Weapons of mass distraction

Business has got enough to do without a deluge of regulation, but there are signs the Government could be about to listen, reports FRAN O'SULLIVAN.

One month ago, and it looked as if it was all on for another "Winter of Discontent" between business and Government.

The effects of a surging kiwi dollar, a political backlash on Treaty of Waitangi issues, the dumping of popular Commerce Minister Lianne Dalziel and a potential revolt by small to medium-sized businesses against a welter of onerous employment legislation threatened again to sour their relationship.

It is not as if the relationship was already coated in gold-plate.

Since Labour took power the Government has occasionally played favourites and marginalised critics as it has sought to impose what critics claim is a trade union-inspired agenda.

The Government's "anti-business" reputation is not entirely fair.

It has won applause for sectoral initiatives to try to build up the information, communication, technology, biotechnology and creative industries.

"Yes, but," says Jim Syme, Deloitte/Management Magazine's 2003 chairman of the year, "the policy should be available to all businesses."

Overall the perception has turned negative.

National Party leader Don Brash's dramatic rise in the opinion polls, and Helen Clark's quick u-turn on some negative Treaty of Waitangi issues, have given business confidence that if it beats its drum loudly enough it might get a backdown.

There has been a significant development in the Government-business relationship, particularly with those companies from the "Big End of town".

Chief executives from the top 10 listed companies on the NZX recently held what is said to be the first of a series of biannual meetings with the Prime Minister.

The meeting - which took place under "Chatham House rules" a fortnight ago - was instigated by NZX chief executive Mark Weldon.

It is understood the agenda included discussions on immigration and the controversial Employment Relations Law Reform Bill - the mishandling of which cost Cabinet minister Margaret Wilson her Labour portfolio in Clark's recent Cabinet reshuffle.

Details of the discussion, which have since filtered out to a select group within the business community, suggest Clark may entertain some changes to the employment legislation as it winds its way through a parliamentary select committee. Others caution that the changes may simply be cosmetic.

There have been other indications that Clark will ensure a full consultation takes place with the business community on two key external initiatives - her quest for a free-trade deal with China and Finance Minister Michael Cullen's proposal for an Australasian single market.

She now seems aware that business is fed up with the Growth and Innovation Advisory Board acting as a private court - but not consulting widely with the broader business community.

"They've been duchessed", said one chief executive of Rick Christie's advisory group.

The top 10 companies do not intend to become a formal group and are there by right of size - not prime ministerial choice, or self-selection.

There is huge opposition within the business top table to the employment-related changes.

Fully 90 per cent of the 120 chief executives and company chairmen surveyed said the legislation rated as a negative.

This negativity outweighs some relatively positive responses to other Government-led initiatives on sectoral reform, skills development and transport and spills poison on the relationship.

None of the "top 10" chief executives who were invited to the prime ministerial soiree attends the Business Roundtable, though Fletcher Building chief executive Ralph Waters pays lip service through an annual membership fee.

Neither is Andrew Ferrier, chief executive of Fonterra, New Zealand's largest company, a member.

Few from today's top 10 listed companies line up with Roundtable executive director Roger Kerr's economic rationalists. Clark's ostracism of Kerr continues.

But there are signs a more vigorous debate is emerging within the business community on some aspects of employment and productivity.

ASB Bank chief executive Hugh Burrett says the employment legislation assumes all employees want to join a union. Burrett presides over two major businesses.

"We have Sovereign with a collective and we have ASB on individual contracts, so we see both sides and probably understand both sides, and would rather have the opportunity for an either/or.

"Whatever they put in place we'll operate that and I'll make it happen."

But Burrett does not want any more "going back to the sixties" stuff.

"Ross Wilson in the CTU has said he wants industry awards - well that is just bloody ridiculous in the world today."

Some businessmen see an opportunity to make cultural change.

Bill Falconer, chairman of a raft of New Zealand listed companies, said if the employment legislation survives intact, it will make it difficult to negotiate contracts across industry. "What I am seeing is a regulatory framework introduced by this Government which is going to make business harder."

