KEY POINTS:
Helen Clark's barely disguised threats to sack the board of the high-performing New Zealand Super Fund if it breaches ethical guidelines is an extraordinary over-reaction to a Green Party beat-up.
Clark's comments - made after alarmist and hyperbolic allegations by Green Party co-leader Russel Norman over the fund's
claimed investments in "nuclear weapons" - is an implicit message to the directors of all state-owned enterprises or government-appointed commercial agencies that if your organisation causes embarrassment to the Government then Cabinet will have no hesitation in bringing the boom down by firing you at the first opportunity.
The Super Fund - aka "Cullen Fund" - has been a roaring success, clocking up annual returns averaging nearly 15 per cent, with close to 19 per cent expected this year. It was established on the basis of being at "arm's length" from government control. Its "guardians" are explicitly mandated to perform their duties free from political interference and expand the fund to ensure returns are preserved to help fund future state-provided super payments for our ageing population.
It's doing a pretty good job. Clearly far too good for the Green Party, which now wants to use Norwegian rules to circumscribe what the fund should invest in.
Clark was caught on the back foot by the claims - retailed by the Greens and The Listener - that the fund may be in breach of section 5 (2) of the 1987 NZ Nuclear Free Zone Disarmament and Arms Control Act which says no government agency can manufacture, or aid others in the manufacture of, nuclear explosive devices inside or outside New Zealand.
The Greens' claim appears to be based on comments in The Listener by a Victoria University law expert, which appear contradictory at best.
Alberto Costi suggests that the fund's investments in six particular companies (including US firm Boeing) are "certainly immoral" and "hypocritical", and may violate the anti-nuclear laws, as the firms are involved to some extent in the production of nuclear weapons.
Finance Minister Michael Cullen's response to the allegations is logical. The fund has a responsible investment policy and the use of generic components in specific products is an example of how difficult it can be to implement such policies. "Would you avoid investment in Mercedes because it appears to be the dictator's car of choice?" he asked.
But instead of backing Cullen's stance that the fund's managers should be left alone to get on with the job, Clark has bowed to the Greens' scare-mongering by indicating a need to "talk through what the issues are here".
A Labour Party backbencher's bill on ethical investing by state agencies may now be elevated.
In a 20-page paper called Betting the Bank on the Bomb the Greens "revealed" the fund had invested a total of $64 million in 12 companies that had been blacklisted by the Norway Pension Fund for ethical reasons.
On the Greens' list: Wal-Mart (US and Mexico) for human rights breaches, Freeport McMoran Copper B for "severe environmental damage", six companies - Boeing, BAE, EADS, Finmeccanica, Northrop and United Technologies - for the "production of nuclear weapons" and two - Lockheed Martin and Raytheon - which are said to have produced cluster bombs.
The Listener has gone a step further. In an article headlined Dirty Dollars - which the Greens gazumped with their Friday press release - the magazine quadrupled the $64 million at issue to some $230 million of questionable investments that the fund has made in so-called "sin stocks".
New Zealanders might be amused to know that the "sin stocks" include a raft of companies that are responsible for services they might enjoy. SkyCity features among four "gambling" companies in which the fund has invested some $40 million; Lion Nathan is among eight brewing companies (total investment $22 million); NZ's Rakon - a nifty little technology company of which we should all be proud - has been lined up in the 14 "arms" companies that the fund has invested some $109 million; then there are the three "uranium" miners - companies including BHP Billiton and Rio Tinto Zinc - into which $19 million has been sunk; the $28 million in seven tobacco companies, and $12 million invested in companies trading with the Sudan like Germany's Siemens.
Many of the companies singled out for special attention are well-known to business readers and a fair swag of New Zealand consumers who buy their products.
But notably the Greens have not called for a boycott of all products made by the 12 multinationals the party singles out nor the additional 29 companies on the "sin stocks" list.
The party would find itself a laughing stock if it demanded the Government legislate to ban all those companies from selling their products here. Among them are fuel cells, air pumps - and all manner of stuff that fits a Green umbrella.
The Greens also put "uranium" in the unethical category - leaving aside the fact that if the developed world wants to reduce climate warming it had better ensure countries like China get access to uranium to fuel nuclear power stations. But instead the party indulges in spectacular nonsense by asking for the fund's investments to be realigned with New Zealander's values. Deciding where that boundary lies would be extremely difficult.
Fund chair David May is on solid ground when he says what's considered ethical in New Zealand is a "moveable feast".
Among the guardians are Sir Doug Graham, Bridget Liddell, David Tume, David Newman and Glen Saunders.
Notably the fund does not appear to have made any investments in companies selling prostitution services - a service that many New Zealanders might feel unethical but one that has been explicitly legalised by this Government.
Under the Greens' rationale, investing in a company which owns brothels - and they do exist elsewhere - would be legal, but, investing in a plane manufacturer like Boeing, on whose planes thousands of New Zealanders fly each day, would not.
Clark has indicated she finds the idea of investing taxpayers' money in tobacco companies "offensive".
If the Prime Minister was assured of her convictions, her Government would simply make the sale of tobacco illegal in this country rather than pocketing close to $1 billion in excise taxes each year.
The danger is that chairman May - and the other guardians - will start second-guessing Government responses when it comes to laying down investment guidelines for the fund's various managers.
That's not the best outlook for the fund.
