From the Chair
While New Zealanders adjust to being rocked by earthquakes, the Americans (and the rest of the world) are adjusting to being rocked by an election. Amongst the things that anger both Donald Trump’s and Bernie Sanders’ supporters is the greed of Wall Street firms.
Indeed, part of Trump's electoral success was founded on espousing widely shared bleak views of the US economy, that were described as being caused by Wall Street. And these are widely shared views - The London Economist found evidence that two-thirds of Americans think the economy is rigged in favour of the rich and a higher proportion believe that their politicians don't care about the ordinary citizen.
A factor is that for the last decade in the US, the purchasing power of average wages has remained stagnant. While some top incomes have risen despite the Global Financial (GFC) between 2007 and 2014, the wages of already low-income earners declined. Along with this, the job-certainty of low-skilled workers has been especially hard hit.
For many Americans, Wall Street is represented by their bank - banks who responded to the GFC by foreclosing on their mortgages and pushing their families out of their homes.
The experience here of the GFC, while significant, has been less dire than in the US. The impact of the GFC was buffered in New Zealand due to the quality of New Zealand banks. New Zealand’s 4 largest banks are supported by the strength of the balance sheets of their Australian parents who maintained strong credit ratings and were amongst the world's most stable banks during the GFC.
To find out whether our financial system has integrity, Transparency International New Zealand (TINZ) is developing an assessment methodology, the “2017 New Zealand Financial Integrity System Assessment” (FISA). View the draft assessment.
It will be the first ever review of the strength of the integrity system of any country’s finance system, covering the RBNZ, Financial Markets Authority, DIA, MBIE, Commerce Commission, Banking Ombudsman, the Insurance and Financial Services Ombudsman, Financial Services Complaints Limited, Financial Disputes Limited, the payments system, registered banks, non-bank deposit-taking finance companies, co-operative credit unions and savings societies.
The assessment will provide customers, citizens, communities, civil society and businesses with detailed knowledge of the way that the finance system prevents corruption, reinforces core ethical values and how these factors both strengthen the integrity of the system and of the organisations that make up the system.
Armed with this knowledge, citizens and customers can both identify good performance and push for more effective service and product delivery.
FISA aims to evaluate whether financial organisations demonstrate an effective approach for managing the prevention of corruption. There’s more – the evaluation is also concerned about the resources available to continue to successfully combat corruption. So, there is also an evaluation of whether organisations adopt a proactive role for realising the benefits of their integrity.
International reform in banking and financial systems isn’t even on the radar. In contrast, the New Zealand financial sector as a whole has undertaken one of the most comprehensive changes in regulatory regime of any other local industry sector and any other country’s international financial sector.
The improved detail of our regulatory regime should not overshadow its purpose – commitment to the broad spirit and culture of ethical integrity.
And so it is that TINZ is putting its draft FISA out for consultation. Everyone is encouraged to take a look at the draft assessment and provide feedback. The knowledge about the features of an ethical banking system gained during the consultation is an important basis to then understand the findings of the assessment when they are published in the second half of next year.
Suzanne Snively, Chair
Transparency International New Zealand Inc.
In This Issue
Message from the CEO
TINZ Chief Executive Officer
As progressive minded people all over the world come to grips with the results of the US presidential elections, they are all asking themselves the same question – how can it have gone so wrong? One thing is clear to me as we face the aftermath civil society organisations such as Transparency International New Zealand have now become even more relevant and vital to finding new ways of thinking and doing things.
Before the election, Mike Moore predicted the outcome in a blog and documentary saying, sadly the worst will happen – Trump will be President and that those who saw it as unthinkable were “…living in a bubble that comes with an adjoining echo chamber where you and your friends are convinced the American people are not going to elect an idiot for president…. You need to exit that bubble right now. You need to stop living in denial and face the truth which you know deep down is very, very real. Trying to soothe yourself with the facts – 77% of the electorate are women, people of colour, young adults under 35 and Trump can’t win a majority of any of them!” – or logic – people aren’t going to vote for a buffoon or against their own best interests! – is your brain’s way of trying to protect you from trauma”.
At about this stage one of my colleagues wrote similarly to me about the risk of our own echo chamber saying that: “One of the positive things about the conversations for integrity and transparency is they seem to cut across partisan lines. But still we only reach like-minded people. So, how do we get these conversations spread more widely? That's the big question.” Getting the traction TINZ is experiencing is a good start.