Productivity to Falconer is the key to social equity. "Social equity is not about redistribution - it is about driving the system better to everyone's benefit.

"There's nothing more satisfying to an employer than to be able to award a bonus or special payment or put the wages up because people have done well.

"To achieve social equity by redistribution of an existing cake just seems to me to be backwards looking."

Waters also points to the need to get a high wage growth mentality established. "I think New Zealand's got a bit of a serf mentality where they think low wage costs is a comparative advantage," he said. "Well Fiji's a low-wage-cost country.

"We've had high wage growth for years in Australia and high productivity and I think it makes the cake bigger because at the bottom of the pyramid all those people are earning more."

Westpac's Ann Sherry shares Waters' view that business reaction against the employment legislation has been overdone.

"People keep saying how terrible it is," said Sherry. "I think, 'Well, not compared to some of the union things I've dealt with'."

Others suggest their frame of reference is coloured by the fact they are both Australians and used to union-dominated industrial relations agendas.

Shane Jones, chairman of Te Ohu Kai Moana - which has a major stake in the New Zealand fishing industry - questions whether business should turn the blowtorch on its own performance more often. Jones laments the calibre of chief executive candidates coming through.

"A lot have been skilled at sharpening costs but not at regrowing businesses."

The surging kiwi is another major issue facing the top table chief executives and chairmen. Already it has had a huge impact on the earnings of dairy farmers and a host of other exporters.

Carter Holt Harvey chief executive Peter Springford said despite Reserve Bank Governor Allan Bollard's proposed intervention, currency remains a big issue. "It's a bit of an overhang for us.

"We're working damn hard on productivity to overcome it," says Springford. "We'll get a long way towards overcoming it, but it's our number one profit driver for this year."

The forestry chief says the employment legislation is imposing impediments on CHH's productivity drive. "We're certainly telling the Government."

Others such as Air New Zealand's Ralph Norris say their business is already operating on tight margins. Norris says if the Holidays Act is applied in the way in which it is intended, Air NZ's business will become less competitive - particularly within its engineering group, which competes for business internationally.

Sherry says the dollar will also put pressure on farmers who "cash-flow their businesses" from year to year.

Over-riding the top table concerns is a desire for a "no-surprises" policy environment. Many chief executives canvassed by the Herald suggested the Government-business relationship would be greatly improved if they talked to - not past - each other.

Over-laying this concern is the potential for a change of government.

Said AMP's Rosanne Meo, "Flip-flops on policy create uncertainty over a broad range of initiatives.

"It feels like electioneering is well under way."

BIG END OF TOWN

The chief executives

Ralph Norris, Chief executive, Air New Zealand: The Air NZ chief says his airline is already struggling with an exchange rate priced in US dollars without having to bear additional regulatory moves. "It's the old story ... it's not just one change ... it's the incremental effect of changes over time."

Peter Springford, Chief executive, Carter Holt Harvey: CHH is hugely exposed to the kiwi dollar. But Springford does not have much faith in Reserve Bank interventionist talk. "We don't have a lot of foreign reserves and if we start fighting hedge funds then we're going to lose ... I think it's just talking."

Hugh Burrett, Chief executive, ASB Bank: Burrett wants Labour Minister Paul Swain to create a better environment. "Ross Wilson in the CTU has said he wants industry awards - well that is just bloody ridiculous in the world today. You've got to have competition - healthy competition - and I don't think that provides it at all".


The chairmen

Jim Syme, Chairman, Waste Management: Syme, honoured as New Zealand's top chairman at last year's prestigious Deloitte/Management Magazine Top 200 Awards, said the Government was selecting favourites. "Policy should be available to all business."

Rosanne Meo, Chairman, AMP New Zealand: Meo is concerned at the apparent abandonment of targets to reposition New Zealand within the OECD. "Flip-flops on policy create uncertainty over a broad range of policy initiatives ... It feels like electioneering is well under way."

Bill Falconer, Chairman, Restaurant Brands: Productivity is the key issue. "I want to see New Zealanders having bigger pay packets ... to be earning the same as Australia ... and feel good about the rewards for enterprise here."