Bryce Edwards: Shipley’s downfall raises questions about NZ’s political class

Bryce Edwards: Shipley’s downfall raises questions about NZ’s political class

It’s a big deal when the High Court rules against a former prime minister and fines them $6m for their reckless business practices. After all, it raises questions about the probity of such former political leaders, especially given that Jenny Shipley has a knighthood and holds the respected honour of being New Zealand’s first female prime minister.

This week a High Court judge ruled that Shipley is liable for up to $6 million after the collapse of construction company Mainzeal, of which she was the chairperson. Along with her fellow directors, Shipley was deemed by the judge to have been “reckless” in allowing the giant firm to keep trading for nine years while insolvent.

She will personally escape the fine, which her insurance will apparently pay. So, does this mean that she gets off scot-free? No, her reputation is hurt, and there are now questions about whether she should relinquish her knighthood, and whether it’s time for her to step down from her other public and business leadership roles.

The most damning response to Shipley’s loss in the High Court is today’s Dominion Post editorial which says: Shipley’s shiny post-politics career forever tarnished (). The newspaper points out that the $110 million her company was left owing to creditors has been “borne by the ordinary, hard-working New Zealanders politicians like Shipley usually champion.” And she had that position as a result of her “mana”.

Shipley’s loss in court “could hardly have come at a worse time” according to the paper, because it comes on the back of her recent public statements in praise of China. The editorial states: “The Chinese government was clearly using a former New Zealand Prime Minister as a propaganda mouthpiece.”

The reaction in the blogosphere has also been severe. Documentary-maker Bryan Bruce sees Shipley’s judicial loss as apt, because the controversy mirrors her time as a politician: “The legacy of both the Bolger and the Shipley neoliberal governments was that they opened up a huge gap between the rich and the poor in our country. They slashed benefits for example, as a result of which all the diseases that affect poor children the most all shot up” – see: Former PM ordered to pay creditors $6 million.

Bruce points out, “As a result of the Mainzeal collapse a lot of tradesmen were not paid, some of their businesses went under, and it caused their families a lot of stress.”

Leftwing blogger No Right Turn is asking why Shipley and her colleagues haven’t faced stronger penalties, saying it “seems to be a straight-up violation of s380(4) of the Companies Act, carrying a penalty of 5 years imprisonment. Which invites the question: why weren’t Shipley and the others prosecuted? Or do those laws against corporate fraud mean nothing?” – see: The obvious question.

He questions why the Financial Markets Authority hasn’t taken a case against the Mainzeal directors, and how it is possible that insurance can apparently cover Shipley’s $6 million fine: “Most insurance policies for us dirty peasants include a clause saying that they won’t pay out for intentional, reckless or criminal behaviour – so they won’t pay out if you burn your own house down, or if you crash your car while drunk driving or robbing a bank. Are the rules different for rich corporate directors? If so, it seems to be a perfect case of moral hazard, not to mention a terrible business decision on the part of the insurer.”

Unsurprisingly, the Government is now said to be discussing whether to remove the former PM from her role on a state-funded board. RNZ’s Jo Moir reports: “Sources have told RNZ that Dame Jenny’s role on the executive board of The New Zealand China Council had already been an item of discussion amongst senior Cabinet ministers in light of yesterday’s court judgement” – see: Future of Dame Jenny’s senior positions on multiple boards uncertain.

Moir also says: “It’s understood senior ministers saw Dame Jenny’s comments as failing to put the security, safety and wellbeing of New Zealand’s interests first.”

In addition, there is pressure on Shipley to step down from her other company board directorships. Under particular scrutiny is her role on the board of the China Construction Bank NZ. Deputy Prime Minister Winston Peters has previously commented on this saying, “It is actually extraordinary that someone who has so little knowledge of banking, for example, should be in the second biggest bank in China”.

Peters spoke out again yesterday, responding to journalists quizzing him on whether Shipley should remain on her various boards: “What are you journalists doing about it? I’ve been telling you for years, I’ve been telling you since the Winebox Inquiry, since the BNZ scandal about this person’s incompetence and the incompetence of a number of National Party people to actually understand business or to represent our country properly.” He is also reported as saying that “public money is not safe” under the current situation.

This is covered in the Herald’s article, Winston Peters renews criticism of Jenny Shipley following Mainzeal court ruling. This points out Peters’ long-running problem with Shipley: “The animosity between the two goes back to 1998, when Shipley sacked him as treasurer and deputy prime minister in a coalition government.”

Prime Minister Jacinda Ardern has also been asked about Shipley’s roles, and although she mostly refused to comment for the moment, she has replied “It would very much depend on which boards you might referencing.”

The Reserve Bank has the official role of deciding what individuals are suitable to be company directors of banks operating in New Zealand. But so far the Reserve Bank has merely said that the Shipley court judgement will be “read with interest”.

Former economist with the Reserve Bank, Michael Reddell, has blogged to say that “They need to be seen to act pretty quickly” and “this isn’t a time for pleasantries.  Whether or not she stands aside voluntarily, or the owners remove her, the Reserve Bank should make clear that her continued presence on the Board (let alone chairing it) would not be acceptable to the Reserve Bank” – see: Fit and proper?

Reddell doesn’t believe it’s tenable for Shipley to stay in her position: “I can’t see that the Reserve Bank will have any choice but to indicate to CCB that they would object to the continued presence of Jenny Shipley on the Board. The Mainzeal case involved the failure of a substantial institution while Shipley was chair of that Board, and not because of some unforeseeable shocks out of the blue, but because of actions and choices that the Board had control over.”

Last year Reddell also raised important questions about the trend for former politicians such as Shipley to become company directors, lobbyists and businesspeople, and pointed out the dangers of this for democracy – see: Retired politicians in demand.

In addition, Reddell draws attention to how many former senior politicians are now working as directors for Chinese businesses operating in New Zealand, or other related entitles (including Ruth Richardson, Don Brash, Chris Tremain and John Key).

Others are suggesting that Shipley’s court loss represents a challenge to New Zealand’s ethical standing in the world. John Moore writes: “The fall from grace of Dame Jenny Shipley is both a personal blow to the former PM, as well as a blow to New Zealand’s standing on corruption indexes. Shipley has attained several lucrative positions on both private and public boards over the years since she was PM. Shipley, like many former politicians, has been able to leverage her past pubic service, as an elected politician, to gain wealth and power in her post-parliamentary al life. The light that has been shone on the dodgy activities of the former PM, while acting as a director in a private construction company, point to the endemic rotating door between parliament and lucrative positions in the business world” – see: Critical politics alternative analysis.

For those doubting what skills Shipley has for her business roles, it’s worth looking back to a 2009 interview she gave to Management magazine in which she explains her role: “Most of my consultancy and speaking work is on tracking mega­trends. I track political trends, demographics, the rise and fall of markets, and think about what should be on people’s radar screen so they apply their minds to strategy, allocating their people and finances into the right places. You learn so much… I then have fun pulling the situations and people together to think about what the new shape of the future looks like and where they fit into it” – see: Face to face: Jenny Shipley: Life after politics.

Finally, it’s not only former National Prime Ministers causing grief for their current political parties. Last year, Helen Clark was particularly active in New Zealand public life, leading to a quiet but definite backlash forming amongst some in politics – see Graham Adams’ Helen Clark’s chest-beating is wearing a bit thin and Richard Harman’s Buoyant Labour airbrushes out Clark.