Currently here in New Zealand we are having excellent conversations with our public-sector leaders, with the banking and finance sector (see the Chair’s description of FISA), lawyers and accountants about integrity issues. These are occurring in our one-on-one meetings with public sector leaders, as well as by working with our corner stone partner, the Office of the Auditor General.
Events like the release of the Auditor-General's report on the Government's Saudi Sheep Contract provides the basis for a wider public debate about corruption and bribery. The report called for detailed analysis about what happened and how to avoid similar re-occurrences. It is often stated that we learn more from our mistakes than from our successes and this clearly is an example of where that needs to happen. I sincerely hope that the necessary analysis takes place and lessons are learned so that we do not see a reoccurrence of this type of lawful but awful behaviour. It will be our ability to progress these kinds of conversations with the wider community in the coming year that will be our way out of the echo chamber.
TINZ Chief Executive Officer
Transparency International New Zealand Inc.
TINZ 2016 Annual General Meeting
David Dunsheath and Daniel King
New Director Election, Tim Goodrick
Happy Hour 2016 TINZ AGM
John Shewan and Suzanne Snively
Finance Officer, Helen Bewley, with TINZ member, Helen Algar
Keynote speaker John Shewan
Keynote speaker John Shewan with Suzanne Snively
Keynote speaker John Shewan
Master of Ceremonies, Malcolm Alexander, CEO LGNZ and TINZ Treasurer, Christine Stevenson
Member Ruby McGruddy, Lexi Mills and administrator Eva Lu
Retiring Director Fuimaono Tuiasau and Suzanne Snively
Suzanne and Janine
TINZ AGM Audience
TINZ Director Charles Hett
TINZ Director David McNeill
On 10 November 2016, Transparency International New Zealand held it's Annual General Meeting in Wellington. This is the one event of the year which is members only. With TINZ's growing membership, there was a full house.
The business portion of the meeting featured a Chair’s statement by TINZ Chair Suzanne Snively reviewing the organizations accomplishments over the last year.
She highlighted that awareness among public servants and business leaders is growing rapidly and they are more engaged with the idea of transparency, integrity and accountability as core values.
This awareness now needs to be expanded to all of New Zealand's population.
During the AGM Directors David McNeil and Mark Sainsbury were re-elected for another three years. Tim Goodrick was newly elected.
Conway Powell, was appointed an interim Director to replace Janine McGruddy, and introduced to AGM attendees.
Tim Goodrick, an Associate Director at KPMG in the Forensic practice,has over 10 years’ experience combatting financial crime whilst working in government, international organisations and consulting.
Tim joined KPMG in March 2015 from the OECD’s Financial Action Task Force (FATF) in Paris, France. There, he had spent three years developing international AML/CFT policy and assessing countries against these international standards.
Prior to his role at FATF, Tim was the Director of the Financial Crime Section in the Australian Attorney-General’s Department, with responsibility for Australia’s national policies to combat money laundering and foreign bribery.
He has represented Australia and the FATF at various international meetings including at the United Nations, the 2014 G20 anti-corruption working group, the Basel Committee on Money Laundering, and the OECD Working Group on Bribery. Tim has undertaken FATF and OECD country evaluations and both led and managed FATF initiatives to help countries combat the misuse of companies and trusts (beneficial ownership guidance) and to use AML measures to combat corruption (anti-corruption guidance).
Tim has also previously worked for AUSTRAC, Australia’s financial intelligence unit and regulator, in policy and compliance. Tim is a qualified lawyer with a Master of Laws (Criminal Justice and Criminology), and is a Certified Anti-Money Laundering Specialist (CAMS).
Fuimaono Tuiasau has stepped aside as an elected Director of TINZ to a specialist role in Open Government Partnership and Pasifika. His work in the Pacific, involvement with the National Action Plan Stakeholder Advisory Committee and work with South Auckland youth is recognised. He will remain involved in these activities and issues of transparency.
John Shewan spoke on "The Panama Papers- Lessons from the Government Inquiry into the Foreign Trust Disclosure Rules."
