Seymour DavidURGENT DEBATESAir New Zealand—Minister of Finance's Letter of ExpectationDebate resumed.DAVID SEYMOUR (Leader—ACT): Thank you Mr Speaker. I move That the House take note of a matter of urgent public importance.That matter is a letter sent by Grant Robertson on behalf of the Government to Dame Therese Walsh the chair of Air New Zealand. This letter has been described by Fran O'Sullivan one of our most senior journalists and respected business journalists in the New Zealand Herald as a shocker." And she does not use that term lightly because that's exactly what this letter is. It is a letter sent to the business a commercial airline that has achieved enormous success and many international awards along with an exceptional reputation amongst New Zealanders. It's been sent to that business and it set out a series of mutually competing and in some cases contradictory expectations that in my view put the directors of that company in an impossible position. The implications are not just for Air New Zealand they are for all of New Zealand because what this letter means is that good people who sign up to be directors on companies to aid New Zealand by offering their skills may find themselves put in positions where they simply cannot discharge their legal obligations with the political pressure that surrounds them.I recognise the narrowness of this debate but it is worth acknowledging some of the storied history that got us here. Not so long ago in some people's lives at least we had a Prime Minister who was also the Minister of Finance and ruled and micro-managed with an iron fist. Rob Muldoon went over to the UK and agreed that the National Airways Corporation or Air New Zealand would use Rolls-Royce jet engines instead of General Electric even though Air New Zealand was not set up to service Rolls-Royce engines. So the people trying to run the business went through the machinations of trying to actually figure out how to land and take off on time and serve their customers and run an effective airline while dealing with the most unconscionable political interference. The reasons that we have an State-owned enterprise (SOE) model the reasons that Air New Zealand and many other SOEs are operating as private businesses with an objective to their shareholders is actually to avoid that kind of micro-managing interference that makes it impossible for the directors and management of a company to deliver a useful service to their customers.And this letter says given the critical role Air New Zealand plays in the success of New Zealand both socially and economically the Government's enduring expectations for Air New Zealand are to be a "national airline" and it must continue to operate to support economic development including access to international markets for our exporters and international tourism linkages once international borders reopen.Now if the directors are to take the letter—which has come from someone who's the Deputy Prime Minister and the major shareholder—seriously then they've got to do that. But they've also got to maintain comprehensive domestic route networks that allow people and goods to move across New Zealand in a timely fashion at a reasonable cost. Well to what extent should the directors put weight on that particular matter? And then they have to demonstrate their commitment to environmental sustainability despite being an airline whose primary business is blasting large vehicles through the air. And they have to also engage with the development of new aviation fuels for New Zealand. So so far they've got to be a network for exporting and connecting with the rest of the world maintain a domestic network that's comprehensive—whatever that means—at a reasonable cost and deliver goods and people across New Zealand in a timely manner but they've also got to try and save the planet by engaging in the development of new aviation fuels.But wait there's more. You might think that Air New Zealand would have to lean quite hard on its employees in order to get them to deliver what is starting to sound like a monumental task but actually they also have to be a leader in best practice workplace relations given it is one of New Zealand's largest employers. So they not only have a role as an airline delivering things around the world and New Zealand not only do they have to help invent new fuels but they also—according to this letter from the Deputy Prime Minister from their chief shareholder—have to actually make sure that they're a world leader in workplace relations. And then they have to continue acting as a responsible corporate citizen. Now I have to assume that that was put in as a bit of filler. But anyway that's another thing that they have to do. If the board are going to discharge their duties in good conscience then they also have to do that. And then here's the kicker—here's the kicker—they have to achieve these objectives while operating as a commercially sustainable and capital efficient business. So not only do they have multiple and at times conflicting objectives put on them by the Deputy Prime Minister of New Zealand they also have to do it while making good use of capital and actually be commercially sustainable.These are not all the objectives that the directors will have. The directors also have an objective which is in the Companies Act section 131 if I remember correctly that they must act in accordance with what they see as the best interests of the company. Now if you are a director somebody of serious calibre in that sort of position who has options who is invited to be on a range of different boards—in some cases in New Zealand but in many cases for our top directors in New Zealand across the Ditch and further afield as well—what has just happened to the attractiveness of serving our national carrier of being on the board of Air New Zealand? Well you are put in a nearly impossible position where you may not be able to achieve all of the conflicting objectives you have including those recently given to you in a rather aggressive letter by the Deputy Prime