and openly registered.

This may be the last year when British businesses distribute Christmas largess. When the Bribery Act  comes into force next year, giving anything of substantive value could be considered an unlawful inducement. Comments by a Price Waterhouse Coopers spokesperson about the legal implications has been widely reported. From 1 April businesses will need to have a “corruption sniff test”  and ensure that gifting is not a reward for an “improper performance of a relevant function”.

http://www.telegraph.co.uk/finance/yourbusiness/8217356/Christmas-gifts-could-be-illegal-under-Bribery-Act-says-PwC.html

http://www.oag.govt.nz/2007/sensitive-expenditure/part8.htm

 

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December 24, 2010

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Bankers fall off Christmas card list

22 December 2010

Bankers using bonus payments to create bogus business is another aspect of the financial sector meltdown reported by Pro Publica, a United States NGO .  The report will give more ammunition to those who claim that some in the finance industry are without ethics.  Merrill Lynch informants disclosed to pro Publica how they placed mortgage-backed securities which were too toxic even in a market  that eagerly bought risky assets.

Bank executives  set up a group within Merrill to take on the bank’s money-losing securities. The part of the bank creating the securities paid for them by passing portions of their bonuses to the new group. This  then enhanced their capability to earn even larger bonuses.

Pro Publica indicates that tens of billions of dollars of Merrill Triple A-rated mortgage-backed assets were developed. When their value evaporated, Merrill folded, was sold  to Bank of America, and had to be bailed out by taxpayers.

Not surprisingly stories of this sort influence the declining public perceptions of once revered bankers.

In the 2010 UMR Mood of the Nation Report, NZ bankers improved on the levels of public confidence, but still rated below public servants and lawyers, although above politicians.   Doctors, nurses, teachers and police officers continue to be held in considerably higher regard by the public.

www.propublica.org/article/the-subsidy-how-merrill-lynch-traders-helped-blow-up-their-own-firm

www.umr.co.nz/Reports/UMR%20Mood%20of%20the%20Nation_2010.pdf

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December 23, 2010

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Are ethicists more ethical than others?

21 December 2010

Ethicists are possibly short on ethics. This is a conclusion to be drawn from research highlighted in an article in the Guardian.

The research compared the number of philosophy books that were missing from university libraries.  It found that relatively obscure, contemporary ethics books of the sort likely to be borrowed mainly by academics and senior students were  about 50% more likely to be missing than non-ethics books.

This research, which first received media attention in 2005, has new “legs” because of recent experience interacting with participants at a conference of the American Philosophical Association.  Sweets were offered as an inducement to complete a questionnaire about the ethical behaviour of ethicists they knew. Many took sweets without completing the questionnaire, or took more sweets than was considered appropriate.

The conclusion reportedly published in the journal Mind, is that “on the whole, ethicists behave no more ethically than do other persons”.

The expectation of State servants is that they do behave more ethically than others.  The standards of integrity and conduct set by the State Services Commissioner, and the spirit of service prescribed in the State Sector Act, are explicit characteristics of public service professionalism. The requirement to be fair, impartial, responsible and trustworthy, is more demanding than community norms.

http://www.guardian.co.uk/education/2010/dec/13/ethics-study-steal-books-moral

http://schwitzsplinters.blogspot.com/2006/12/do-ethicists-steal-more-books-more-data.html

http://www.cabinetmanual.cabinetoffice.govt.nz/3.50

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December 21, 2010

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Corporate hospitality at Olympic Games may breach UK Bribery Act

20 December 2010
The Telegraph(UK) today has drawn attention to a possible impact of the Bribery Act 2010  on corporate hospitality associated with the London Olympics.  The Act may have the effect of outlawing the sort of entertainment and gift given which, to date, has been part of major sporting events. Many major companies host their contacts at such events.  But using the Games as an opportunity to influence current and potential customers, suppliers and business partners may constitute an offence when the Act comes into force next year.
The Act creates offences that include offering or receiving financial or other advantage, bribing or corrupting a foreign public official and other corporate crimes – yet to be defined. The report suggests that companies will face high costs in training staff and setting up processes to monitor potential bribery.
The Act may distinguish between the acceptability of “reasonable” business lunches and lavish corporate events intended to influence participants.  Undue influence may be unlawful. The Act is intended to have a rigorous effect, and to demonstrate a commitment to the OECD Anti bribery Convention and the UN Convention against Corruption.  
The bribery provisions in the New Zealand Crimes Act relate only to judges, MPs, law enforcement officers and officials.  This means the aspirations of business to use the Rugby World Cup next year to entertain and influence, are unlikely to constrained.  However, there would be implications under the State Services code of conduct if agency board members or their staff accept such entertainment.
 

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December 21, 2010

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Australia joins International Anti Corruption Academy

19 December 2010

The International Anti Corruption Academy (IACA) opened in Vienna in September, as a cooperative venture involving UNDOC, INTERPOL,  European Anti Fraud Office  and the Austrian Government. Australia this week become the 43rd State signing an Agreement setting up IACA as an international organisation.  The Agreement is open for States’ signatures until 31 December 2010.

IACA seeks to strengthen the capacity of countries to manage corruption and to develop the skills of officials. The list of Founding members is somewhat like the membership of the UN Convention Against Corruption – suggesting good intention rather than real commitment.  Recent signatories include Burkino Faso, Kenya, Congo, and Iraq ( rating respectively as 98th, 154th,  164th, 175th on the Transparency International Corruption Perceptions Index.)

The first course conducted in September involved Asset Recovery processes.  IACA is developing a degree program including a 18 – 24 month Masters course involving a holistic approach to corruption –involving philosophy, cultural studies, ethics, criminology, political science, psychology, economics and law.

New Zealand Government, which has deferred ratifying UNCAC until legislative changes are in place to fully comply with convention obligations, has not made any statement about IACA.

www.iaca-info.org/

transparency.org/policy_research/surveys_indices/cpi/2010/results

http://justice.govt.nz/policy/criminal-justice/copy_of_bribery-and-corruption/legal-framework/the-united-nations-convention-against-corruption/?searchterm=corruption

 

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December 19, 2010

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