John Shewan provided some valuable insights at the TINZ AGM about government process, the media and the subject matter of his inquiry triggered by the issue of unregistered foreign trusts with overseas beneficial owners and settlors.
A key achievement of the Shewan Inquiry is that out of 20 recommendations made in the published report, 19 were adopted. A further feature of the report is that it provided a clear way forward for the adopted recommendations to be implemented. View the Shewan report: Government Inquiry into Foreign Trust Disclosure Rules.
Timing is everything
Importantly, Shewan focused on the immediate purpose of inquiry, thereby not letting a wider range of issues undermine his ability to deliver his report in good time
He did not agree that the scope was too narrow. In other ways, Shewan found the TINZ submission very helpful.
Carrying out the inquiry was quite a lonely experience as the non-partisan convention around independent inquiries meant that it had to be his opinion based on the evidence. This made it difficult to test the evidence against the opinions of others.
Shewan's objective was to set reasonable expectations very early, so wider media commentary was not able to gather momentum around topics outside the scope.
Another reason for managing expectations is Shewan's concern that wider media coverage ran the very high risk of damaging New Zealand’s reputation overseas.
Speaking of the media, Shewan gave Nicki Hager and the RNZ/TVNZ support team, the only people in NZ who actually had access to the Panama Papers, credit for their objective appraisal.
Turning to the content of the report, Shewan noted that higher disclosure requirement under Anti-money Lanundering Phase 2 is very important and he is pleased that this is being progressed so quickly by government officials. Accountants and lawyers needed to be included in the scope of the AML rules.
Public or private trust register?
Shewan recommended that the register be kept non-public but accessible through correct channels
He noted that there was no political intervention or pressure at all during the inquiryconcerning the conclusions or recommendations.
Shewan thinks that the government could be less siloed and he recommended that we bend the ears of politicians re proper information sharing – this is happening but too slowly. It was very valuable to have government officials willing to work together to provide evidence for his inquiry.
He was frustrated by some media inaccuracy and then the unwillingness to retract wrong information. He found that there were low standards when it came to the accuracy of financial and business reporting in New Zealand compared to most developed countries.
Shewan's evidence led him to conclude that automatic sharing of information on trust as happens with Australia is not needed accross the board and there is a risk that some offshore governments could misuse it.
He found that IRD showed themselves very competent and sophisticated in their response and management. The inquiry benefited from the contributions of other government officials joining with IRD to provide evidence and analysis.
New Director, Tim Goodrick, TINZ member Mark Bennett and Director, Dr Bryce Edwards
TINZ Member asks John Shewan a question
TINZ member Matthew Underwood behind him is long-term TINZ member and supporter, Bernie Harris.
Photos courtesy Eva Kaprinay
"You measure what you treasure”
Improving transparency and accountability through public access to school data
Principal presentation Darlinghurst Public School
Canberra DFAT meeting UNESCO study tour
by Janine McGruddy
TINZ Chief Executive Officer
Last month, I participated in a study tour of Australia’s ‘My School’ initiative, focused on how a transparency portal used data to ensure accountability in schools.
This event was organized by the Australian Curriculum, Assessment and Reporting Agency (ACARA) and the UNESCO International Institute for Educational Planning (IIEP). I was invited as a representative of TINZ, leveraging my background in education. Also from New Zealand was a representative from the Ministry of Education and one from the NZ Parent Association.
Darlinghurst Public School
Introduced to Australia eight years ago, the My School initiative provides educators, parents and the community important information about each Australian school in a readily accessible and shareable format. It also contains data on each school’s student profiles, enrolment figures, attendance rates, performance, and funding levels and sources.
The five-day study tour was enriched by presentations from the Australian authorities and stakeholders of the My School initiative. A stand out was visiting schools to gain an understanding of the operation and limits of My School from a front-end user perspective.
My School, which has information about over 10,000 schools in Australia, features students’ growth in reading, writing, language conventions and numeracy based on the results of the National Assessment Program - learning and numeracy (NAPLAN). It is a nationally administered test for all students in years 3, 5, 7 and 9. The results are available for everyone to see. It has students' test performance results, de-identified to protect their privacy.
Controversially, the My School initiative allows statistical comparison of schools’ and students’ performance according to a context-sensitive Index of Community Socio-Educational Advantage (ICSEA). Perhaps the most useful part of this data from a parent’s perspective is that it can show individual progress in students, so they can see not just where their child is at but how they are progressing from year to year.