Minister of the country.And then—here's the kicker—here's what comes next: see that is a difficult situation but some people might say "You're taking it too seriously. Maybe it doesn't really have the kind of weight and gravity that's been made out by people like Fran O'Sullivan in the New Zealand Herald." Well here's what it says next the letter says—menacingly I would say—"I would like to be involved in the renewal of the board." Now these are smart people they can read on the line and between the lines and they know what it means. It means: "If you don't fulfil my fantasy as a shareholder then I am going to find other employment for you; actually I won't—I'll just make sure that you're not reappointed on this board."But this is not just a shame because of the damage it does to Air New Zealand. Yes it is true: it is wrong it will harm the quality of people who want to be on and remain on the Air New Zealand board and it will affect the value of the company and its operation. All of those things are true. But it is worth remembering that the SOE model is applied to Air New Zealand amongst a number of organisations and there is quite a range of them. There are some very important businesses in the electricity generation space. Now we have a major issue with electricity generation right now. There is a shortage of electricity. Prices are high. It is threatening the deindustrialisation of New Zealand. We need quality governance in the generation and "gen-tailer" space if we are going to have a competitive energy market that is also going to achieve the objectives of more environmentally friendly electricity. Those were some of the big SOEs.What message does this letter—and they've all read about it I can guarantee you; there won't be a single corporate director in this country who is not aware of what is going on here. What affect does it have on the people on those boards? And it is a few others. It is organisations that are SOEs that hold data for the weather and actually do all sorts of useful services. Well they are all going to be tarred with the same brush that Grant Robertson has tarred Air New Zealand with. That means that we are going to have a decline in the quality of governance.Some people might say "Well this is just one instance. We're on new ground here." Actually I think it is important that public policy is evidence-based. We over the last 40 years have had the benefit of enormous evidence of over $2 trillion of privatisations and there have been studies—there have been studies of those studies—there have been people like Phil Barry the economist here in Wellington who have played a role in evaluation the effects of shifting Government enterprises from public ownership to private. And guess what! Private and privatised entities in the long run on average over time outperform public entities like for like in terms of productivity.So not only is it on the face of it wrong what the Minister has done to Air New Zealand's board we actually have good reasoning and good evidence and good data built up over many decades which tells us that this action by the Minister is going to make us all poorer. And that leads you to the question: what can we do about it? Because anybody can point out what is wrong but the next thing we need to do is actually figure out how we can have some honest conversations about uniting New Zealanders behind good ideas that will make us more prosperous.What the Minister could do is a little bit like what another Minister did just before question time. Stuart Nash rang up Nicole McKee and said "Sorry I called you a nutter" and Nicole McKee very graciously accepted that apology. I think we saw the true colours of both politicians. Well Grant Robertson has the opportunity to show his true colours and say "I've made a mistake here. It is wrong what I have done. I'm actually prepared to go and say that this is not a good way to operate. This is not a good way for a shareholder to operate a company. If you want a company to achieve certain objectives then actually you've got to allow them the freedom to actually pursue those objectives otherwise if I know what they should be doing then maybe I don't need a board anyway. Instead of what I've done I'm going to rescind the letter." Grant Robertson should rescind the letter that he has sent to the board and send a signal to governance organisations and particularly SOEs up and down New Zealand that this Government does not engage in wanton interference in commercial affairs and that it respects the people that have been appointed to governance positions and it is going to uphold the best practices that attract the best people to govern the organisations that we need to be well governed in this country.That is the opportunity that the Minister of Finance has and if he is not prepared to do it for Air New Zealand or for those in governance roles or for the wider country and the future of SOEs here is another reason why he might do it. What does he think the long-term effect—other things being equal you know without the current monetary policy conditions—on the share value of Air New Zealand is going to be for all of those New Zealanders who have KiwiSaver interests in Air New Zealand? What does he think it is going to be in the long term? Does he really think that Air New Zealand is going to be a more profitable company for those investors in the long term and on average with him sticking his ore in and interfering in its governance? And if the Minister wants to get up and tell all of those New Zealanders that their investment is better with him running it then that is a very interesting claim for him to make. I will be interested to see if he does. But what would be far better is if he apologised to those investors apologised to Dame Therese Walsh apologised to those in governance positions in Air New Zealand and SOEs up and down New Zealand and affirmed his Government's commitment to trusting people that have been appointed to do the job and let them get on with it without political interference. Thank you Mr Speaker."