Unlike Australia, the New Zealand educational system does not carry out standardised testing. It is more difficult here to get transparent data from National Standards on the progression of individual learners at primary school level. There are tools that enable progress in a year to be quantified, for example the Progress and Consistency Tool (PaCT), but uptake for these has been slow.
The study tour demonstrated the advantages of moving more quickly in offering transparency information about our students' and schools' performance.
OAG report on the Saudi sheep saga
On 2 November, 2016 the Office of the Auditor-General (OAG) released its Inquiry into the Saudi Arabia Food Security Partnership. On the 3rd of November TINZ provided a press release on this landmark report. Our Chair, Suzanne Snively noted “the dangers of complacency about corruption, and the need for transparency to be used as the foil that prevents corruption from taking root”. Release of this report on the Government’s Saudi Sheep Contract provides the basis for a wider public debate about corruption and bribery.
Transparency International New Zealand will continue this conversation. Our mission is to foster a New Zealand culture where transparency, integrity, good governance and ethical standards and practices are the core values for all New Zealanders.
As a result of the OAG’s report on the Saudi Sheep deal:
- The government needs to deliver on the OAG's request that benefits through the actual use of taxpayer’s funds are comprehensively reported, both the $8.6 Million spent and the remaining amount totaling $11.5 million.
- Action to extend the coverage of the Official Information Act to include Parliament and to strengthen parliamentary oversight of the executive, as recommended in our Integrity Plus 2013 New Zealand National Integrity System Assessment, will help prevent similar activity in the future.
- A continued push for transparency in international trade agreements is necessary.
The OAG's final message is clear. Government contracts are monitored for their probity and in this case, the benefit to the New Zealand people. Even with the best of intentions, opacity in government no longer works, sooner or later it will be exposed to the light of day.
To paraphrase the Police: Everything you do, every word you speak, every step you take, the world is watching you! Let's lead the world by ensuring that government business is conducted in broad daylight!
The Second Open Government Partnership National Action Plan has been released
On 22 October, 2016 State Services Minister Paula Bennett announced New Zealand's second Open Government Partnership (OGP) National Action Plan for 2016-18 (NAP).
This plan is a solid roadmap to achieving more openness in government and will foster greater public participation in government.
The NAP includes the following key commitments:
- Commitment 1: Open Budget - presenting budget data in ways that make it easy to understand.
- Commitment 2: Improve access to official information by publishing responses to requests on government websites and developing principles for more proactive release.
- Commitment 5: We will build a flexible and enduring platform for engagement between the New Zealand government and New Zealand communities around the Open Government Partnership.
- Commitment 7: Improving policy practices. We will improve knowledge of tools and techniques policy makers can use to create more open and user led policy.
The OGP process is continuous. It is critical to New Zealand's democracy and reputation to implement this NAP and to start immediately on the 2018 NAP. In order to assume leadership in the OGP, this third NAP will need to incorporate much broader citizen involvement and additional new ambitious recommendations.
TINZ is determined to support - and prod - the government and actively promote broader civil society involvement.
New Chair at Victoria to spearhead research in ethical leadership
Victoria University of Wellington has appointed Professor Karin Lasthuizen from the Netherlands to a newly established Professorial Chair.
As published in the 1st November 2016 Victoria University News, Professor Lasthuizen is the inaugural Brian Picot Chair in Ethical Leadership, which is within Victoria Business School’s School of Management.
She joins five other Professorial Chairs at the Business School who lead research on important contemporary issues in specialist areas of digital government, public finance, business in Asia, economics of disasters and restorative justice.
Pro-Vice-Chancellor and Dean of Commerce, Professor Bob Buckle is delighted to welcome Professor Lasthuizen to Victoria as the University’s first Chair in Ethical Leadership.
“Professor Lasthuizen is highly regarded in Europe for her research and consultancy work in responsible leadership and ethics in the public sector, as well as her innovative research in the methodology of organisational misbehaviour.
“She has held numerous senior research and policy positions, and most recently was an Associate Professor in Leadership and Ethics Management at VU University Amsterdam.
“Her appointment will significantly strengthen the Business School’s capabilities in training, researching and supporting stakeholders to strengthen ethical practices in business, government and community organisations.
“Although ethics is embedded in many of the courses taught at Victoria Business School, the establishment of this Chair has been prompted by our commitment to supporting the wider community. Research in this field will provide insight that can improve leadership and practices to improve confidence in business, inform public policy and help mitigate the risks that can lead to organisational failures.”
Professor Lasthuizen says the newly created role is “a huge opportunity” to further develop her field of expertise.
“Ethical leadership is still a largely unexplored area of research. Traditionally, much research has assumed there is a one-size-fits-all style of ethical leadership that works across all types of organisations. But latest insights, including my own research, suggest that ethical leadership is more context-dependent.
“By translating academic knowledge into practical insights, I hope that as Chair, I can help organisations enhance their organisational integrity, societal value and overall performance through ethical leaderships and ethics management.”
Professor Lasthuizen will be supported by an Advisory Board comprising members of stakeholder organisations.
Chair of the Advisory Board, and Controller and Auditor-General, Lyn Provost says leadership has long been recognised as a way to make a difference to an organisation and its future.
“Ethical leadership adds a national and global aspect to that future. I look forward to working with Professor Lasthuizen and the advisory group.”
The Brian Picot Chair in Ethical Leadership has been established with support from a private donor, the Gama Foundation and the Financial Markets Authority.
New Zealand’s latest film festival brings fraud to the big screen
New Zealand’s first International Fraud Film Festival
18 & 19 November at Auckland’s Q Theatre
“Cinema is the most beautiful fraud in the world” Jean-Luc Godard
As we go to press the Fraud Film Festival is has just concluded.
New Zealand’s latest film festival is designed to bring the issue of fraud, and other forms of financial crimes, alive through the medium of film. It opened on Friday, 18th November, to an invited audience. Saturday was open to the public to join in the debate after each film about how to counter fraud.
To demonstrate the far-reaching impacts of fraud and the various guises it comes in, the festival is focusded on a variety of topics on the Saturday. These included dishonesty, tax fraud, investigative journalism and corruption in sports.
Get a preview now - Previews of four films can be seen now at www.fraudfilmfestival.co.nz
Partners include Deloitte, Meredith Connell, ACC, ASB, Financial Markets Authority, MBIE’s Consumer Protection team, Omega Investigations, Serious Fraud Office, Transparency International New Zealand (TINZ), Dave Clark Design and VISA New Zealand.
Source - Fraud Film Festival.
National Integrity Systems Assessment Update
“Transparency” is a term so frequently used and used in such diverse contexts that it is worth re-stating why it matters so much. Citizens have a right to information – a principle well established in such codes as the International Covenant on Civil and Political Rights and New Zealand’s Official Information Act 1982. Transparency is also a precondition for effective public debate, strengthens accountability, and promotes fairer and more effective and efficient governance. As Professor Jeremy Waldron, an internationally regarded New Zealand legal academic, has observed, “there is such a degree of substantive disagreement among us about the merits of particular proposals... that any claim that law makes on our respect and our compliance is going to have to be rooted in the fairness and openness of the democratic process by which it was made”.
- Introduction to the
Integrity Plus 2013 New Zealand National Integrity System Assessment
Transparency International New Zealand's 2013 Integrity Plus National Integrity Systems Assessment (NIS) remains the definitive document for our organization. Its comprehensive analysis following a proven framework and thorough review gives us a keystone for analyising and reacting to the topics of the day.
TINZ leadership routinely refers to the NIS when formulating recommendations to address situations of questionable integrity and lack of transparency.
On the 21th September 2016, Cabinet published a report reviewing the progress on addressing the recommendations. The State services commission developed this into a web page dedicated to the NIS and a detailed response to each of the its recommendations.
The NIS served as a starting point and reference document for both New Zealand Open Government Partnership National Action Plans.
Work on a second edition to the NIS is underway. Liz Brown, the former Banking Ombudsman and Project Manager for the initial version is leading this effort. TINZ plans to use this as a basis to regularly monitor progress on the 2013 recommendation from now on. See Response to National Integrity Systems Report on New Zealand by Transparency International
The Principle of a principled company – the New Zealand way
by Brendon Wilson
Writing for Employers and Manufacturers Association
Visionary New Zealand business leaders and their companies have a long, remarkable record of taking their business models to the other side of the world and in a quiet unassuming way carving a major place in far larger economies - to great effect for New Zealand’s reputation as well as for their own growth. From a New Zealand start-up in 1986, Katherine Corich has developed Sysdoc to international success, with revenues in Europe now outstripping their New Zealand earnings, providing a wide range of consulting, IT and managed services.
Katherine gave us some pointers to how she runs her New Zealand global company. She herself leads a busy existence, now based in the UK, with outreach activities across business, public sector, academic and charitable and philanthropic enterprises. Sysdoc operates projects in the UK, Europe, North America, New Zealand and Australia, working in every corner of the world.
Katherine Corich Founder and Director of the Sysdoc Group
But the real story here is in the underlying style and philosophy underpinning this success. Katherine makes it clear Sysdoc, a specialist consultancy, is a New Zealand story, personifying the ways New Zealand’s business methods are seen as best practice in far bigger economies, that can scale value creation and success in those markets to far outreach expectation and local practice. By this model for getting the leadership and philosophy right, and New Zealand companies CAN conquer the world, while bringing wider benefits to clients and economies than were dreamed of. That’s real value for money.
Katherine built Sysdoc with the belief that with good governance, leadership and goal-setting at the core, then integrity, ethics and the right strategy building blocks are straightforward - an uncomplicated platform which is clear to team members and clients, and an enabler for innovation, added value and growth for clients. Key to this is a leadership style which is low-profile, leads by example, always displays ethical behaviour and doesn’t run from difficult decisions or issues. By addressing medium and long-term strategies, the short-term goals fall into place and problems become tactical steps, more easily addressed.
Katherine shows that a good board will ensure management are working to good governance, and focus to ensure shareholder values are not put ahead of stakeholder values. With the right focus clients win and Sysdoc also benefits. With these approaches, a positive culture of integrity is not difficult to set – ethical, enabling, fair, open, communicative and values-oriented for the client and for all involved - so neither integrity nor ethics become goals or structures in their own right within expected culture.
The old model has it that leadership constitutes deciding the strategy, making sure everybody gets on board and stays focused to the immediate goal. This can be a win-lose philosophy which looks to short horizons and doesn’t allow focus to stray outside the strict path to the next milestone. There are better ways ....
An economy in crisis
UK’s economy was far harder hit by the Global Financial Crisis than New Zealand’s, so operating a medium company there was testing to say the least. However Katherine realised that the very ‘New Zealand’ attributes which had led her company to remarkable success so far and which were so different to most established business approaches in the UK market, were her biggest assets in helping the UK to move forward, while building a better future for clients, their employees and stakeholders.
The Sysdoc model won them major business to the surprise of established UK business, as for example the British government recognised their ability to be a game changer in that economy. They were appointed to a very small panel of companies to improve procurement of the Small to Medium Enterprise (SME) sector throughout the UK. Senior government recognised that the old model was eating itself, and that Sysdoc’s was a business model to create the new paradigm for leverage with the SME sector’s greater responsiveness and openness to change to lead UK’s economic recovery. It offers business revival, employment and opportunity outside the old narrow win-lose models, and shows how real understanding of shareholder and stakeholder values leads to better growth in a better economy. And so it has worked out. The Sysdoc model was so successful it has been moved up to the big end of town.
Can BIG Business benefit from the Sysdoc model?
Sysdoc thinks so. Their work for large companies and corporates in New Zealand, Britain and around the world includes significant contribution to many sectors and large-scale organisations – Associated British Ports, Fonterra, McLaren, Biffa, Vodafone, Chevron, Westpac and NAB to name a few. Their approach has turned heads in providing similarly impressive results in this more complex corporate climate, to enable transformation of older industry companies, for example automotive, and in the fast-moving technical world of aviation.
Point of Principle: Should ethical companies work in ‘dirty’ sectors?
A dilemma faced by thoughtful companies everywhere is whether to engage with industry sectors or individual clients with ‘tainted’ reputations – eg high carbon emissions.
Katherine describes their internal discussion in deciding whether to do work for say a company with a poor reputation in facing environmental requirements. Some in the team said ‘don’t go there, getting involved just adds to the problem’. But Katherine wonders ‘does it benefit the world if we just protest and hold our noses in the air?’ If the right opportunities permit, she believes that to work with clear integrity inside such companies to ensure improvement and change is not ignoring principle. Rather, it is seizing the opportunity to be the agent for change which otherwise won’t happen. Key to this approach is getting agreement from the top of a client company that in a given project they will work together to also identify other ways to improve, even outside the brief to not only ensure project goals are achieved, but also seek permission to add further value where potential for innovation and improvement is uncovered.
They regularly recognise opportunities to get clients to think differently and create a better industry. As an example, by not standing aside, Sysdoc have been major agents for change in Britain’s motor industry, enabling unseen opportunity, encouraging best practices in green technologies, greatly increasing production, increasing employment and ensuring difficult new environmental standards are met.
After soul-searching doubt, Sysdoc agreed to carry out a project with a central-Asian mining/drilling company, a combination of an ethically-challenged industry and part of the world. This a mix offered enough risk to deter most. In their work with this client, Sysdoc became aware of their ‘ignored’ mountains of industrial waste resulting from continuing years of industrial processes. Although outside their working brief, Sysdoc proposed new notions of ‘quality improvement’ and ‘waste management’ to the company, whose governance model excluded these factors.
By introducing a ‘how we leave the country’ focus, Sysdoc encouraged the company to separate their waste mountains into good waste and hazardous waste thereby enabling use of the good waste as a resource to enable change. As a result the company now produces garden fertiliser from the waste which is used in public parks, thereby improving the bottom line, improving public and government perception, raising challenging points of principle for themselves and others to think about, and benefiting their countryside, their industry and the world.
Now - A model for Brexit economic conditions
Britain’s recent Brexit decision brings a new set of serious challenges to business and their economy. With Sysdoc’s recognition for game-changing approaches in working with clients to solve problems and create benefit, can a principled New Zealand company play an incisive role in Britain’s ability to rise above the situation and make this a positive event? Sysdoc thinks so and we do too.
Katherine: “Integrity and ethical business are not goals in their own right, they are the way we change ourselves and the world around us, the way we are, to all do better and more for everyone.”
The New Zealand Way? We’d like to think so.
Are there enough lifeboats on Godzone?
Circa 1922 shopping trip for a loaf of bread.
Courtesy of webofdebt.com/articles/hyperinflation.php
by Ferdinand Balfoort
TINZ board member
Transparency Times regular contributor
Part II – The fallacy that rising tides will lift all boats
Adam Smith already warned us about the risks of inflationary policies, which is what Quantitative Easing (QE) is, albeit with a novel technical term, as described in Part I of this article published in the October publication of the Transparency Times and includes a description of QE. In the good old days, we would call QE a policy of “printing more money” This conjures images of the Weimar Republic in the 1920’s and frantic Germans pushing wheelbarrows filled with worthless paper money to the bakery to buy a loaf of bread. The reason we don’t see wheelbarrow pushing customers queueing in front of New World in Wellington is because inflation is curiously flat. Part of the reason may be that property inflation is not part of official inflation statistics compiled by governments, including our own. This flatness of inflation is in contrast to the hilly landscape of Wellington, which may be another reason for not wanting to push a wheelbarrow for your daily shopping expedition.
Neo-classical economic principles apparently include sleight of hand.
Original art courtesy of Robisto - rsh5096.tumblr.com/
A rising tide of QE does not lift all boats, contrary to what US President J F Kennedy stated in 1963, especially if there aren’t enough lifeboats to go around and we have hit an iceberg. In the case of New Zealand, the rising tide of credit created by the QE may well sink our ship. This news is continuing to be ignored by our political and economic elites, and certainly by those who own assets which are being inflated at unprecedented rates. I don’t expect an Invisible Hand to pluck S.S. Godzone from the malaise anytime soon.
One reason why some boats rise and others sink is that, while credit flows into property and financial assets, there is a comparative drought in investments channelled into new productive ventures. These ventures hold the promise of creating new technologies and jobs, followed by consumption by salaried employees. Theirs remains an unfulfilled promise due to the lack of available credit. Continuing the maritime theme, the Ancient Mariner may well have said, “Credit, credit everywhere, but not a cent to find for productive investment.” In a miserable tandem of whammies, property prices are rising while at the same time there is hardly any growth in employment opportunities.
The New Zealand government’s policy towards economic immigration from other parts of the world means that we are importing the natural results from QE into our own New Zealand backyard. Whereas Canada, the United Kingdom and Australia especially, contain major sized cities that are part of relatively sizeable populations, New Zealand is a minnow in the global national population stakes. This means that the impact of the economic consequences arising from the flood of QE generated funds hits much harder in our beloved Godzone. As Adam Smith noted, “As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.” (Adam Smith, The Wealth of Nations, 1776). In New Zealand’s case, the rent will increasingly have to be paid to landlords that are not even in New Zealand, including overseas corruption suspects.
Inflation, Inflation Variability and Corruption
This is because inflation masks corruption-induced price variability through the lack of information transparency in transactions.
As a result, it is more difficult to control and monitor the behaviour of parties involved in commercial transactions.
This in turn generates opportunities for deception, thereby affecting morality in society.
Once corruption benefits have been generated these then need to be invested in targets that facilitate masking the source of such funds and equally provide a legitimization for new found wealth.
Due to the ease of generating masking profits through property investments, available finances are diverted from production, which thereby impacts negatively on national GDP growth.
A great book on the topic:
Quantitative Easing as a Highway to Hyperinflation by Imad A. Moosa. Royal Melbourne Institute of Technology, Australia, 2013.
This is because QE has also increasingly generated corrupt and illicit wealth globally. This hot money finds an easy way into professional trust accounts and then into property, where it is possibly even less likely that questions are asked about the source of those funds. On our own shores we have recently seen the legal case of Sir Ngatata Love who was noted to have received NZ$ 1.5 million as a backhander in a corruption case. Although the case has been reported as fraud it should be classified as a corruption case, following the OECD definition of corruption as abuse of power. It involved the use of Sir Love’s public position for his personal financial gain. The corrupt funds were paid by a property developer and, coincidentally, then re-invested into a personal property in Wellington. This underscores the temptations posed by the inexorable rising of property prices, which rationalizes the act after succumbing to the temptation. Similar property related corruption scams are evident globally.
As TI UK noted in its report titled em>Corruption on your Doorsteps (2016), the “high end real estate sector is particularly vulnerable to money laundering, in part due to its capital intensive nature.” It is no surprise that the sector therefore attracts criminal attention, as cases noted in our sidebar. This includes internationally financed criminal gangs such as the one apparently involved in defrauding royalty in Romania, Brazil Petrobras corruption funds invested in London and Leeds, and Malaysian spending sprees in the US property market. Due to the magnitude of sums involved, some commentators now refer to “Grand Corruption” to emphasize the enormity of corrupt deals involved. (The Independent, 04 March 2015). Future Transparency Times articles will investigate Grand Corruption in more detail.
You read it here. Hot money is a natural end result of QE and it is now in the process of blowing up New Zealand’s hallowed traditions and social harmony that was based on an egalitarian society. It is time our political and business leaders addressed this growing social time-bomb. Otherwise we may well all end up strangers in our own lands.
“It is not these well-fed long-haired men that I fear, but the pale and the hungry-looking.”
(Attributed to Julius Caesar, Plutarch, Life of Anthony, 75 A.C.E.).
About the author: Ferdinand C Balfoort (MCA,CA,CIA) is an international corporate governance expert with academic and professional expertise and interests in cross cultural impacts of corruption, economic history and the Scottish Enlightenment philosophers.
Global corrupt property purchases
Below are several examples where corrupt property purchases have been exposed. How much remains unexposed?
London property boom built on dirty money Billions stolen through corruption flood into capital’s broken housing market.
Malaysian Leader Najib’s Stepson Allegedly Funded U.S. Property Deals With 1MDB Money At least $50 million allegedly diverted from a state investment fund in Malaysia was spent on luxury properties in New York and Los Angeles by the stepson of the Malaysian prime minister, according to documents reviewed by The Wall Street Journal and people familiar with the matter.
Romania Prince detained in a fraud case The New York Times
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TINZ in the media
Lessons learned from the Saudi sheep saga Of concern is that the judgement that the deal was within the law has the potential itself to raise eyebrows offshore - The Saudi contracts may be lawful but the optics are awful.
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